What Do Fulfillment Companies Charge?
The most frequently asked question that companies ask us is “What do fulfillment companies charge?” Ultimately, this is the very reason that we exist – to get you connected with multiple fulfillment companies that will provide you with pricing proposals for your review. Unfortunately, we can’t tell you what companies charge exactly, because we truly do remain unbiased throughout the entire process and therefore don’t ask our vendors what they charge companies specifically. However, we do have experience in the industry, and therefore we can give you a general idea of the types of charges that you’ll see should you choose to outsource your fulfillment with a third party provider.
We like to think of it as the Circle of Life in Fulfillment. Just like we have a life cycle as human beings, your product goes through a sort of cycle within the fulfillment world, and each stage represents a potential cost impact or milestone.
- Initial Set Up: This is the stage where you integrate with a fulfillment company. There are certain things that have to be established, such as connection with your shopping cart, so that you can seemlessly pass information back and forth.
- Receiving: After you coordinate set up with a 3PL, you’ll send them product that they can keep in inventory to fulfill orders. This is usually a nominal charge in the grand scheme of things. And usually 3PL’s charge on either a per unit basis or an hourly basis. Keep in mind that receiving can include unloading the product, counting it, entering it into their inventory system, and then locating it in bins or stations. One last important point – you could incur other charges if you need additional services, such as bar code labeling, thorough inspection for damage, etc.
- Storage: Once inventory has been received, it remains in inventory until an order is placed. This can be one of the most significant costs of outsourced fulfillment. Companies usually charge on a per pallet basis (ranging from a 4’X4’X4′ space to a 4’X4X’6′ space). However, there have been more and more companies charging either a cubic footage fee or a square footage fee. Storage fees are usually average over a month, as inventory can vary depending upon when you receive and ship out your product. Finally, if more sophisticated storage environments are needed, such as temperature controlled, there will be additional costs involved.
- Order Fulfillment: When your customer orders product, the warehouse will have to go out and pick the order and package it for shipment. This process is referred to as either order fulfillment or pick and pack. Most companies charge one of two ways for this service. First, many companies use a flat per order fee for each order. Second, many companies have opted for a flat per order fee (usually a bit lower) coupled with a per item fee. This way, if the order is smaller or larger, it gets priced out accordingly.
- Shipping: The final and one of the largest components of cost is the actual freight charge to get the order from the warehouse to your customer. Whether it’s shipped out on a small package (parcel) basis, LTL (less than truckload), full truckload or international basis, the main premise here is that most fulfillment companies get very good rates from carriers because they ship an aggregate of products of multiple companies. Because of this, you stand to get a much better shipping rate using the warehousing company’s account rather than your own. Usually, logistics firms charge you either a mark up over their cost or a discount off of published rates. If you insist on shipping on your own account, there may be an additional fee from the fulfillment house. This isn’t to overly tax you, but rather for the processing and time involved with shipping a product.
There are other fees that might come into play, from returns to account management to box fees and others. However, the majority of your overall costs will be comprised of the fees discussed above.
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