Cutting The Cord With Shipping: Is it Time to Find a Fulfillment Partner?

Cutting the Cord with Shipping: Is it Time to Find a Fulfillment Partner?

For every retailer, there comes a time when keeping up with shipping becomes a challenge. Maybe sales are increasing, and a bigger subscriber base has upped the demand for packing and shipping. This is great news for your business, but it does present some fresh challenges. Or, perhaps your company just wants to save money on shipping costs. Whatever the reason may be, if shipping feels overwhelming, it may be time to think about a fulfillment partner.

As you make the decision of whether to continue to ship in-house or outsource to a fulfillment partner, here are some things to consider:

What a fulfillment partner can do for you

If you outsource your shipping to a fulfillment partner, they will provide a range of services. These include warehousing some of your products, picking and packing your orders, and shipping those orders. Because fulfillment partners focus just on packing and shipping, they can usually save your company time and money on shipping compared to what you would spend to do the shipping on your own.

Your current shipping costs

When you ship an order to a company, you pay UPS or FEDEX’s frontline shipping rate. You may get a discount—say, 70 percent off—but the resulting rate is still substantial. On top of that, you will pay additional fees. Shipping a bottle of wine, for example, may cost $18 to zone 4, but you will pay an additional $18 in fees—an adult signature surcharge, residential address surcharge, etc. All these fees add up to a large percentage of your overall shipping costs.

The size of your products

Pound for pound, lightweight packages are the most expensive to ship. UPS and FedEx usually charge the same fee for all packages 10 pounds and under, so a 0.5-pound box will cost the same to ship as a 9.99-pound one. So, if your company specializes in lightweight items, such as jewelry, you’re probably throwing a lot of money away by doing the shipping yourself.

The cost of using a fulfillment center

Typically, fulfillment centers charge two different rates. The first is a pick and pack rate—the cost of boxes, packing materials and labor to fill boxes with products. For example, they have one pick and pack rate for 10-pound items and another for 25-pound items. Some centers charge a pick and pack rate and allow you to use your own shipping rate, and other centers bundle all the services together. For example, they will have one 10-pound pick and pack rate to zone 8, which includes the labor and the cost to ship. For most smaller e commerce companies, the fulfillment center’s shipping rate will be significantly lower than their own shipping rate, so even if the center makes some money on the shipping, the company still pays less than they would if they shipped on their own. When you talk to fulfillment centers, verify the costs involved with set-up, management, maintenance, and shipping fees, so there are no surprises down the road.

Location, location, location

Think about the location of your company as well as the location of your customers. Are most of your customers in zone 2 or 3? If so, you can go with a fulfillment partner that is physically close by. If your business is on the East Coast or West Coast and your customer base spreads across the country, you will want to think about one of the following options:

A strategically based fulfillment center: If you operate on the East or West Coat, using a fulfillment center in the middle of the country makes sense. Depending on your volumes, you may save in shipping costs by picking up your container at a port, driving it to a fulfillment center in the middle of the country and having it processed there so all your shipments are in a lower zone.

A fulfillment partner with multiple center locations. Some fulfillment partners have multiple centers; for example, one center on the East Coast in Virginia, and another on the West Coast in California. Hiring such a center allows you to store goods in both centers and ship from the one closest to your customers; by doing this, your user shipment will never be higher than zone 4 or 5.

As you consider whether to go with a third-party fulfillment center—and where and what kind of center to choose if you do—keep in mind your shipping profile. The best location for your fulfillment centers will depend in part on the kinds of packages you ship. Franklin Parcel can give you the shipping data you need to calculate predicted shipping costs from potential fulfillment center locations across the country. This tool can help you choose the center that best matches your budget and overall shipping needs.

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