Category Archives: Warehousing and Fulfillment Resources

Information about warehousing and fulfillment for those new to warehousing and fulfillment.

Third Party Warehousing

Is Third Party Warehousing More Cost Effective Than In House Warehousing?

by Will Schneider

A great number of product based businesses consider outsourcing with a third party warehousing company as a viable option for handling the warehousing and distribution of their product. But once they begin researching these third party providers, they oftentimes get hit with “sticker shock” in terms of storage and fulfillment fees. They often think to themselves, “Is it cost effective to outsource?” Or better yet, “Will cost savings be realized by outsourcing warehousing and fulfillment?” These are extremely important questions that need to be analyzed from a detailed financial perspective in order to gain appropriate insights to make the best decision.

Do You Know All of Your Warehousing Costs?

One of the most difficult aspects of any in house versus outsourcing financial analysis calculations is the gathering of ALL “in house” costs. If any of these costs are left out of the equation, you’ll surely not be able to gain the proper perspective in your decision. What kinds of costs need to be included?

  • All salaries, benefits, insurance, and employee related expenses
  • All management expenses related to storage and distribution
  • All warehouse lease fees, including insurance
  • All materials costs, including packaging materials, etc.
  • All equipment costs, including ongoing maintenance costs and support equipment such as pallets, racking, computers, scanners, scales, etc.
  • All customer service expenses for support with your customers and any related benefits, insurance, and employee related expenses
  • Any software expenses related to inventory management and order management

Some of the most commonly overlooked areas are equipment purchases and adequate measures of management support related to the fulfillment process. Without a thorough analysis, you’ll potentially be left thinking that outsourcing isn’t the best option when in fact using a third party warehousing solution would be the best way to go.

The Added Benefits That Get Overlooked

In addition to forgetting to include certain in house costs, another common mistake is not accounting for other added benefits of outsourcing your third party warehousing. Some of these “intangibles” can really provide significant savings. They include:

  • Ability to use as much or as little space as needed for warehousing, thereby eliminating the risk of warehouse leasing and time spent negotiating
  • Synergy from opportunity cost of not having to spend valuable internal resources on distribution, thereby increasing time spent on other more important functions such as sales and marketing

Properly accounting for all costs and benefits will help you make the best decision regarding the use of third party warehousing. Don’t be short sighted when looking at the pricing proposals from fulfillment companies. Take into account all costs and you’ll set your business up for the greatest success possible.

Keep Your Shipping Costs in Line

Blog Post Written by Scott Reynolds, American Western Distribution

Keeping Your Package Shipping Costs in Line – Small to mid size companies

Shipping packages has become increasingly more expensive with the cost of fuel continually on the rise. Companies need to keep a close watch on these costs. It pays to review your invoices regularly for mistakes and insure you are charged correctly. Was the package a residential or commercial delivery? It matters, delivery to a business is less costly than to a residential address. Was the fuel surcharge invoiced correctly? Finding these mistakes can save money.

Another method of lowering costs is through increased volume. Each time you sign a new account, check with your carriers to see if they can offer a higher discount with the additional volume. We recently were fortunate enough to acquire a new account that will be shipping thousands of orders per month. This volume could have a great impact on our shipping rates, for all our accounts, and also put us in a position to acquire additional new business as a result of reduced rates! We called our carrier reps in for meetings to see what programs were available to us with this new business. Allow plenty of time for this. The reps are busy people and they tend to travel a large area so they may not be able to see you for a week or longer. The various carriers have many different programs to offer plus they have partner programs with each other that can offer additional savings! Once you receive the cost analysis back from the carriers, compare them and don’t be afraid to ask for a better rate if the first analysis isn’t what you were expecting! If you don’t ask, you won’t receive. We did and the rates that came back to us averaged another 3 to 4% discount!

Make sure to compare fuel surcharges (FSC). This also can greatly affect the total cost. Some companies charge a percentage of the delivery cost and others charge by weight. Depending on the type of product you are shipping there could be tremendous savings by choosing the company whose FSC best fits your needs (providing their basic rates are competitive). In this particular case we saved $.32 cents on the average order just on the FSC not to mention the basic rates were the most competitive offered!

Another method of keeping your package shipping costs in line is through the carrier pickup. Most carriers charge a fee for this service that can be waived if you are near their drop off location and have the ability to deliver the orders to the terminal yourself.

From startup companies to small companies to midsized companies, shipping fees are a large percentage of the total cost charged for your services. As a result you need to pay due diligence to this segment of your cost structure as it could make or break you in efforts to signing new accounts and keeping current customers!

About American Western Distribution, www.awdaz.com located in Phoenix, AZ, specializes in providing World Class Warehousing, Distribution and Logistics Services. AWD receives product for companies that don’t want the expense of a ‘brick and mortar’ organization but require our services for storage, order fulfillment and distribution of their products. All of our programs are custom tailored to meet each customer’s needs!

What to Look for in an E-Commerce Fulfillment Company

by Will Schneider

When it comes to choosing a company to deal with your e-commerce fulfillment, it’s important to know what to look for in order to save time, money, and prevent headaches in the future. With an experienced fulfillment company by your side, you can streamline your process which lowers operational costs and gets your products to your customers’ front doors as quickly as possible. Here is a short list of the things that matter most in terms of logistics companies so you can rest assured you are choosing the right one for your individual needs.

Experience. Some e-commerce business owners choose any fulfillment company to process their orders, but only some have the experience that is necessary to do so effectively. The difference between traditional fulfillment companies and e-commerce fulfillment is that the latter exchanges information over the Internet as opposed to via telephone, fax, or email. As you can probably guess, this is a much quicker way to get the order processed and out the door; therefore, looking for an experienced e-commerce fulfillment company is important for timeliness purposes.

Prices. Of course when it comes to logistics services it’s tempting to choose the option with the lowest price tag. Unfortunately, however, that approach can turn out to be a costly mistake in the long-run. While it’s important to compare prices, it’s important to never sacrifice experience for pricing. Finding the right balance between cost-effectiveness and quality of services is the safest and most reliable way to get the right services without breaking the bank.

How to Pick the Best Public Warehouse

by Will Schneider

When it comes to making business decisions, choosing to outsource public warehousing only goes so far. Instead, it’s vital to pick the right public warehouse that truly save money and time.

Public warehousing is a strategic decision made by a company, but choosing the warehouse that best meets a company’s needs is often overlooked. Public warehousing is usually used for short-term storage solutions, such as holding extra products during busy seasons. But it’s important for a business to select one that meets all of the company’s demands. So here are some things to look over when choosing the best public warehouse:

Be Strategic – A decision process should definitely be used that involves several levels of management. Make sure put the appropriate time and analysis into the selection process and just don’t pick the first public warehouse that’s listed.

Begin with Detailed Location Analysis – One of the advantages of public warehousing is not being tied to a single geographic area. In-house distribution may be in New York but with public warehousing a company can choose a place that can better serve customers elsewhere. Request for a proposal from the public warehouse, this may give insight on the market that works best for the company.

Know System Capabilities – Make sure that the public warehouse provides the necessary system support – not only for current production but future advancements.
Leave Room to Expand – Usually public warehousing is short term, however, businesses should consider future expansion plans that could turn the contract into something more long-term.

Evaluate Public Warehouse Networks – Again, a lot of preparation is looking down the road. Look and see if the provider’s other locations may be beneficial to future expansion. Does the company allow movement into new and profitable markets?

Timing is Everything – Find out how long it takes to move and start using the public warehouse. This should give an idea of how long the process will take and how much money it will actually save.

Visit the Site – This seems like an obvious step but sometimes businesses jump into things without even seeing a public warehouse. Examine the facility’s cleanliness and maintenance standards and how was the relationship of employees and management. These are all indicators of a well-managed public warehouse.

Check Independent Sources – Make sure to evaluate independent references. They usually have insight of how the public warehouse is run and how it helped out their business.

What do Fulfillment Companies Charge?

by Will Schneider

One of the most frequently asked questions that we receive through our site is “what do fulfillment companies charge”? Of course, this is somewhat of a complicated question to answer, but we wanted to give those new to “fulfillment” a broad idea of the types of charges that they’ll encounter should they decide to outsource their fulfillment.

We understand that in order to decide whether you should do fulfillment in house or outsource, you have to have an idea of the costs of third party fulfillment. Before we elaborate on some of the more common charges, we wanted to give you a few words of wisdom when comparing costs. First, when comparing to the costs of doing it in house – make sure that you’re looking at all of the costs that you’ll incur to do the fulfillment in house. This means that you can’t ignore things like management time and the most commonly overlooked cost – opportunity cost (what you could have done with your time had you not been, for example, on the warehouse floor shipping packages). Second, when comparing costs among various outsourced fulfillment companies, make sure that you’re comparing apples to apples. This is a very difficult task, because for some reason many fulfillment companies like to make things extremely complicated! But beware, because what seems like good pricing at first glance may not be the best option when you look at all of the fees.

Okay, so on to the most common fulfillment charges! These are the most common types of charges that you’ll see in the fulfillment industry. If after looking at these charges you’re interested in getting “live quotes”, then just let us know and we’ll get you connected.

  • Receiving to count and enter your materials into inventory (each time they receive inventory)
  • Storage of goods per pallet per month (or square footage or cubic footage)
  • Processing of orders either a flat per order fee OR a per order fee combined with a per item fee
  • Shipping charges (usually a discount off of published rates – and most likely better than you’d be able to get on your own)

There are other fees that vary from company to company – such as account management, fees to interface with a shopping cart, returns fees, etc. Remember, keep a close look on all of the charges when comparing costs – not just between fulfillment options but also when you’re comparing against keeping it in house.

Why Small to Mid-Sized 3PL’s Excel for Small Businesses

by Will Schneider

If you’ve ever researched a fulfillment company and looked at some of the large fulfillment companies like Amazon Fulfillment, then you know how frustrating it can be to simply get a live person on the phone. We recently had a company use our service to find a fulfillment company because after they filled out four quote requests on Amazon’s site, still nobody had contacted them. And even more interesting…there was no phone number on the website.

Now, don’t take us the wrong way – there are plenty of customers that are extremely happy with these types of companies and we’re sure that they do a great job of fulfillment overall. But to the small to mid-sized business that needs extra attention and prefers to actually get the chance to speak to a representative over the phone, there may be better options.

There are a number of very high quality small to medium sized 3PL companies that not only do a great job of fulfilling orders accurately but also offer a higher degree of customer service. It can be very critical for some companies to be able to speak with their fulfillment company in order to communicate the specific needs of their storage and distribution. Furthermore, it’s more realistic that significant relationships can be forged with the management at these 3PL companies, which can prove to be invaluable during different stages of the relationship as well as offering another key consulting advice to help your small business grow.

And finally, these smaller to mid sized 3PL companies usually offer very competitive pricing. Oftentimes, pricing is noticeably lower than pricing with the larger scale companies.

So remember, there are so many variables to consider when outsourcing your fulfillment and distribution, so take a look at all of the options in order to choose the best fit for your company.

Choosing a Pick and Pack Company for E-Commerce

by Will Schneider

With so many pick and pack companies out there, how do you know who to choose when it comes to fulfilling orders for your e-commerce business? The one thing you can be certain is that most pick and pack companies are going to tell you that they’re good at all types of fulfillment services, from retail and product fulfillment to e-commerce fulfillment. But there really are a select few that truly specialize in the intricacies of e-commerce fulfillment. So knowing what to look for will help you make the best decision.

E-commerce fulfillment involves shipping orders that come from an online web store (also known as a shopping cart). There are so many web stores and shopping carts to choose from – each with their own programming language and technology. Pick and pack companies that truly focus in on e-commerce fulfillment have the ability to integrate with most shopping carts seamlessly, meaning that they can automatically receive all of your orders from your website as well as send you back any information that you need after the packages are shipped (such as tracking information). There are a lot of details that can cause trouble and confusion when exchanging information between your shopping cart and your pick and pack company – from SKU information to handling charges passed on to customers to what happens if someone requests a change to their order after it has been submitted. This is why it’s important to have a pick and pack firm that knows what they’re doing.

Some of the questions you should ask your pick and pack company before making a decision:

What kinds of shopping carts can you integrate with?

What happens if a customer makes a change after the order has been submitted to you?

Can you update my shopping cart with the shipping costs?

Taking a thorough look at the pick and pack companies before making a selection can mean the difference between tremendous pain and great success.

What’s the Best Location for a Fulfillment Company?

by Will Schneider

Many small and medium sized businesses are searching for a fulfillment company to store and ship their goods for them. But determining where the fulfillment company should be located can be a great challenge. Of course, most businesses would prefer for a fulfillment company to be located right down the street. This way, they can easily travel to them to check on stock and in case there are any issues. While this isn’t a bad strategy to employ, looking at the world this way could also lead to missed opportunities.

First and foremost, finding a fulfillment company right down the street doesn’t necessarily mean that they’re going to be the best fit for your business. There are so many other factors that mean a great deal when considering who to choose to perform your outsourced warehousing and distribution. Other things could have a big impact such as the specialty of the fulfillment company and their pricing. For example, most people wouldn’t know this because most third party fulfillment firms tell you that they can do “any” project, but the reality is that most fulfillment vendors focus on certain types of clients. Some are really good at e-commerce fulfillment, while other are really good at retail fulfillment to retail stores. Furthermore, there are some really good fulfillment companies that offer great service and some of the most competitive pricing, but if you won’t consider anyone outside of your city, you might miss on these potential cost savings.

Second, a huge indicator of costs involved in any fulfillment project is shipping. If you choose a fulfillment company right by your company, it may or may not be the best decision to lower your overall shipping costs. Two factors come into play when making this determination – where your product is manufactured and where your customers are. For example, if your product is produced inChinaand most of your customers are inCalifornia, then it would make sense to located a company in or near a major port inCalifornia. And for many companies that ship to customers all across theUS, finding a fulfillment company that is centrally located may be the best option.

As you can see, this is no easy decision. But taking into account all of the factors, instead of just looking at convenience, will lead to the best decision overall for your company.

Outsourcing Pick and Pack

by Will Schneider

Are you considering outsourcing pick and pack with a fulfillment company? This is a very important question that many product-related companies consider. While the answer may seem obvious to some, there isn’t really a clear cut answer in many instances. Here are some of the reasons it can be difficult for people to outsource, as well as some things to consider when making the decision.

First and foremost, it is extremely difficult for many small business owners to outsource anything, as many times they have been responsible for the core functions of the business. Many small business owners do a great job at the core functions of their business, and rightfully think that they can do them better than anything else. However, the hard truth is that we only have a certain number of hours in each day. Especially if a small business is pursuing growth, sharing responsibility is the only way. Whether this is hiring additional staff or outsourcing the pick and pack, getting it off of the plate of the small business owner can be extremely successful. The catch is this – they have to be willing to accept that whoever they give pick and pack responsibilities to will not necessarily do it as well as they did it. No one ever has as much care for a business as the owner. However, owners must realize that they can only do a certain amount of things each day, and if they can get others to perform even at 80-90% of their capability, then the job will be done well.

The other big thing that we see when considering whether or not to outsource pick and pack services is “where” the fulfillment company must be located. Again, going back to the “control” issue, most small business owners wish to have the pick and pack located close to them. They figure that this way they can have more control over the process. While this may be true, the unfortunate reality is that there aren’t necessarily quality, high performing fulfillment companies in all areas of the country. This means that they could compromise by going with a local firm, taking a great risk that they warehousing company doesn’t perform well. But the really good 3pl companies will do a great job, whether or not you’re located next door to them. And believe me, finding a great pick and pack company is worth its’ weight in gold.

Finally, when looking at whether or not to outsource, keep the costs in mind. However, it’s not all about whether or not it’s cheaper to outsource. This is because most small business owners fail to incorporate “opportunity costs” into the equation. Simply put, there is an opportunity cost of continuing to do the fulfillment in house. If you do, you won’t have time to, for example, locate new customers, grow your business, or uncover earth shattering business opportunities. In order to make the best decision, you must include opportunity costs into the equation.

Warehousing and Fulfillment Pricing Tips

by Will Schneider

Looking at a pricing proposal from a warehousing and fulfillment vendor is akin to browsing the statutes of a typical homeowners association. Although it may be a good solution for sleep troubles, reviewing the pricing proposals of warehousing and fulfillment companies should be done with great care and diligence.  Below are some tips to help avoid some of the challenges of warehousing and fulfillment pricing.

  • Make sure that the warehousing and fulfillment vendor has listed ALL costs
  • Beware of monthly minimum charges
  • Ask for volume discounts that are available for higher volume order processing and storage
  • Determine all monthly fixed recurring charges
  • Ask if the handling charges can be rolled into your product costs and make sure that you are comfortable with the resulting net profit
  • Ask if the vendor makes margin on freight
  • Ask for referrals from current customers to make sure that costs don’t change after sign up
  • Check the vendor’s BBB rating
  • Make sure that everything is documented in a contract

Taking a few precautions when looking at warehousing and fulfillment proposals can help in avoiding unncecessary troubles, and can lead to a long-term agreement that works for both sides.