Tips for Avoiding Surprises in Your First Fulfillment Service Bills

Fulfillment services are a real life and budget saver when you are starting any sort of online business. Whether you sell books, shoes, or just about anything else, a full service fulfillment provider can really help you to get up and running and successful. Unfortunately, a lot of business owners become incredibly confused where fulfillment fees are concerned, and in this article, we are going to help you avoid a huge and unpleasant surprise with your first bill.

Let’s begin at the very beginning – the fulfillment pricing proposal. This is a major document that outlines what your potential fulfillment provider sees as the solution to your needs. However, as is the case with so much in the world of business, it is a buyer beware market. It is entirely up to you to ask the right questions and perform all of the vetting and due diligence that will make such a big difference.

Fulfillment Pricing

Now, let’s just set the stage properly here – fulfillment pricing is a difficult issue. There are no black and white prices to stick with. Just consider the main fees that most fulfillment firms charge and how widely they can vary:

  • Setup – This involves that integration of your existing system with the fulfillment providers system. It can cost from as little as $100 or more than $1000 based on many unique factors.
  • Receiving – This is when you send your products to the warehouse and it is then unloaded, inventoried and added to the existing system. It is also when the materials are put away awaiting sale and shipping. This is an ongoing issue as you will continually send new merchandise. It can average around $35 to $45 per hour.
  • Storage – This is often a big surprise to retailers and it is also one of the most flexible fees because inventory levels can vary. It is a fee typically based on the amount of space your materials take up in the warehouse, and you are going to be charged on a “per pallet” or even a square footage basis. The average per pallet price is between $8 and $15.
  • Order Fulfillment – This is the actual service you think you are paying for, and this is where so many retailers get confused. They think the (average) $2 to $8 per order is all they are going to pay, and will forget about the receiving, storage and setup fees too. This fee includes the picking and packing of orders.

Shipping rates are another item to consider – and you may be able to recoup some expenses here because a lot of fulfillment companies are able to get discounted shipping rates that they can pass on to you.

What It Means to You

As someone involved in fulfillment shipping, what you want to find is a great deal of transparency about the total costs. Never assume that the “fulfillment” price is all there is to the matter. Be very clear on pricing and be sure that you are clear about each component involved in the bottom line, monthly or quarterly bills.

A good and reputable fulfillment services provider is going to be extremely specific and open to your questions. They will submit a proposal that breaks down into those four areas, at the least. You will still want to go over every item and discuss each fee in order to avoid sticker shock and arguments when you get billed.

Areas of Particular Confusion

While the setup is easy enough to understand, the other points can get confusing. For example, storage may not be by the pallet. Your products may be easier if stored and picked from bins. How does that pan out in the proposal? If you don’t see how they are calculating storage fees, feel free to ask for clarification. How are they storing your items? How does that figure into the overall fee? How can that vary if you add or change the ways you handle products?

Always ask if you can opt for square or cubic foot storage fees rather than pallet storage if you worry about dead space fees. For example, most of the time, cubic foot storage is calculated by the precise measurements of the items you sell. For example, you can multiply the total number of items by their specific cubic feet and find out, precisely what you will be charged. However, if you go strictly with pallets, you could pay for a single small item taking up that entire pallet space.

Square foot storage works similarly to the cubic feet, but does leave you at a disadvantage where dead space can occur. You might also have to pay for a base amount and this may not be the most easily managed style of storage. If you have bins or cabinets required, you may have higher setup fees as the cabinets can be costly to assemble and manage. They might need to be locked, they may need climate controls or they could take up a lot of room. Understand what it will mean – bottom line – to use bins.

Other Fees

If a company is totally transparent with you in the proposal, you will see a lot more than those categories above. For example, you will always see the setup, the receiving, storage and fulfillment. However, also consider costs associated with box fees and storage for boxes and packaging, custom labeling and/or order insert fees, return fees for items sent back by your clients, “kitting” or combination fees for items that require multiple “picks” and double checking, and account managing fees that can include a long list of issues.

If you do the proper vetting and review multiple fulfillment proposals from a variety of providers, you should find a reputable group. Do remember that the fees you pay are going to offset the headaches of managing operations yourself. Buying and maintaining a warehouse, paying staff and being on top of the order fulfillment process is a full time job – the right provider can do it well and at a good rate.

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