Category Archives: WarehousingAndFulfillment News

Recent news and important events about our company – WarehousingAndFulfillment.com

The Warehousing and Fulfillment Industry is Changing from the Inside Out

Changes in the Warehousing and Fulfillment IndustryWarehousing and fulfillment – two words that bring up mental images of huge structures, palletized goods, and complex shipping rules. Some large brands have the resources to tackle these processes on their own. Many small businesses, however, tend to struggle to find the warehousing and fulfillment solutions that work best for them.

Recent shifts are altering that landscape further, as e-commerce selling and marketplaces grow in popularity. What was once a drab, uninteresting industry has transformed into something much “sexier.” Budding interest in the sector has brought a lot of changes – some for the better and some that remain to be seen.

In fact, the industry is changing so rapidly that it is becoming somewhat unrecognizable in many ways. In this article we will explore some of these more seismic shifts and look towards some of the changes that are forever altering the landscape of warehousing and fulfillment forever.

The Astonishing Shifts Within the Warehousing and Fulfillment Industry

Brands Morphing into Fulfillment Services Companies

As has always been the case, many brands and companies that sell products choose to pursue their own fulfillment operations – in many cases because they can’t find an outsourced fulfillment service that meets all of their needs. But what is happening more frequently is that more and more of these brands are leveraging their own in-house fulfillment divisions into the creation of a full-service outsourced fulfillment operation. One of our own customers, Next Level Resource Partners, successfully achieved this metamorphosis. NLRP began as a sporting goods business and has evolved into an organization that also offers highly customized fulfillment services.

“We have always managed our back of house operations for our brand Harrow Sports, so the formation of NLRP was very organic,” noted Keith Krasney, V.P. of sales of Next Level Resource Partners. “Our sporting goods business is extremely custom & specialized and it would be difficult to turn that over to a 3rd party. To us it was clear, there are thousands of brands who need specialized, white glove services and we had decades of experience via our own brand. The ability to think like a brand owner allows us to provide a very consultative approach to our clients. Some of the biggest pain points our apparel customers experience when attempting to outsource with other providers are their extremely high SKU counts, the dynamic storage space requirements needed, the strict process controls necessary to pick similar and “like” items, and the specialized services needed the would require customization. We’ve done it well for years, so it was only natural to help others. This has streamlined our supply chain, increased our capabilities, and has allowed the company to help numerous other brands that need specialized fulfillment services as well.”

Easy Access to Technology and Airbnb Style Fulfillment Networks

Technology, in part, has fueled some of this shift. Currently, it is easier than ever to procure highly sophisticated warehouse management systems to “become” a third party logistics warehousing company (3PL). These systems, in many cases, integrate with shopping carts, marketplaces, and shipping platforms – making third party fulfillment more attainable for newbie 3PLs.

Other brands– that aren’t even fulfillment providers– are also starting to plug-in to Airbnb-style fulfillment networks. These provide an easy opportunity to amass additional revenue streams. Simply put, these networks allow anyone with a warehouse to plug into their warehouse management system and use their technology to process warehousing (and in some cases, fulfilment) for other businesses that need additional help. In the case of these Airbnb-style options, there are some significant potential downfalls (read here for more details), but they are gaining in popularity nonetheless.

Fulfillment Companies are Incubating Small Businesses

Fulfillment companies are changing the way they do business, too. Some of them have even begun to “incubate” small businesses. This partnership helps small businesses grow thanks to fulfillment companies’ support. Fulfillment companies may take any number of steps to help incubate a small business, including:

  • Assisting with marketing (especially online marketing services such as paid search marketing and search engine optimization)
  • Providing fulfillment spaces for collaboration
  • Connecting small businesses with investors
  • Placing small businesses in flex spaces at fulfillment centers so that they can “grow into” more advanced fulfillment services

Even the Big Online Selling Platforms are Shifting Towards Fulfilment

If you try to think of the biggest corporate name in the fulfillment world today, your mind probably flies to Amazon. We don’t blame you! Amazon is still a giant in the realm of fulfillment, but other big players are beginning to recognize opportunities in the industry, too.

Shopify, Walmart, eBay, and other commerce leaders are inching further into the fulfillment world to compete with Amazon. Nobody can predict how these shifts will play out – for Amazon or for The Other Guys. But they’re changing the landscape of fulfillment as experts know it.

Fulfillment Centers and Businesses Working Together for Expansion

Fulfillment centers have even started to partner strategically with other businesses that have idle warehouse space. More and more we’re hearing stories of companies in our vast network of warehouses where, instead of procuring and leasing warehouse space in a new market, they are hunting down a company with idle warehouse space in their target new market and partnering up with them to expand into that new market.

Here’s how it works – rather than starting a new operation in a new market from the ground up, they simply train the partner company’s staff on systems and processes used, spend some time with them for a short period of time overseeing the training process, and then remotely monitor their performance alongside occasional visits. Then, once the operation grows enough, they lease or purchase space in the area and branch out on their own.

The entire process mitigates risk and ramps up the time to market in new locations. Procuring warehousing is expensive, difficult, and comes with a plethora of red tape. In some cases, it’s easier to work together with other businesses to create a solution somewhere in the middle.

Co-Warehousing with Other Merchants

You’ve heard about co-working, but how about co-warehousing?

Co-warehouse space is beginning to pop up across the country. In these spaces, self-fulfillers have the freedom to rent and share flex space as desired (or necessary). This allows small brands to handle shipping services without committing to the lease of a full warehouse on their own. Places like Saltbox in Atlanta are pioneering this new option. Usually, the co-warehouse space will provide warehouse space for storage, forklifts or pallet jacks, shipping stations, pick areas, and other aspects needed to perform the entire spectrum of do-it-yourself fulfillment.

Change is the New Constant for the Warehousing and Fulfillment Industry

These new changes are helping sellers and distributors of products find creative solutions to their problems and challenges. In the coming years, we expect to see more and more “outside of the box” thinking in this otherwise very predictable and historically undisrupted industry.

COVID-19 Immediate Impact on the Fulfillment Industry

Coronavirus Impact on the Fulfillment IndustryThe COVID-19 pandemic is sending shockwaves throughout global supply chains, so it’s no surprise to learn that US and Canadian warehousing and fulfillment industry is experiencing significant impact as well. In order to gauge the short-term ramifications of this deadly virus on fulfillment providers throughout the US and Canada, we conducted a poll of the 600+ warehouses in our network. In the poll, we asked these five questions:

 

  1. Are you currently open and shipping orders for customers?
  2. Has your overall order volume for all of your customers remained the same, decreased, or increased as a result of the COVID-19 situation?
  3. What is your estimated percentage change in overall order shipping volume for all of your customers?
  4. If any of your customers’ order volumes have increased, what types of items do they sell?
  5. In what other ways is your business being impacted as a result of this crisis?

We thought that it would be helpful to not only provide timely data on the virus’ impact on businesses from the perspective of the fulfillment industry, but also to let fulfillment business owners in this vertical understand how other companies are being impacted during these unprecedented times.

Warehousing and Fulfillment is an Essential Service

One small blessing for the fulfillment industry is that the services these companies perform are considered an essential service in the event of a catastrophe such as COVID-19. Global organizations and even cities such as New York have deemed mailing and shipping and warehouse/distribution and fulfillment as essential. Especially since the world has already adopted online ordering habits over the past decade, it’s not a stretch for consumers to utilize e-commerce channels for purchases during a crisis. During times like these, 3PL warehouses can continue to deliver products to customers who order online, assisting in the social distancing efforts and helping to flatten the curve and contain the spread of the virus.

From shipping basic supplies like food and household products to medical necessities like thermometers and medicine, fulfillment companies are critical in keeping people at home rather than risking infection by venturing out into public areas. Furthermore, population groups that are at extremely high risk due to previous conditions or age or increased susceptibility to catching the coronavirus rely upon products being delivered to their doorstep.

How Many Fulfillment Companies Are Still Shipping Orders Amidst COVID-19

All of the fulfillment companies that responded to our survey indicated that they are still operational and shipping orders – a full 100%. None of our fulfillment centers indicated that they were fully closed. Only 7.7% of respondents indicated that they were operating on a limited basis.

Percentage of fulfillment companies still open and shipping 100%
Percentage of fulfillment companies fully closed 0%
Percentage of fulfillment companies operating on a limited basis 7.7%

Despite Being an Essential Service, Many Products Aren’t Essential

When asked if the COVID-19 outbreak has increased or decreased overall order shipping volume, only 13% of all respondents indicated that order volume has increased. These companies, perhaps highly leveraged towards customers that ship essential or medical related items, are reaping the benefits of such a strategic mix of clients during a global outbreak of this nature.

But these fulfillment centers that are shipping more orders than normal are definitely a minority. 32% of fulfillment respondents to our survey are shipping the same number of orders as they were before the outbreak struck, and an astonishing 55% of fulfillment companies are shipping fewer orders than normal. Many of the fulfillment warehouses we polled are experiencing significant declines in orders and revenue that are leaving them with very real and lingering questions about the overall impact that this crisis will have on their businesses, despite the fact that they are an “essential service.”

Percentage of fulfillment companies that are shipping more orders since COVID-19 13%
Percentage of fulfillment companies that are shipping the same number of orders 32%
Percentage of fulfillment companies that are shipping fewer orders since COVID-19 55%

Overall Fulfillment Volumes are Down by 18% on Average

The short-term devastation of the coronavirus is already being seen in the warehousing industry. Of all the fulfillment centers that responded on our survey, the average change (plus or minus) in order shipping volume was a whopping decrease of 18%. Fortunately, many companies noted that shipping volumes were still unchanged, and only a small percentage of fulfillment providers have seen their order volumes increase (as much as 10% to 30%). But for over half of the respondents of our survey, significant decreases in shipping are being seen. For example, the average decline in order volumes for those that reported decreases was about 25%, and the highest decreases reported were up to an astonishing 70-80%.

What Products are in High Demand During the COVID-19 Crisis

When we asked the fulfillment houses in our network about the products that were still shipping in high demand during the last few weeks, many of the answers were expected, with food and medical items showing up most frequently in the survey answers. Some of the most commonly shipped items during this crisis so far include:

  • Foods and groceries, especially dry goods like pasta
  • Medical and pharmaceutical products (one company even noted ‘medical beds’)
  • Personal care and beauty items
  • Nutritional supplements
  • Emergency deliveries
  • Hand sanitizers and disinfectants and cleaners

However, some of the items on the list of products that are flying off the shelves are somewhat surprising, including:

  • Exercise equipment
  • Packages being sent to attendees of events that have been cancelled
  • Samples being sent to customers to cope with the crisis
  • Board games and puzzles
  • Books and crafts
  • Footwear and apparel
  • Supplies related to precautionary spacing of workplaces
  • Computer components
  • Pet supplies and products (one company even noted ‘back yard chicken supplies’)

Due to in-home isolations, consumers are increasingly turning to solutions that will help them exercise at home, including exercise equipment. And with kids at home and many schools opting to try to utilize homeschooling methodologies, we expect that homeschool supplies, books, arts and crafts will continue to be popular during this time. In order to ensure proper use of computers and printers, many consumers could be forced to order computer related supplies for their in-home systems. Of course, pets need to be maintained during this time as well, so pet supplies and products are in high demand as well. Another area that was somewhat surprising was that businesses are sending out samples to help consumers cope with the crisis and perhaps perform some light marketing, and packages are being sent to would-be attendees of events, in hopes that things will pick up swiftly after this crisis is contained.

Impact of COVID-19 on Fulfillment Companies is Far Greater than Sales and Revenue

Perhaps one of the most intimate and impactful ways that this crisis is altering the fulfillment landscape relates to all of the changes that companies are having to make ‘on the fly’ in order to cope with the practical implications of maintaining a healthy workplace – both physically and mentally.

According to one warehouse representative, SOP’s (standard operating procedures) are changing rapidly to cope with COVID-19 and to mitigate risk. Some of the ways that warehousing companies are changing includes:

  • Being vigilant about working 6 feet apart and limiting all contact (even going so far as to set up workstations that didn’t otherwise exist before the crisis)
  • Diligently enforcing sanitation policies of hand washing and covering mouths when coughing, and erring on the side of caution in terms of sending employees home at the first sign of sickness
  • Instituting much stricter policies around interactions with outsiders, including truck drivers and customers
  • Allowing some administrative staff to work remotely from home
  • Updating policies to be more relaxed and flexible for PTO and employee time off, not only to deal with potential health issues for the employee but also for their families and children
  • Alternating shifts and schedules to keep employees fresh and less apt to illness and burnout
  • Helping employees get to work, including paying for delivery services to bring employees to work if they’re unable to drive or in cases where they rely upon public transportation

On top of all of the changes, it’s becoming very challenging even finding temporary workers to help fill the gaps where needed, as was noted by a number of our warehouse respondents.

The Mental Aspects of Dealing with COVID-19 in the Fulfillment Industry

Of course, the coronavirus is causing a great deal of anxiety for fulfillment workers and management. Maintaining a positive corporate morale is an extremely important task in a situation where there are so many unknowns. Our survey uncovered in some cases that it is becoming increasingly difficult to keep employees coming to work due to the anxiety and fear that some workers have about potentially catching the coronavirus in the work setting. In other cases, especially part-time employees, workers are flat out not showing up for work or are notifying warehouses that they will not be coming in.

Lots of questions are being asked by clients and staff alike, wondering if shutdowns are on the horizon, if there will be layoffs, or generally how the company will be impacted financially by the outbreak of the virus. Some companies have had to reduce hours already, which makes maintaining a positive company morale even more challenging. And in scenarios where warehouses are continuing at a normal pace or even growing in shipping volume, concerns still loom regarding whether or not their customers will be able to pay their bills. The fear of a cash flow crunch in the near-term is significant among respondents. One common theme among most warehouses in our survey was that the bulk of the growth strategies for the upcoming year will likely have to be significantly adjusted.

Preparing For a Rebound Still Presents Challenges for Fulfillment Centers

Lastly, although there is optimism among the industry about achieving normal operations at some point in the future, there are also some additional hurdles to clear as the economy rebounds. Incoming shipments currently are light or non-existent, and some warehouses aren’t expecting inbound replenishments for a few months. Once new products start to be sent, particularly from overseas manufacturers and suppliers, it could take some time to flush out these receipts and truly replenish stock to meet upcoming demands. While this is a significant challenge to overcome, it’s no doubt a welcomed challenge that the industry is anxiously anticipating.

Warehousing and fulfillment providers most certainly keep our global economy moving. They will continue to work through the challenges of this virus, and will help us not only get through the kinks of replenishing stock once the outbreak curtails, but will continue to fuel the world in the distant future.

Sizeable Increases in Warehousing and Fulfillment Costs According to insightQuote’s 2020 Poll

warehouse and fulfillment costsIn January 2020, we conducted our annual warehouse costs and pricing survey. This year, our participation numbers continued to grow, and we would like to sincerely thank every warehouse who participated in this year-long survey.

Before we jump into the results, let’s talk about some of the assumptions we made during the process of the survey. For starters, we didn’t record which answers were associated with which warehouse. This allowed our vendors to remain confidential and gave them the ability to answer in-depth questions without fearing accidentally providing critical information about their competitive practices.

We also excluded any survey answers that were too far outside of the bell curve. For example, if a warehouse indicated that they paid $100 per-square-foot for warehouse space, we would exclude that answer if the bell curve average was $20 per-square-foot. In these cases, we assumed that exceedingly high or low answers to survey questions were due to misunderstandings — not massive price fluctuations. That being said, we still included abnormal figures, as long as those abnormal figures didn’t make a significant change to the bell curve alone.

Third, we didn’t segregate any of the results by geography. The primary reason for this was to simplify the overall architecture of the survey results. However, we do fully acknowledge that removing geography from the equation can skew the results of the survey — since we have vendors operating in the United States, Canada, and across Europe.

Fourth, we computed the averages to questions with multiple-format answers to provide simplification. So, if we asked warehouse owners what they pay their management, we may receive answers that include both salary and hourly wages. Instead of supplying both forms and increasing the complexity (and digestibility) of the answers, we simply calculated hourly into salary and presented salary as the only answer.

Finally, if there were any responses that warranted some further explanation, we elaborate on those responses below. This allows readers of the results to better understand the context and circumstances surrounding the response.

Summary of 2020 Survey Results

Overall, the growth in e-commerce fulfillment, the complexity of same-day returns, and rising warehouse market costs resulted in warehousing costs rising this year. For the first time, we also measured add-on services (e.g., inbound calls, kitting, shopping cart integration, etc.) — which are being utilized by many warehouses to help offset the growing costs of fulfillment. This year’s survey showed an increase in costs across the entire warehouse ecosystem (e.g., leasing costs, employee rates, salaries, etc.), yet the total profitability of warehouses rose significantly. After last year’s decline, warehouses have found their momentum and are gaining significant profit growth — partially fueled by increased customer fees and technology integration.

You can view some of the high level summary results on our infographic:

insightQuote's Warehousing and Fulfillment Pricing and Costs Survey

Performance Data

For questions relating to performance data, our primary objective was to discover how many fulfillment providers leverage performance data to measure and improve their quality-of-work. We asked fulfillment providers the following questions:

  1. If you own multiple warehouses, do you charge the same for each location?
  2. What percentage of customers do you retain each year?
  3. Do you measure performance?
  4. What is your picking accuracy?
  5. What is your inventory shrinkage rate?

We found that 53% of respondents with multiple warehouses have a unique pricing structure for each location, while 47% operate on identical charging structures between all locations. As we continue the trend of year-over-year tech adoption, we saw a rise in the number of fulfillment providers who measure performance (93% vs. last year’s 82.9%).

The overall picking accuracy has also jumped from 99.19% to 99.31% — likely as a result of wider performance measurement adoption. Surprisingly, inventory shrinkage rates jumped from 1.26% last year to 2.84% this year, possibly indicating frictions in performance measurement adoptions. Finally, customer retention rates dropped this year. In 2018, we saw fulfillment providers keeping 99.52% of their customers. This year, that number has dropped to 94.5%. This is likely due to an increase in competition fueled by fulfillment demand.

Agreement Terms

We often get questions surrounding the standard terms of agreement that fulfillment centers utilize from companies and warehouses looking to outsource their fulfillment needs. To help shed light on these questions, we asked participants:

  1. What terms do you offer on your agreements (e.g., month-to-month, annually, multi-year, no-term, etc.)?
  2. Do you increase your pricing on a regular basis?
  3. If you do increase your pricing, what percentage do you increase pricing?

In our survey, we found that 55% of fulfillment providers offer month-to-month agreements, 54% offer annual agreements, 45% offer multi-year agreements, 16% offer no term agreements, and 46% offer multiple types of agreements depending upon needs. Overall, we saw a 21% increase in multi-year agreements and a whopping 33% increase in no term agreements. There was also a slight decrease in both month-to-month agreements (1.8%) and annual agreements (12%).

The number of warehouses that increase pricing on a regular basis also jumped to 69%. That’s a 5% increase from 2018 and a 27% increase from 2017. For those that increase pricing, they do so by an average of 3.3%. Again, that’s a slight decrease from last year’s 3.7%. 92% of warehouses who increase pricing do so annually, while 8% do it every 2 (or more) years.

Warehousing Costs

Warehouses looking to remain competitive need to understand how much other warehouses are paying to operate and maintain their warehouses. Here are some questions we asked:

  1. Yearly cost per square foot of your warehouse space?
  2. Starting hourly rate of your warehouse staff?
  3. Annual pay for a warehouse management employee?
  4. Corporate profit?

The average yearly cost per square foot of warehouses was $7.81, increasing $0.03 from last year. Additionally, the average starting hourly rate of basic warehouse staff was $13.47. For warehouse managers, the average salary was $52,765 (or $25.37 per hour). Last year’s results stood at $13.32 and $50,524, respectively. Corporate profit rose on average from 7.25% to 9.77%, largely as a result of the the increases in pricing, which are detailed below.

Pricing and Discounts

In addition to fundamental questions about warehouse pricing, we polled warehouses to get deeper insights into their pricing structures, discounts, and additional services. These questions will help warehouses, businesses, and fulfillment providers better understand some of the pricing complexities in the market — including the average fulfillment pricing, costs, and fees.

For Order Fulfillment Pricing, We Asked:

  1. What is your average pick and pack price for a single item direct to consumer order?
  2. What is your average pick and pack price for a business to business order?
  3. Do you offer discounted pick and pack rates?
  4. How much do you charge for cartons, inserts, and promotional materials?
  5. If you do offer discounted pick and pack rates, what is the break with which you provide the discount and how much of a discount do you offer?
  6. How much do you charge for Amazon FBA orders?
  7. How much do you charge for subscription box orders?

The average B2C pick and pack fee for single item orders was $2.96 (up from $2.86 a year ago) while the average B2B pick and pack fee for single item orders was $4.27 (up from $4.17 a year ago). This year, 69% of warehouses offered discounted pick and pack rates for high-volume shippers, which is down 6% from last year. Discounts range from 2 – 10% (with an average of 6.8%), and the average break is at 2,400, with a range of 500 to 20,000.

This year, we also asked warehouses about how they handle Amazon FBA orders. The vast majority of warehouses do not discount for Amazon, and their pricing structure is generally the same (plus $0.2 – $0.5 per SKU label and $.50 per carton label). We also asked about subscription boxes. Usually, the price is the same for subscription boxes, but some warehouses do a mass kitting project at a better rate before charging pick and pack for single item orders.

When it came to cartons, warehouses we surveyed applied cost plus a 10 – 15% add-on fee (overall average was a cost plus 14.5%). A whopping 77% of all warehouses The average cost for materials  was $0.99 on average with a  range of $.25 – $1.50. When it comes to adding inserts or other promotional materials, 17% of warehouses didn’t charge any additional fees, while the majority of warehouses charged an average of $0.17. The methodology behind inserts ranged drastically from warehouse-to-warehouse, with many offering free initial inserts with charges for each additional insert.

For Storage Pricing, We Asked:

  1. How do you charge your customers for storage?
  2. What is your average price for storage?
  3. Do you offer discounted storage fees?
  4. If you offer discounted storage fees, at what breaks do you offer discounts and what discount is offered?

By far, the most common was of charging for storage was via pallet storage (95% — which is a 5% increase from last year). This was followed by cubic foot (31%), square foot (27%), per bin (25%), and other (4%). 53% of surveyed warehouses used multiple storage charging methods.

The price for each storage method (besides per bin) also increased this year. Pallet storage is up to $14.58 (up from $13.20 last year) per pallet. Per bin storage is up to $3.3 (up from $2.85 last year) per bin. Square foot storage is up to $0.77 (up from $0.66 last year) per square foot, and cubic foot storage remained unchanged at $0.495. We also asked warehouses what they charge for climate-controlled storage, with the average premium at 173% over the base storage fee (anywhere from $16 – $23 per pallet).

The number of warehouses offering storage discounts is up to 62% this year, a remarkable 29% increase from last year. This discount was applied at an average of 420 pallets, with the majority of warehouses offering the discount at breaks of 100 to 500 pallets. The average discount range was 2 – 15%, and the average discount was 7%. Some provide discounts for double stacking pallets, and some discount storage if order volumes increase.

We Surveyed the Warehouses About Their Shipping Pricing and Discounts. Questions Included:

storage and pallet fees

  1. How do you charge for shipping?
  2. If you offer shipping discounts? If so, what discount do you give for ground, express, international, and LTL shipping?
  3. Do you let customers use their own freight accounts?
  4. Do you have Commercial Plus Pricing with the USPS?

With regards to shipping and pricing, we found that warehouses offer a variety of approaches (and 23% offer more than one approach).  32% of warehouses offer discounts off of the published rates, 45% offer cost-plus, 7% offer no discounts, 36% allow customers to use their own rates, and 9% exist in the “other” category.

For warehouses that do use shipping discounts, the average ground shipping service discount was 13% off published rates (with 12.5% markup over cost). For express shipping services, the average discount was 20% (with 12% markup over cost). For international shipping services, the average discount was 11% (with 12% markup over cost). For LTL shipping services, the average discount was 57% (with 15% markup over cost).

We also asked warehouses whether they allowed customers to use their own freight account. A massive 91% of warehouses allow customers to use their own accounts, while 9% do not. For those that allow customer freight accounts, the majority don’t charge additional shipping processing fees (68%), but the average charge for those who do is $1.59 (range of $0.5 to $2 on average). Also, we found that the majority (64%) of warehouses have Commercial Plus Pricing with USPS.

Set Up, Account Management, Receiving, and Returns Fees

Like in our 2018/2019 survey, we asked questions about some of the other ancillary fees fulfillment companies charge. In addition, we asked about some new services such as shopping cart integrations, kitting services for subscription boxes, and call center services. As these additional profit streams continue to grow, we’ll continue to add new questions to our surveys in the future to ensure that fulfillment centers, warehouses, and businesses understand the global optics of fulfillment profits.

We asked questions like:

  • Do you charge a routine account management fee, and if so, how much and how frequently?
  • If you charge a set up fee for a new client, how much do you charge on average?
  • How much do you charge for call center services?
  • Do you charge receiving fees, and if so, how much?
  • Do you charge returns fees, and if so, how much?
  • How much do you charge for kitting services?
  • How much do you charge for shopping cart integrations?

The majority (56%) charge for setup fees. The fees vary from client-to-client, but the average was $520 (with a wide range of 0 to $5,000). This is up from last year’s $336 average setup fee. This year, we also asked about online shopping cart integration. The average charge for a one-time shopping cart integration was $156 (or a $75 average monthly fee).

Conclusion

This year, only a small majority (51%) of companies are charging routine account management fees (down 9% from last year). For those that do charge return fees, the average was $130. A whopping 91% of all fulfillment respondents charge for returns, which is a 7% increase over last year. The average return charge was $4.05, and 11% charged the same amount as their regular pick and pack fee. The majority of warehouses (84%) charged receiving fees, though this is down 11% from last year. The average receiving fee charge varied by type. The average hourly charge was $35.30. The average charge for a 20-foot container was $330. The average charge for a 40-foot container was $465. The receiving fee was charged at $6.3 per SKU on average (range of $2.5 to $10), and the average charge for cartons was $1.50 (range of $0.5 to $5). In addition, the average per pallet charge was $7.65 with a range of $4 – $12.

This year, we dove deeper into some of the additional revenue streams like kitting and inbound call services. The average cost for kitting was $35.75 per hour ($0.20 per unit for simple projects). For inbound call services, the average was $1.05 per minute with a range of $0.75 to $1.25.

To view the results of the previous surveys from the last couple of years, please see below:

2018-2019:

Warehousing and Fulfillment Fees Rise According to Latest insightQuote Survey

2017:

Warehousing and Fulfillment 2017 Warehouse Costs and Pricing Survey

Market Growth: Red Stag Fulfillment Expands with New Fulfillment Center

It takes a village to raise an e-commerce business. The good news is that when e-commerce successes happen, they come with significant gains for the people who help make products and those who get them to customers on time. 

Red Stag Fulfillment is one such logistics and order fulfillment company that is turning valuable work supporting e-commerce businesses into an expansion. The company broke ground on a 313,000-square-foot extension that will increase its warehousing and fulfillment capabilities. The $16 million project is scheduled to complete by the end of August (2020) and will generate an additional 150 to 200 new jobs.

Red Stag Fulfillment

Expanding with the Market

Companies like Knoxville-based Red Stag Fulfillment are the hidden force behind most of today’s e-commerce businesses. These third-party logistics providers (3PLs) help ensure that ecommerce customers receive the right order at the right time while keeping costs low. By focusing on core warehouse and shipping activities for others, 3PLs reach high shipment volumes that allow them to grab discounted rates from carriers, while also implementing industry best practices for order and inventory management.

When the process is done right, the customer never knows that someone like Red Stag Fulfillment was involved.

That level of service and invisibility is becoming more critical as ecommerce sales expand. Ecommerce sales hit a record in the 2019 holiday season, growing 18.8% compared to 2018. And, having the right 3PL fulfillment partner can play an even more significant role: limiting the number of returns you have to process thanks to increased accuracy of last-minute orders that scramble out of a warehouse.

Every beat of growth in ecommerce increases complexity that companies must understand to respond to, whether that’s choosing an outsourced 3rd Party warehouse or adopting their own warehouse and inventory management solution.

A Global Presence at Home

Red Stag Fulfillment’s expansion is happening at its existing Knoxville, Tennessee location. The increase will allow it to serve existing clients best as well as extend offers for new businesses around the world. Any brand with a U.S. customer base can reach them within two days thanks to Red Stag’s footprint.

For 2019, the company shipped 99.998% of orders on time, with 99.997% order-accuracy.

“The new expansion is part of Red Stag Fulfillment’s commitment to calculated, profit-driven growth as well as delivering fulfillment excellence to our customers,” said Red Stag Fulfillment President Eric McCollom. “Strong companies are built brick by brick, and that’s what we’re doing for Red Stag Fulfillment and our customers with this growth.”

Red Stag Fulfillment

By enabling more companies to outsource their warehouse and fulfillment efforts, Red Stag is empowering business owners to focus on mission-critical sales and customer service elements of their operations. Not having to worry about orders getting out the door makes it easier to test new products and markets, offer greater deals, and adapt as the economy changes.

Their advice to anyone considering outsourcing but not knowing where to begin or what to expect: Ask. The best 3PL partner for you is going to be someone who knows your industry segment, understands shipping constraints and customer demands, and takes the time to help you understand those things too.

Find a company that feels like a friendly neighbor (even if they’re hundreds of miles away) because that’s the kind of help we all need to keep things running smoothly.

Warehousing and Fulfillment Fees Rise According to Latest insightQuote Survey

2017 WNF Warehose SurveyIn December 2018 and through January 2019, we conducted our annual warehouse costs and pricing survey. This year, we polled around 600 warehouses and had even more participation than in 2017, and we’d like to thank everyone that took the time to fill out the confidential survey.

Before we launch into the results, it’s important to point out some of our assumptions. First, we did not record which answer was associated with a particular warehouse. This was done to allow vendors to confidentially answer questions without fear of providing key information about their specific company. Second, if we found any of the survey answers to fall far outside of the extremes, we did not include the results in the averages outlined below. For example, if someone indicated that they paid $75 per square foot per year for warehouse space and the next highest amount was $18, we did not include the result so that we could accommodate for any order entry errors. Unreasonably high or low answers to our survey questions could have been a result of misunderstandings related to the question or an error in entry. Third, we did not segregate the results by geography. We acknowledge that this definitely has a tendency of skewing some of the results, as we do have vendors that operate in the United States and Canada. Fourth, in cases where results were given in various formats for a single question, we made our best attempt to compute averages based upon the most common answer type given. As an example, some respondents answered that they pay a warehouse management employee a salary, while others indicated that they paid an hourly salary. Similarly, some respondents provided answers to how much they charge for pick and pack per order as a flat order fee, while others responded that they charge a per order plus a per item fee. Finally, if there were any responses that warranted further explanation, we elaborated on those responses in our discussion below, so that readers of the results can understand the various responses received.

Summary of 2018/2019 Survey Results

Overall, the hot fulfillment and warehousing market, bolstered by e-commerce fulfillment growth and increased demand for timely processing of internet-driven orders, seems to have caused warehousing costs (mainly warehouse leases and labor related costs) to rise. As a result, the end of 2018 and beginning of 2019 has seen an increase in warehousing and fulfillment pricing for outsourced services. The survey showed that costs rose in all areas for warehouses (warehouse lease costs, hourly employees rates, and management salaried staff), and as a result overall profitability decreased slightly. In order to keep up with rising costs, providers of warehouse and fulfillment services increased their pricing offered to customers across the board as well, including storage fees, pick and pack fees. Furthermore, fulfillment companies opted to extend lower shipping discounts to customers as well.

2019 Warehousing and Fulfillment Pricing and Costs Survey

Below are the results of our latest survey. In order to make the results easier to digest, we’ve segmented them into the following categories:

  • Performance Data
  • Agreement Terms
  • Warehousing Costs
  • Pricing and Discounts

Performance Data

For performance data, our main objective was to see how many fulfillment providers use performance data to gauge the quality of their work. We asked the following questions:

  1. Do you measure performance?
  2. What is your picking accuracy?
  3. What is your inventory shrinkage rate?
  4. What percentage of customers do you retain each year?

In the survey, we found that 82.93% of companies polled measure their performance in some way. The average picking accuracy for order fulfillment companies was 99.19%, and the average inventory shrinkage was 1.26%. Respondents, on average, retained 99.52% of their clients. Performance data results didn’t vary significantly from our 2017 survey.

Agreement Terms

We get a number of questions, both from warehouses as well as companies looking to outsource, about the standard terms of agreement that fulfillment houses employ. In our survey, we asked:

  1. What terms do you offer on your agreements? (month to month, annual, multi-year, or no term) This question allowed warehouses to respond with multiple agreement types, since many firms are flexible and offer different terms to different customers.
  2. Do you increase your pricing on a regular basis?
  3. If you do increase your pricing, what percentage do you increase pricing?

In the survey, we found that 56% offer month-to-month agreements, 61% offer annual agreements, 37% offer multi-year agreements, and 12% don’t require an agreement in all cases. Month-to-month agreements rose slightly in popularity from 10.26% to 12%. More significant, however, were increases in annual and multi-year agreements. The use of annual agreements rose from 38% in 2017 to 61% in 2018/2019, and the use of multi-year agreements rose from 25% to 37% over the same periods. Furthermore, 64.29% of all respondents said they do increase pricing yearly. The rate of price increases nearly doubled – in 2017 the average increase was  2.37% and our latest survey indicated that the average rate increase is now 4%.

Warehousing Costs

It’s helpful for warehousing companies to see what others are paying to maintain their warehouse. In the survey, we asked:

  1. What is your yearly cost per square foot of your warehouse space?
  2. What is your starting hourly rate of your warehouse staff?
  3. What is your annual pay for a warehouse management employee?
  4. What is your corporate profit?

The average cost per square foot of warehouse space was $7.79, a marked increased of $6.53 in 2017. The average starting hourly rate of warehouse staff was $13.32, and the average annual pay for a warehouse management staff was $50.524 (2017 results were $11.44 and $47,478 respectively). The average corporate profit came in at 7.25% for 2018.

Pricing and Discounts

In order to get a feel for the going rates of fulfillment companies, we polled warehouses and asked them questions relating to their pricing and discounts that they offer customers. Not only do warehouses need to understand the competitive landscape, but we also get tons of questions from companies looking for outsourced fulfillment services that are looking to uncover the average fulfillment pricing, costs and fees. For pick and pack fees, we asked:

For order fulfillment pricing, we asked:

  1. What is your average pick and pack price for a single item direct to consumer order?
  2. What is your average pick and pack price for a business to business order?
  3. Do you offer discounted pick and pack rates?
  4. If you do offer discounted pick and pack rates, what is the break with which you offer the discount and how much of a discount do you offer?

The average pick and pack fee for a single item B2C order was $2.86 (up from $2.64 a year ago), whereas the average fee for a B2B order was $4.17 (up from $3.74 a year ago). An overwhelming 74.29% said that they do offer discounted pick and pack fees based upon volume of orders (which was unchanged from 2017), and the average discount was applied at 1,000 orders per month (with the highest frequency of responses either 500 or 1,000 orders per month). Discounts ranged from 5% up to 10%.

We did introduce an additional question in the 2018/2019 survey – ‘Do you charge differently for Amazon orders, and if so by how much?’. We found that 57.14% do in fact charge different for Amazon orders. On average, fulfillment houses charge $1 more for Amazon orders.

For storage pricing, we asked:

  1. How do you charge your customers for storage?
  2. What is your average price for storage?
  3. Do you offer discounted storage fees?
  4. If you offer discounted storage fees, at what breaks do you offer discounts and what discount is offered?

The most common way of charging for storage was pallet storage (90.24% – which was a 10% increase from 2017), followed by storage per bin (26.83%), per square foot (24.39%) and lastly per cubic foot (12.2%). These percentages reflect that companies, in many cases, offer more than just one storage pricing. Warehouses shied away from pricing per cubic foot in 2018 and into 2019.

The average pallet storage fee came increased only slight from $13.02 in 2017 to $13.20 in 2018/2019. The average cubic footage charge was $.5, the average cost per bin was $2.85, and the average cost per square foot was $.66. A full 48.65% of respondents offered discounted storage solutions (mostly at pallet levels), which was largely unchanged from last year’s survey. The average discount was 10% given at roughly 500 pallets.

We surveyed the warehouses about their shipping pricing and discounts. Questions included:

  1. How do you charge for shipping?
  2. If you offer shipping discounts, what discount do you give for ground, express, and LTL shipping?

With regard to shipping pricing, again we found that many companies offered a number of approaches. The most common approach (43.90%) was to allow customers to use their own rates. This was interesting, as many fulfillment providers rely upon making margin on freight. Not far behind, however, was the option of offering a cost plus model, where they mark up their shipping costs (41.46%). About a third of the respondents (31.71%) offer a percentage discount off of published rates, and 14.63% responded that they don’t apply a discount at all. When discounts were offered, the average shipping discount for ground was 20.02%, for express was 29% (both of which were decreases from 2017. 51.33% was the average discount given for LTL freight.

Set Up, Account Management, Receiving, and Returns Fees

In 2018/2019, we expanded our survey to ask questions about other ancillary fees fulfillment companies sometimes charge. The questions included:

  • If you charge a set up fee for a new client, how much do you charge on average?
  • Do you charge a routine account management fee, and if so, how much and how frequently?
  • Do you charge returns fees, and if so how much?
  • Do you charge receiving fees, and if so how much?

The average set up charge was $336, but some companies charge as much as $2,000-$10,000 depending upon the complexity of the integration. 56.41% of companies in our survey indicated that they account management fees, and the average fee was $226.54 per month. 84.62% of those surveyed indicated they charge returns fees and the average charge per single unit return was $3.53 (although some companies charge the same as their standard pick and pack fee OR around $35 per hour). Most companies polled charge a receiving fee (94.87%). Receiving fees varied widely including depending upon the unit of measure: $.25 unit; $7 pallet; $31.95 hour; $373.33 container; $1.21 carton.

To view the results of the previous surveys from the last couple of years, please see below:

Warehousing and Fulfillment 2017 Warehouse Costs and Pricing Survey

The Best Times To Use a Fulfillment Company For Amazon Related Orders

Amazon FulfillmentIt’s no secret that Amazon is the powerhouse when it comes to online commerce. If you’re thinking of selling products through Amazon’s marketplace, you’ll want to make sure you have the preparation process figured out down to a T.

If you’ve ever seen an FBA warehouse (Fulfillment by Amazon) operation in action, it’s pretty impressive. They employ more that 15,000 robots to help retrieve products, have huge conveyor belts to transport product from storage to packing stations, and they ship 35 items every second. In fact, Amazon’s outbound shipping cost is over $1.5 billion a year!

One of the main reasons why Amazon can ship so many items each day is because they’ve streamlined their inbound process. That minimizes the time it takes to receive products and get them ready to be picked, packed and shipped. They’ve been able to streamline their receivings by passing the preparation process on to its vendors.

Failing to comply with FBA product preparation requirements may result in the vendor being charged for non-compliance and/or their products being returned, disposed of, or even blocked from future shipments to the fulfillment center.

Amazon does offer its vendors guidelines such as its Quick Reference Guide on how to prepare inventory for FBA. However, the opportunity cost of vendors preparing products for fulfillment takes away from sales and marketing. A lot of fulfillment centers—like ShipMonk, for instance—saw an opportunity and began offering FBA prep services to help vendors prepare their inventory before it’s sent to an FBA warehouse. Everything from opening containers and repackaging thousands of SKUs to simply labeling products correctly with barcodes—prepping products for FBA is essential if you want to be a successful Amazon vendor.

Here’s a list of various FBA Prep Services:

  •      Quality control
  •      Repackaging
  •      Labeling
  •      Fragile item preparation
  •      Loose products
  •      Sold as a set
  •      Boxed units
  •      Poly bagged units
  •      Case-packed products
  •      Expiration dates

Now that you understand the importance of Amazon preparation, you’re probably wondering if you should do it yourself or look to a fulfillment center for help.

The answer isn’t anywhere near cut and dried. Therefore, you’ll need to take into account the following:

Where is your product manufactured?

The best solution would be for your manufacturer to prep the products for FBA for you, but you’d have to calculate how much that affects your shipping rates. If you’re importing from China or another foreign country, you’ll probably want to save as much as you can on shipping to the U.S. To do this you’ll need to put more than 1 SKU on a pallet—which is great for lowering costs but makes the product unfit as an FBA receivable.

How many SKUs do you have?

If you have a lot of different SKUs that require different prep services, it may be too much to keep track of and stay up-to-date. Also, do you have the space and equipment to de-palletize and repack the products on pallets or in boxes for FBA?

What packing materials are needed?

If you need specific packing materials such as poly mailers, fragile item wrapping, or labels, a fulfillment center may be a great option. They have various materials in stock and may even give you a discount since they can purchase in bulk.

What’s your profit margin?

How much are you selling your products for and what are you making? If you have room in your profit margin, it probably makes sense to outsource the FBA prep service. Then you can focus your efforts on expanding your product line and/or selling more product. (Unless, of course, you just love working in the warehouse, then absolutely, you should not outsource!)

Is the risk worth the reward?

Can your business afford to have its products returned or be billed a non-compliance fee for failing to meet FBA standards? A reputable fulfillment center will include in their SLA that if something happens due to not following FBA guidelines, the fulfillment center will assume responsibility.

Are there seasonal spikes throughout the year?

You may want to prepare inventory yourself throughout the year except for the holiday season. During that time, you’ll probably want to focus on customer service and marketing. So consider outsourcing FBA prep during those busy months and then take it back into your own hands if you want to cut back on outside costs during the off season.

What can I be doing with the resources it takes to manage FBA prep?

This is the million-dollar question that only you can answer. Most business owners can manage the FBA prep process, but—will it take away from growing your business?

 

NorthGate Announces ISO 9001:2008 Certification

FLINT, Mich., January18, 2013 — NorthGate announces they have achieved ISO 9001:2008 certification. Perry Johnson Registrar, Inc., (PJR) assessed the Quality Management System of our Corunna Road and Dort Highway facilities in Genesee County Michigan and declared NorthGate to be in conformance with ISO 9001:2008 standards.  PJR issued Certificate # C2012-03268 effective December 27, 2012.

This certification is the culmination of years of consistent top-quality work, and the dedication of our employees, stated Teresa Witt President of NorthGate. She continued saying, “although NorthGate has been operating under the guidelines of ISO 9001:2000 standards for many years, I believe our decision to upgrade to ISO 9001:2008 Certification is a proactive one that not only anticipates the demands of customers, but also demonstrates NorthGate’s commitment to providing quality products and services.”

The scope of the certification for NorthGate’s Corunna Road packaging and order fulfillment processing center entails; design, development, assembly, sub-assembly, sorting, inspection, packaging, warehousing, shipping, supplier monitoring, processing, and distribution for automotive products and other industries.

The scope of the certification for NorthGate’s Dort Highway reverse logistics, packaging and order fulfillment processing center involves; development, sorting, inspection, packaging, warehousing, shipping, supplier monitoring, processing, and distribution for automotive products and other industries.

ISO 9001:2008 is a set of international standards and guidance documents for quality management and quality assurance. The standard represents an international consensus on good management practices, policies and procedures with the aim of ensuring that our organization can consistently deliver the product and services that meet the customer’s quality requirements.

NorthGate, is a third-party, cost effective business solutions provider of Warehousing, Packaging, Fulfillment Processing and Reverse Logistics services. We are an independent, family-owned business dedicated to providing hard work and outstanding customer service. NorthGate offers a strategic location in the heart of North America’s industrial engine, where we have prime access into a vast array of major US and Canadian cities. Our vision is to be your partner… now and in the future, through every challenge, and every success.

Want to learn more on how NorthGate can make a difference in how your business is done? Please visit us at www.go2northgate.com or contact us at [email protected] or by phone 1-810-235-8110.

Amazon Fulfillment Fees

Amazon Fulfillment Fees Increase Hits Online Retailers Hard

by Will Schneider

Most online retailers using Amazon Fulfillment will be hit hard starting in February of 2013 with a multitude of price increases targeted to combat increasing transportation costs. Most notably, the fee increases include an adjustment to the “weight handling” fee and an addition of a returns processing fee. These fees and increases will apply to anyone that self-fulfills through their system – in an attempt to further entrench customers by giving them incentive to fulfill by Amazon.

Like many of the price adjustments over the last couple of years, these recent increases hit retailers hard – and at a time when many online merchants are struggling to squeeze as much profit out of their company as possible and weather the economic storm of the last couple of years. In particular, smaller businesses may find these particular fee increases a heavy burden to shoulder next year.

“Of anything that we hear most about the Amazon Fulfillment network, the vast majority of comments are related to expensive pricing structures and challenges with unique service requirements and flexibility,” noted Will Schneider, CEO of WarehousingAndFulfillment.com. The well known fulfillment provider is definitely the “800 pound gorilla” in the fulfillment space, offering multiple locations, quality execution and tie in to its Amazon network. But, as Mr. Schneider notes, “for many smaller companies in particular, the large orientation of Amazon makes addressing the challenges of a smaller business difficult – from lack of branding options, difficult to come by personal customer service, and now a series of price increases that make is less competitive with other outsourced fulfillment options.”

Of course, a price increase is never easy to swallow, although oftentimes understandable. But the interesting part will be to see what the Amazon Fulfillment fees increase, which was announced during the holiday season, will bring for Amazon in the New Year.

Logistics Software for 3PLs

by Will Schneider

Ferber Warehousing just announced that it is selling its proprietary logistics software, Conveyorware.com, to fulfillment and logistics firms. The software, which includes decades of customs from industry needs and experiences, will be sold as a SAAS (Software as a Service), starting at just $100 per month for 5 users. It’s an all inclusive software, managing the entire 3pl process from start to finish, simplifying the systems needs of growing 3pls.

To learn more about the software, please visit the Conveyorware software at www.conveyorware.com or read the press release about logistics software.

3rd Party Logistics Provider

by Will Schneider

If you’re operating a new business, chances are that you may not know what a 3rd party logistics provider is and what they can do for your business. And contrary to popular thought, 3rd party logistics providers offer more services than most might think. So we thought it would be important to define the term and then show you some of the important things that these companies can provide for your small business.

Logistics companies help bring your product from manufacturer or supplier to your end customers. And for some, this could entail quite a bit of steps. For example, let’s say you have your product produced in another country, and you sell your product to consumers in the United States. In this case, you will have to ship it to the United States, clear customs, deliver it to whatever warehouse will store and ship the goods, and finally ship orders out as needed to customers. All of these services can be fulfilled by a 3rd party logistics provider.

So what is the benefit to using one of these companies, you might ask? Well, for starters, this is a lot to manage on your own. So having someone help take care of this part of the business lessens the load significantly. Also, these companies are experts at what they do, so they can oftentimes do it better than you might be able to do yourself. Finally, they ship a lot of products for many companies, which means that they get great shipping rates from freight companies – and they can pass these great rates to you so that you can save money for your company and your customers.