For years, third party fulfillment warehouses have been viewed as simply ‘warehousing and shipping centers’, tasked with the straightforward duty of making sure customer orders are shipped on-time and accurately. The pressure to change and adapt wasn’t present until recently, so the warehousing industry as a whole remained static – and largely does even today.
Lately, however, the importance of on-time and accurate deliveries has become amplified due to consumers’ growing expectations, causing outsourced warehousing providers to become more ‘nimble and flexible’ or face the prospect of losing business. Furthermore, with outside pressures such as Amazon’s growing dominance and a new injection of technology into a largely archaic industry, fulfillment centers are being faced with a challenge – will they expand locations, differentiate, broaden service offerings and become valuable assets to their customers by adding value or will they choose to serve as a traditional cost center and risk extinction? The pressure to become a more strategic partner to customers is so great now that many industry insiders believe that they must either adapt quickly or they won’t survive.
Fortunately, there are a select group of third-party warehouses that are expanding their presence into new markets to offer multi-location shipping, growing their service offerings to provide a suite of valuable capabilities rather than just filling orders, broadening their technological capabilities, and even collaborating with customers in their corporate and marketing processes in ways that would have been unthinkable in the past.
Companies that employ outsourced logistics services companies will need to make sure that their choice of provider meets all of these requirements in order to remain competitive in the omni-channel landscape.
How Many Locations Does the Fulfillment Center Have?
Many customers want their package delivered within at least a two-day ground window throughout the US. Despite Amazon’s push to create same-day deliveries and dominate the outsourced fulfillment market, multi-location fulfillment centers have carved out a niche by focusing on not only offering a substitute for Amazon’s FBA service (via merchant fulfilled service), but also capitalizing on multi-channel fulfillment of orders through customers’ websites and other online marketplaces, such as eBay, Jet.com, etc. In order to meet Amazon’s Prime fulfillment status, a third-party warehouse must be able to operate on a 2-day ground basis throughout the country. This means they must have, in most cases, three or more facilities spread strategically throughout the United States. Only a very small fraction of companies can meet this requirement. Other online marketplaces aren’t quite as strict in terms of ground shipping requirements, but the expectations will most certainly evolve over time.
Amazon isn’t the only factor applying pressure to the multi-location demands. Because consumers are flat out demanding quicker delivery of goods, a new breed of technology driven warehouse marketplaces are popping up, helping companies strategically locate goods using multiple partner warehouses tied together by one overarching technology and warehouse management system. But these new warehouse marketplaces don’t offer the same advantages of using a single company with multiple locations. First, the online marketplaces add a layer of commission in an otherwise very tight margin industry, driving up overall costs for users of outsourcing. Second, pressures to conform to additional third-party software distract from the focus of the fulfillment center, which lead to differences in service levels. At the end of the day, if profitability is higher for internally generated customers, more time will likely be spent servicing them rather than less profitable marketplace customers. Speaking directly with multi-location warehouses or using a fulfillment services matching service to find a single company is imperative to not only save money but ensure the highest level of service.
How Innovative is the Fulfillment Center’s Technology?
Most e-commerce fulfillment companies offer quick and easy integration between Web Stores and their in-house WMS (warehouse management system). This has become the norm, as more WMS programs have expanded to include integration with most of the popular online shopping carts. However, fulfillment centers that are on the cutting edge of technology have taken things a step further – not only offering a more customized experience but also allowing for integration above and beyond the cookie cutter order and shipping tracking levels.
Through the use of API (application programming interface) and web services, e-commerce fulfillment companies can be more flexible with the information that they send back and forth between their company and customers. Most importantly, real-time inventory information can be more easily synced, allowing for a more robust set of data viewed online by end consumers. But the expanded exchange of data doesn’t end there – some fulfillment providers are even sending information to ERP and accounting software programs (such as QuickBooks), eliminating the frustration of manual entry.
Is the Fulfillment Center Able to Provide Packaging Consulting?
How companies package their products is becoming more important than it was in years past. Providing a unique and memorable “unboxing experience” is a way that some sellers are differentiating themselves from competitions especially in very competitive markets. Contract packaging and custom packaging production are two major areas a fulfillment center can have a measurable impact on end customer satisfaction and brand loyalty. By assisting sellers with the design and production of creative and cost-effective packaging solutions, fulfillment companies can add measurable impact.
Because fulfillment centers have purchasing leverage by aggregating carton, box and other packaging materials purchases among their overall customer base, offering packaging consulting services would appear to be a “no brainer”. However, very few fulfillment warehouses offer this service. Usually outsourced warehouses have a set of standard boxes that they offer customers, but nothing more.
Another way that packaging consulting can be valuable is by helping sellers design or implement carton and packaging solutions that will reduce shipping costs or damage. Warehouses with significant experience in carton selection are best positioned to act as a strategic consultant.
Are Returns Management Services Available with the Fulfillment Center?
Customers are inevitably going to return products. In fact, it’s almost as if the perfect storm for increased returns has struck the online retail marketplace – increasing consumer purchases online combined with major retailers offering almost unheard-of returns policies to increase the likelihood of purchasing. Some companies, such as Amazon, have made returns so easy that other smaller competitors are almost forced to follow suit or else they will lose the sale.
But again, many traditional fulfillment services companies haven’t built internal capabilities to truly serve as a returns processing center for their fulfillment clients. Returns processing is quite challenging and requires not only thorough knowledge of the product, but also oftentimes requires specialized equipment or processes. For example, in order to handle returns processing for an apparel company, a fulfillment provider must be able to inspect the goods for damage and prepare it for resale, which could include additional services such as re-tagging or ironing.
Furthermore, technology plays a major role in being able to effectively manage returns. When done formally, consumers must obtain a returns authorization, which needs to be communicated to the fulfillment provider in order to process the approved return. Once the return hits the docks, the fulfillment center must have a robust process in place to quickly receive, inspect and return the product to inventory or it will be stuck in an obscure receiving bin for an unknown period of time. Fulfillment houses that track this process manually simply aren’t prepared to handle the stringent needs of fulfilling returns – which is why many “pass” on the opportunity.
Does the Fulfillment Provider Offer Accounting Support, Call Center and Creative Services?
While it is extremely rare, some fulfillment companies offer additional back-end business services to client, such as invoicing, billing, accounting, call center services and even other creative services so smaller businesses can focus more on selling and marketing their products. While not necessarily related, these services are easily outsourced without much risk, making a one-stop shop especially intriguing.
A lot more of them offer this now because they know startups and growing companies need extra help in a more competitive business climate. Offering additional services also makes the fulfillment center more competitive compared to ones only capable of shipping expertise.
The most well-known of these services spans from accounting to call center support services but can include such wide-ranging support services such as web development, online marketing support, photography for e-commerce, video production. Outsourcing web development, marketing, and e-commerce photography is very valuable for e-commerce companies, and benefits the fulfillment company if the work results in more orders to process.
The list of fulfillment providers that offers all of these services and capabilities under one roof is extremely limited. Over time, however, more and more companies will be forced to adapt and expand – or cease to exist. As an online retailer, it’s extremely important to align with an outsourced provider that is well positioned for the future. Taking a long look at the breadth of capabilities offered is critical in forging a partnership that will last and grow and that will serve as a vehicle of additional value.