How Much It Cost To Outsource Order Fulfillment Services?

Fulfillment

Many services have complex operations and fee schedules, making it a challenge to make the best decision for your business. This article addresses the use of order fulfillment companies, which store and package merchandise on your behalf.

First, it discusses the benefits of using such a service, from savings in time and money to professional handling of your product. These are important elements to understand, as developing an agreement with a fulfillment service can be a complicated task, and you’ll want to know what you’re getting out of it. 

It continues by providing a detailed explanation of the services many companies offer, from receiving shipments to processing orders. In addition to the various services, business owners expect to supplement the business’s customer interaction side. In the end, pricing of services is discussed, and an outline of associated costs is offered as a tool to assist in your search for an appropriate firm.

Costs and Benefits of Using Fulfillment Companies

Now that you’ve begun to build a business, you’ll want to find methods for achieving results while cutting back on overhead and work hours. Outsourcing is a useful method of doing so. One area that can be outsourced is order fulfillment. 

A fulfillment company can receive orders, store inventory, and pick (select the ordered items from stock) and pack your order before submitting it for delivery. This can trim large amounts of work from your operation.

A business owner who warehouses his or her items pay additional associated costs, including building upkeep, utilities, and insurance. A fulfillment service can defray these costs because they are distributed across multiple clients paying storage fees to the service, which can mean big savings.

There are hundreds of fulfillment companies, but delivering your product is one of the final ways you reach out to customers, so it’s important to make the right decision. Part of this choice is to understand the costs associated with using a fulfillment company and the services a company provides. 

While order processing may seem like a single operation, most companies break it down into constituent parts. So, while you may pay one rate for “pick and pack” and kitting light assembly order fulfillment service, getting the inventory to the storage facility and warehousing inventory are listed as separate services, with separate fees attached.

Start with Basics

So, to unwind a potentially complicated problem, start with the basics. The service you seek is for someone to take an order, pack the box with the items in the order, prepare it for shipping, and have it shipped. Most companies charge a monthly storage fee, along with a fee per pallet stored. 

This averages at about £20.00 to £50.00 plus £10.00 per pallet. They also sometimes charge an additional fee for storing a large number of different items (t-shirts, caps, action figures, and marmalade, as opposed to marmalade only).

Charges of Pick & Pack Services 

On top of monthly fees, there are fees for the pick and pack service, the actual order fulfillment. Most services charge between £1.00 and £1.50 per order. To this charge, they will add a cost per item. This charge generally ranges from 30p to 60p.

The final type of charge you’re likely to pay for this basic service level is a receiving charge. There are various ways that fulfillment companies figure these costs, but they generally break down into three categories. 

The first is an hourly rate charged for unloading a large truck full of product. A full container could cost as much as £200. For smaller loads, they might charge a rate per pallet or carton. The cost of cartons or pallets is comparable to the cost of order fulfillment.

Additional Cost-Return Fee

The most common additional cost you’ll find is a return fee. This cost is often the same as the pick and pack charges, and only you’ll have to pay it twice, once for the shipment, and once for the return. There may also be additional charges for taking customer orders directly, C.O.D. orders, and credit card processing. While the principle business of a fulfillment service is to store and accurately pack orders for shipment, they frequently offer several other services. 

These can include telephone customer care, kitting and light product assembly, even product photography. They are, of course, offered for an additional fee. Light assembly, for instance, is commonly offered at an hourly labor rate, rather than on a per order basis, and while it’s convenient, it can amount to a large amount of money.

The way an agreement is reached can also vary. Some fulfillment companies require a contract, with requirements for the use of the facility. Others are less structured and base the agreement on a general fee schedule. For more detailed information, contact each company to acquire a custom quote. There are also costs associated with a company’s method of doing business. 

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For instance, as you research fulfillment services, you’ll want to ask questions about their specific inventory control methods. An extremely accurate inventory model will cost less in the long run, because your inventory won’t be lost or delivered to the wrong customer. If you don’t understand or trust a company’s methods, even a discounted rate shouldn’t be enough to make you choose them. The mistakes will negate the savings.

Alex Marshall

Alex Marshall

My responsibilities include interacting with the Board of Directors, data entry, accounts payable, payroll, grant report entry, managing the organization's HR, helping and creating organizational and program budgets in collaboration with the ED and Program Direct, and other misc. tasks.

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