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Fulfillment Costs: An Overview

Fulfillment - Costs & Co.

Fulfillment is an enormous relief for webshop operators as well as for companies outside of e-commerce. But no matter how much time and money can be saved as a result, the more competent services Fulfillment service provider cost money. So the question regularly arises: What fulfillment costs are to be expected? One thing is certain: every provider - whether in the online shop or in the offline trade - has very different needs and requirements. That's why no two fulfillment orders are the same. The answer to the cost question is simple and touching: It depends. This article explains which factors play a role in defining the costs of fulfillment services.

Fulfillment Costs - Overview:

Maybe you've heard the phrase "Make or buy" before. Many companies are faced with the decision of whether they want to do things themselves or the option of Outsourcings. However, without knowing the exact difference between the costs of internal and external services, it is impossible to say whether fulfilment at the end of the day is worthwhile at all. Therefore, it is important to know what and how much of the tasks should be transferred to the hands of a specialized fulfillment provider.

Among other things, the following tasks influence the costs:

  • Acceptance and storage of goods
  • inventory maintenance
  • Packaging and preparation for dispatch
  • Shipment of goods to the customer
  • Picking
  • customer service
  • Returns-management

These and many other fulfillment services are used by companies to varying degrees depending on their needs and type of goods - some need or want more, others less support. For you as the client, the question is always "What?" and "How much?

In fulfillment, goods are not stored in the company, but by the fulfillment service provider. Conversely, this means that the products of the shop operator or wholesaler must first be accepted.

Here the effort determines the costs:

  • How often are the goods delivered per month?
  • What type of goods are involved?
  • Are the goods delivered on pallets or in cartons?
  • Is an incoming goods inspection desired?
  • Are there different types of goods or do the goods arrive sorted?

Goods are not the same as goods. So it is important for the fulfillment service provider to know which characteristics the articles to be stored have: Are they articles of one or different product groups? Are the articles constant in their properties, as is the case, for example, with books or furniture? Can they vary in content, size or colour? Or are they even freely configurable or customizable by the customer? With regard to the goods inwards inspection, the fulfillment customer also has the choice as to whether, in addition to checking the quantity, the quality of the goods should also be examined or whether the products should be further processed in a certain way (e.g. assembled, deburred, shrink-wrapped, assembled into sets, etc.).

Not only the type of goods is of interest when determining costs. It also depends on how much is to be stored and how: How high is the number of Euro pallets or cardboard boxes, i.e. the storage volume of the articles? Should the goods be stored on pallets or on the shelves of the service provider? Do the articles have to be refrigerated or re-cooled EU organic guidelines? All these details determine the storage fee, shipping fee & Co, which in turn is included in the calculation of fulfillment costs.

Fulfillment service providers themselves are on the move in the B2B sector. But what about your customers? Here the range reaches from simple B2C-Webshop with private customers up to wholesale, which would like to supply other dealers with its goods. The question of whether B2B or B2C is an important point, especially when it comes to packaging and shipping. Because it makes a big difference whether the fulfillment service provider is to send the goods sorted or picked as a mixed pallet to a retailer by freight forwarder or in parcels, small parcels or envelopes by parcel delivery to the end customer. Both the required cardboard boxes and the shipping envelopes can be provided by the fulfillment service if required. The same applies to filling material to protect items during shipping, especially sensitive or fragile goods.

Companies handle the packaging of their goods in very different ways: some have it ready packed, others deliver it completely unpacked. Here, the fulfilment service provider can help on request and pack, label and / or assemble the goods into an assortment. Many online shops would also like your corporate design to come to the fore when shipping. Fulfillment services also put this task on your to-do list - from the shipping carton to the parcel tape. Accompanying material such as advertising materials, merchandising and media products, info brochures, vouchers or other accessories can also be added to the shipment. Often an order in an online shop consists not only of one but several products. This is where the keyword Pick-and-Pack comes into play - in other words, the order must be put together, i.e. picked.

The number of products per order also influences the average size and weight of the shipment. The latter two points also have an effect on the shipping costs, which can vary depending on the parcel deliverer. The fulfillment customer can choose the preferred delivery service himself or leave this to the fulfillment service provider. When it comes to the question of shipping costs, it is also decisive whether only domestic shipping or dispatch abroad is desired. At the end there is again a question of "how much? How high is the current and planned shipping volume per year and how many parcels must be shipped? This is a key figure that is important when determining fulfillment costs.

Customers are not always satisfied with their orders in online shops: Too big, too small, colour does not like, article defective - the reasons for a return can be manifold. But returns are often no problem when it comes to customer satisfaction as long as they go smoothly. Fulfillment service providers ensure this by taking over the entire returns management, accepting customer returns, preparing and storing the goods and taking care of the exchange or reshipment to the customer. Of course, the general return rate is of interest here, because this is where the entire effort can be measured.

Thanks to their experience with processes in various sectors and industries, good fulfillment service providers also recognize potential for optimization in order to reduce return rates and are happy to advise their customers on this and many other points in the process chain. Fulfillment does not always exclusively concern the physical handling of goods, but also the organisational and service-specific *around. Here, too, there is almost nothing that a fulfillment service provider could not do for the customer. For example, some online shops and retailers would prefer to outsource customer care and communication completely or in part in addition to returns and complaints management and use the personnel and time resources released elsewhere.

Whether in offline or online trading: customer orders must function as simply and conveniently as possible - even if the retailer himself no longer accepts the orders or stores, packs, prepares for dispatch and finally ships the goods. What is the current stock level? What is the delivery date? Fulfillment service providers with optimal connection and the setup of data interfaces ensure a smooth process, for example for

  • shop systems
  • Warehouse and inventory management
  • merchandise management
  • Sales platforms outside the online shop (eBay, Amazon, etc.)
  • ERP systems
  • CRM systems
  • payment methods

and many other third-party systems. Here too, of course, the selected scope determines the fulfillment costs.

Conclusion: Fulfillment costs are always individual

The question of fulfillment costs is an important, but not the most important of all questions. The balance, but above all the quality of the provider compared to others must be right. In any case, one should first clarify one's own wishes and needs, such as:

  • What type and number of goods would I like to have stored?
  • How many goods do I send?
  • What wishes do I have with regard to packaging, shipping & Co?
  • How should returns be handled?
  • What payment options do I offer?
  • Which shop system do I have?
  • Which data connection do I need?

Fulfillment is more than just storage - packaging - shipping. As with almost all things in everyday life, the cost determines the price - and the cheapest option is not always the best. In order to be able to name an exact, individual price from the storage fee to packaging costs and shipping fee per package to the EDP interfaces, providers of fulfillment services first need the input from the dealer or shop operator. But don't worry: Determining all this sounds more complex than it really is. The right fulfillment service provider also knows how to ask the right questions in this context.

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