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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

7 Signs You’re About to Outgrow Your Fulfillment Provider

7 Signs You've Outgrown Your 3PL WarehouseSeeing the progress of your business as it grows can be a rewarding and exciting experience. However, business growth comes with several challenges. For many companies, one of these challenges revolves around fulfillment options.

The following information discusses the seven key signs that you’re about to outgrow your current fulfillment provider. If your company fits one or more of these scenarios, then you should begin planning ahead to secure more sustainable fulfillment solutions.

  • You Need Additional Fulfillment Locations

As your customer base grows, your need for additional fulfillment centers will likely grow along with it. Warehouses that are not strategically located may cost you dearly in transportation costs, customer satisfaction, and sales. In some cases, shifting to a different location to better serve a higher concentration of customers can improve efficiencies. For other companies, adding multiple warehouse locations to decrease time of delivery and cost of delivery is a critical success factor. For example, Ruby Has Fulfillment’s bicoastal solution saves clients an average of 45% on shipping costs. Especially if your business operates out of only a single warehouse location, lack of additional warehouses may require you to look at new fulfillment solutions.

  • You Need Additional Sales Channels

There are several reasons why your company may need additional order fulfillment channels for sales. For example, if you own a small e-commerce B2C business, you may begin to penetrate the B2B market, and suddenly require EDI capabilities. Perhaps your customer demands have started to shift over the last several months, and they expect orders to be fulfilled through different means.

Whatever the case may be, quick adaptation to new sales channels is a common occurrence for owners of growing businesses. 

  • Your Current Fulfillment Partner Can’t Scale to Your Needs

 A growing business is a wonderful thing, but you and your fulfillment partner must stand ready to keep up with increasing demands. If your fulfillment partner does not have the capabilities to scale to your anticipated needs, then it may be time to begin searching for other options. For instance, if your current fulfillment partner is a smaller, single location regional provider that you partnered with when your business was just starting out, then it’s likely that they may not be able to quickly scale up to future increases. If your current company is having difficulty keeping up with your growing demand, you will likely begin to feel the pain of increased delays in receiving product and getting orders fulfilled.  

  • You Require Additional Technology to Keep Up

Your growing business may require a more streamlined inventory management system to keep track of both incoming and outgoing quantities. Perhaps more advanced labeling or tracking technology is called for. In some cases, integration with additional sales channels or other systems used by your company is required and can’t be fulfilled within your current operation. Whatever the case may be, it is important to determine the technological capabilities of your current fulfillment vendor, and see how closely they align with your projected needs. 

  • KPIs Are Not Being Met

If your fulfillment partner has demonstrated a pattern of committing costly receiving, inventory, order picking, or shipping errors, then this may be a red flag that it’s time to be looking elsewhere. For example, if inadequate inspection procedures are resulting in the shipment of damaged/defective products, an increase in the number of returns, and even lost sales, then something needs to change. Top fulfillment providers like Ruby Has Fulfillment ship with order accuracy rates of 99.97%. How does your 3PL compare?

  • New Capabilities are Required for New Products

If you add new products to your catalog that require special storage conditions (such as a climate-controlled environment, or cold storage), then you need to investigate whether your current fulfillment vendor can meet such specific needs. Even a simple shift in product offering can cause a fulfillment company to operate outside of their comfort zone and necessitate a move to a new company.

  • Additional Services are Required

As your business grows, you may need to invest in additional services, such as custom packaging, returns handling, FBA preparation services, or call center capabilities. If your current fulfillment partner does not have the infrastructure to support such add-on solutions, then you may need to look into companies that can serve as a “one-stop-shop” for all of your fulfillment needs.

It’s important to keep an eye on these seven signs that your company will soon outgrow your current fulfillment options. If you do so, you’ll be able to stay ahead of the curve, and smoothly transition to enhanced solutions and/or new partnerships as needed. 

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.

Switching to a New Inventory Management Solution

Switching to a New Inventory Management SolutionIt’s a big deal to switch to a new inventory management solution. You need to train key staff members on how to use the software in their daily work and get everything set up and transferred from your old solution. Here are four things you can do to make this process as smooth and simple as possible.

Have at Least One Primary Trainee

You should assign one or more individuals to be present at each training session for the new software and to be the most familiar with its various functions. These individuals could be your warehouse manager, in-house accountant, chief financial officer, and/or anyone else who is qualified to be a system administrator.

Why do this? Because you need someone to be an expert while recognizing that not everyone in the company has to know everything about the software. For example, salespeople just need to know how to generate sales orders, warehouse workers need to know how to generate purchase orders, pick items, and receive inventory, and chief information officers need to be able to check order statuses, inventory turnover ratios, projected sales, and other big-picture information. They have specialized roles to play, which don’t necessitate access to the full software.

If you have a handful of individuals who are familiar with all aspects of the software, they will be able to train others on those parts of the software that they will use in their jobs. And if one expert goes on vacation, takes sick leave, or even permanently leaves the company, you still have others who possess the knowledge to keep things running in their absence.

Set Aside Enough Time for Training

You should expect training on the software to take several days. If you opt to have an expert come to your facility to train your staff in person and help them set up a new inventory database, you will likely spend several hours on the phone with them to prepare. The more information you’re able to gather ahead of time, the better off you will be when the main training session begins.

The amount of time it takes to get fully trained will vary from software to software, but a good rule of thumb is to expect to work with a software expert for two days at a minimum. That’s not including all of the prep time, but if you sign up for an on-site training, it’s safe to assume you will need to spend more than one day with them to get everything you require from them. Try not to rush the process.

Focus on Accurately Setting Up Your Database

In addition to getting trained, the most important thing to do is to set up your database. To do that, you’ll need to add every one of your parts, products, vendor pricing, and locations, among other things. An inventory management solution is only as good as the information entered into it. Start yourself on the right foot by making sure the information you add to your database is accurate and complete. You can do this by making extensive use of spreadsheets.

Spreadsheets Are Your Friends

If you’re moving information from another inventory solution to another or even from an accounting solution like QuickBooks, the way to do it is by first exporting it into Excel spreadsheets. Once everything is in a spreadsheet, you can go in and do all sorts of things to prepare it for importing into the new solution. You’ll likely want to reformat the column headers to match new requirements, clean up errors in the data, and add missing items so that they’re ready to be entered into your new database.

A trainer can help you with this, or you might even be able to find spreadsheet templates, how-to videos, and documentation provided by the inventory solution provider.

This guest post was created by Robert Lockard with Fishbowl.

Receiving Product into Your Outsourced 3PL Warehouse – How to get it Right!

Receiving Process at a 3PL warehouseWhat all is involved in the Receiving Process?

Receiving product into the warehouse is arguably the most important step in the fulfillment process. If inventory isn’t recorded accurately, mistakes will most certainly follow – resulting in everything from stock outs as well as order mis-picks.  “Everything else within the fulfillment operation will literally fall apart if your outsourced 3PL (third party logistics) warehouse doesn’t have a rock-solid receiving process,” according to Chris Jenkins at Warehousing Pro, a Nashville, TN based warehouse and fulfillment center.

What all is involved in Receiving? Simply put, receiving is the process of bringing product into the warehouse, counting it to make sure total units were received (both total and by item), inspecting it for damage or other issues, performing any prep work to get it ready for actual inventory and sales, physically locating it into the proper area of the warehouse, updating the 3PL’s warehouse management system (WMS) to reflect all accurate data, and posting this information to client systems.

How is Product Sent to the Warehouse?

Product can be sent to the warehouse in a variety of ways. The most common ways that product is sent are using:

-Containers: Usually 40 foot or 20-foot containers, sent from overseas. These containers can either be packed “floor loaded” (meaning that they stuff all of the boxes into the container without pallets and try to get in as much product as possible) or pallet loaded (the cartons within the container are stacked and wrapped on pallets within the container). If the container is floor loaded, it will take the warehouse longer to process the receiving of the container and thus costs will increase.

  • Pallets: Usually pallet load quantities are shipped to the warehouse via Less-than-truckload (LTL) shipping carriers.
  • Cartons: Usually cartons of product are shipped in instances where the quantities are much lower, the products are much smaller or there is an urgent need for receiving the product and thus it is shipped by expedited air freight. Cartons are shipped to the warehouse via small parcel shipping carriers (FedEx, UPS, USPS, etc.).

How is the Product Identified?

Product identification is a critical success factor in the process of accurately receiving product into the warehouse. Without appropriate product identification, items can be allocated to the wrong SKU, causing order mis-picks and inventory accuracy discrepancies.

In order for the 3PL warehouse to accurately count the product, there must be some identifying markers on each carton at a bare minimum. This will allow the warehouse staff to know what the contents are of the carton. For increased accuracy, and to allow the 3PL warehouse staff to perform receiving functions more efficiently and effectively using computer technology (such as bar code scanners or radio frequency identification “RFID” smart labels), cartons can be labeled with scannable bar codes or RFID smart labels. To sum it all up, product can be identified in these ways:

  • Basic labels that identify the SKU/item
  • Scannable bar code, RFID smart labels, etc

Sometimes, cartons contain multiple SKUs, in which case they must be opened to verify that the contents of all SKUs are present, or the outer carton (commonly referred to as a “master carton”) will contain many inner boxes (commonly referred to as an “inner carton”) with each contain a product. In the case of mixed cartons, it is critical for the cartons to be labeled as mixed pallets to flag the warehouse staff.

Furthermore, adding more details to the carton labeling can assist the warehouse in more quickly and accurately processing the shipment of product. For example, if the cartons are label with not only a SKU label but also quantities within the carton or even product descriptions, warehouse staff will have more knowledge to better receive the product. Of course, if cartons are bar code labeled, or labeled with an RFID tag, warehouse staff can simply scan the cartons and more effectively process each carton.

What Types of Inspection is Conducted?

Of course, counting the product is the most commonly known step in the receiving process. Counts can take the form of high-level carton counts (relying upon the quantities within each carton to be accurate) where cartons aren’t opened and the sum is taken of all master carton counts on one end of the spectrum, to breaking open each master carton and counting the contents of each inner carton at the other end of the spectrum. In some instances, actually opening up each box and inspecting the contents is necessary, as detailed below.

The cost to perform receiving in these different scenarios will vary, with costs increasing based upon the amount of time it takes to perform the process. Furthermore, the level of accuracy increases as the depth of inspection increases. In some instances, there will be a trade-off between increased costs and increased levels of accuracy. The only way to validate with total certainty the contents of a shipment is to break open and count all items, but this may not be feasible in all cases. If contents of a carton aren’t individually verified, it’s important to note that this could lead to inventory discrepancies.

But counting the product isn’t the only function that gets completed within the receiving process. The warehouse staff must also perform other important steps, including inspecting the product as well as any ancillary functions to prepare the product for sale.

When warehouse staff inspect the products, the first and least invasive form of inspection that they can perform is to simply check the outer cartons for any damage. The next level of inspection could be to break open an agreed upon number or percentage of cartons to inspect the product for damage, giving a higher degree of confidence that the products are in sellable condition. In cases where products are of extremely high value or are highly susceptible to damage, opening up and inspecting each carton for damage may be necessary.

Items may not only be quality checked (QC’d) for damage – they may also be checked for other factors. For example, an inbound receipt of printed t-shirts may be checked to ensure that not only the printing is of good quality, but that the printing is of the correct color, etc. Another example is that products may need to be inspected to verify that each component is included within the product.

What Ancillary Receiving Functions can a 3PL Warehouse Conduct?

In certain circumstances, a 3PL warehouse will need to conduct other functions during the receiving process in order to get the products ready for sale. These include but are not limited to:

  • Labeling for automated inventory and picking/shipping (such as Amazon Prep/FBA labels)
  • Kitting to assemble units together
  • Testing to make sure products work (such as electronic products)
  • Poly-bagging/Shrink-wrapping (such as poly-bagging t-shirts and apparel received from screen printers)
  • Stripping off supplier/manufacturer labels
  • Repackaging into other packaging (e.g. branded packaging)
  • Preparing for subscription box models
  • Preparing for high-volume pre-orders/back-orders

Where Does the Product Get Placed in the Warehouse and in the WMS?

After items have been counted, inspected and prepared for sale, there’s still work to be done. First and foremost, the product will need to be placed in the warehouse. For bulk stock that will be used at a later date, oftentimes it will be either stored in pallet racks or floor stacked in areas away from standard picking areas so that it’s out of the way until needed at a later date. For stock that will be picked and packed and shipped, oftentimes the product will be stored in pallet racks in such a way that it can be picked easily and quickly. This may necessitate putting them in pick bins, etc.

Second, all of the counts and data are entered into the 3PL’s WMS. Once entered, they can be viewed (most frequently online). 3PL warehouses that have even tighter controls over their processes will even make sure that this data gets synced to client systems, so that inventory counts will display appropriate (e.g. inventory levels will display correctly on Web Stores for consumers to order). Because these client-side and 3PL side systems sync, it’s extremely important for information to be not only timely but accurate.

How Long Should All of This Take?

Overall, the speed of the receiving process varies from company to company. Depending upon the size and complexity it can take days, and for some instances it can be done same day or within a few days. Sometimes there will be a heightened sense of urgency to process things quickly (e.g. when back orders exist and customers need products delivered quickly). In these cases, special provisions can be made with the 3PL in order to devote more resources to receive the product quicker. The biggest indicator of success is having an agreed upon timeline for different scenarios so that both sides are on the same page with regards to expectations.

Account Management Models of Fulfillment Providers

Customer Care SolutionsEnd User Support Services for Order Fulfillment

When it comes to warehousing, customer service means different things to different people. When some people think of customer service, they think of what is known as “end user” customer service or outsourced customer support. This service occurs between your client (or end user) and your customer support team, whether that team is in house, outsourced by you, or outsourced by your warehouse. That being said, while some warehousing companies do offer end user customer service, call center services and fulfillment under one roof, such as Our Serviceworks, this is a highly specialized service and is only available through a handful of warehousing providers. Most warehousing companies either don’t offer end user customer support or they offer it through a third-party call center company. If you do need end user customer support and intend to use an outsourced warehousing and fulfillment company to perform these services, make sure that they do it all in-house – otherwise it would potentially be easier and more affordable to skip the middleman and outsource these services yourself.

Standard Order Fulfillment Support Services

What most warehousing fulfillment companies dooffer is direct customer service for your business and the other businesses they serve. Warehousing customer service provides your business answers to questions about order status, inventory on hand, order changes, reporting, shipping and receiving, errors, returns, to anything that affects your account or your inventory.

The most common way most outsourced warehousing providers offer customer support to clients is via email, chat or telephone, but there is a growing push towards email to resolve account matters. Though impersonal, most larger companies like Amazon, Shipwire or ShipBob host a dedicated customer service department, but customer accounts are handled by anyone who answers the phone or email, and your business will likely get a new representative every time you call or email with a concern – even when calling about the same issue. While this does help ensure timely and even round-the-clock customer support where available, it can be frustrating to businesses who must constantly wait for the representative to familiarize him or herself with the account notes or ask the caller to re-explain the problem each time. It also makes it difficult for your business to get customized service that fits your individual needs like they would with a smaller business with dedicated customer support.

Combatting the problem of a too-big customer service department is where the smaller, regional warehouse comes into play. Though smaller in size than Amazon, ShipBob and Shipwire, smaller warehouses often offer big differences in customer support. For example, unlike with larger warehousing operations, smaller warehouses can offer dedicated customer support to your business. This means your account is either handled by one contact within the company, such as the company president himself, or your business is assigned one dedicated person who handles your account and can be contacted directly whenever you need support. This business model enables your business to reach out to an expert on your individual account, eliminating the frustration of briefing a new customer service representative every time you call about an ongoing issue.

Another benefit to having a dedicated account manager is that they become very familiar with your business and its individual needs. Even when there are no issues present, your account manager can be a useful member of your team. They learn your inventory, shipping patterns, preferences and any specialized account details, and will advocate for you and your business.

Unfortunately, there are still downsides to dedicated customer service. For example, though having a dedicated representative often means a quicker resolution to your issue, if your dedicated representative is busy with multiple accounts, out sick, or even on vacation, it could take a while to get a response. This is why many warehousing companies familiarize several account representatives with your account, so there is usually someone around to help you out if your primary representative is unavailable. The downside to having multiple representatives on your account is that your backup representative or representatives may not be quite as familiar with your account as your primary representative is, leading to more delays in service.

Choosing the Best Service-Oriented Fulfillment Center For Your Business

Using a warehouse with dedicated customer support can be a rewarding experience for any business, but there are important key factors to remember when selecting a warehouse. Though its important, don’t just choose a warehousing operation for its customer service department. Make sure the provider has everything your business needs in addition to top-notch customer support.

Another thing to remember is that your business and its relationship with your customer support person and warehousing provider will work better the more involved you are in the relationship. This means holding regular meetings with your team to go over any issues and inventory. How often you choose to do this is up to you, but it is recommended that you meet as frequently as weekly, monthly or quarterly.

Finally, familiarize yourself not just with the warehousing company’s policies, but with their customer service practices as well. Learn who your representative or representatives are, get their contact information and find out what you can expect in terms of timeliness of response, means of response and more. This will ensure a great working relationship with your customer support team, so in the rare case that there is an issue, you are already comfortable with the individuals assigned to assist your business.

Choosing a 3PL WMS

Choosing a 3PL WMSYour business is growing, and you need technology that can help you keep pace. As a third-party logistics (3PL) provider, you likely already have a warehouse management software (WMS). But now that your business is evolving and growing, you’re looking for something more…

  • Capable.
  • Flexible.
  • Scalable.
  • Innovative

But where do you start? When you try to search for “3PL warehouse management software” online, you get innumerable results.

First, you need to identify your challenges, and then based on that, you’ll be able to determine which features matter most to you.

Challenges that 3PL Warehouses Face

As a 3PL, you face additional challenges that other businesses don’t have to deal with. You’re turning warehouse management into an outsourced service. So you aren’t on the hook for marketing your customers’ products, but they’ll be unhappy if your management leaves them with dissatisfied customers.

Handling Clients, not Just Inventory

Yes, you manage products, but you also manage your customers. Their requests, questions, needs, and more. Even though they know you have other customers, they’ll expect you to courteously and promptly respond as if they’re your only customer.

Many times, customers will reach out to you when they have a fulfillment emergency. Perhaps product demand grew faster than they expected, or their product got picked up by an influencer. Whatever the case may be, they’re contacting you, and they need to onboard quickly before their business gets banned in the marketplaces.

You need lead time to set up new clients, and you don’t always have as much as you’d like. Wouldn’t it be nice to have a streamlined process that looked the same for each client, while allowing them to receive individual treatment?

Lack of Real-Time Reporting

Without real-time reporting, you’re going to struggle to make rapid-fire business decisions. If your clients decide to have unexpected sales (as they may be prone to do), does your data tell you how many temporary workers you need to hire?

Are you going to need those workers to work overnights and weekends?

Do you need your customer to place orders for additional inventory so they aren’t out-of-stock?

These are questions that require fast answers. Of course, to be sure you’re coming up with the right decisions, you need real-time data. Real-time data from all of your sales and supply chain channels comes from integrations that connect to your system.

Business Scalability

As you grow your 3PL business, one or two new clients may require you to scale your capabilities. You will seek to grow by landing larger clients with larger budgets. However, once you start to gain those clients, your warehouse capacity will reach its max, which means you may have to add new warehouses to your network.

You’ll need more equipment and more employees, which means you’ll generate more data that can help you run your business smartly. Investing in technology that can support your business growth for the next 3, 5, or 10+ years is a smart investment.

You must build scalability into your business model to have sustainable growth and see the most return on your investments.

What to Look for When Choosing Your 3PL Warehouse Management Software

If you’re looking for a solution that allows you to treat customers as individuals, provides real-time data, and has built-in scalability, then you’re looking for a 3PL warehouse management system. There are so many warehouse management systems to choose from in the marketplace (we created a short list of the top 3PL warehouse software solutions here for your review). Here are some areas you should consider when looking for a 3PL WMS in order to bring efficiency (and profitability) to your business.

Fulfillment Process Optimization

You want your 3PL WMS to help you build better operations processes. That means your software should guide your employees in executing advanced picking methods and tools such as:

  • Zone picking
  • Batch picking
  • Pick-to-light
  • Fulfillment robots

Picking can account for as much as 60% of your warehouse labor costs. Using advanced fulfillment techniques in a non-3PL warehouse can be tricky without the best technology. Handling orders for multiple clients’ customers adds a whole new layer of complexity.

This complexity is why you should use a WMS that has multiple client architecture.

Customizable and Integrated Billing

Your 3PL business has unique billing processes. You should be able to customize your WMS to reflect your requirements. The 3PL WMS that will be easiest for you will let you integrate your billing accounts, and systemically automate billing for functions and services like:

  • Product storage
  • Receiving
  • Fulfillment and shipping fees

If your WMS doesn’t integrate with your billing service, then you’ll have to export this data and import it into your chosen billing platform. This integration can make things much easier when your business goes through financial audits or is preparing for tax time.

Client Portals and Dashboards

We mentioned this above, but multiple client infrastructure is a must have for your business. As a 3PL, you’ll want to extend your great tech to your clients.

Customers want 24/7 access to their business information. As a trusted partner, you want to grant them that access, but you have to make sure that they can only access the right data. Having customer portals is a great way to allow your clients to get a bird’s eye view of their inventory, while securing the data they shouldn’t have access to.

You also operate using many different sets of credentials in order to integrate seamlessly with your clients’ operations. Managing all of their marketplaces, shopping carts, and carrier credentials can easily get out of hand.

You want to present a custom solution, which means taking all of the various channels in stride. You can give your customers the ability to access their information in real-time, and view whatever data they need to make business decisions.

Many businesses struggle to turn over the management of such a critical part of their business. With a client portal, they should be able to view things like receiving, inventory, orders, and reports.

Don’t Forget Your Dashboard

So client portals are wonderful and help foster great relationships between you and your clients. But a great dashboard will help your warehouse run smoothly. When you log into your WMS, you should immediately be able to gain a sense of warehouse operations.

As their service-provider, seeing all of the data in one easy to use dashboard will save you from trying to compile it yourself.

Multi-Channel Integrations

With the account integrations you’re certainly going to want, it becomes a lot easier to trust the data behind your reporting. By minimizing the need for manual data entry, you lessen opportunities for human error. Imagine, you could have real-time 100% accurate data across your entire warehouse.

Real-Time Data and Visibility

If all of your clients’ sales channels are integrated with your WMS, then information will flow from the moment their customers hit the “buy now” button. Most modern 3PL WMSs integrate with barcode scanning technology. This allows for real-time updates on the status of all of your clients’ orders:

  • A picker has received the pick list on their mobile device and is walking the pick face right now.
  • The picker has picked all of the required inventory and is moving to the packing station.
  • The shipping label is waiting at the packing station as your packers scan each item’s barcode.

A truly advanced WMS not only gives you the pulse of your warehouse, but also helps keep your ops in sync. Warehouse operations are kind of like an orchestra. Different parts that create a greater whole. Could you imagine how rough the orchestra would sound if you couldn’t get the percussion and woodwind sections in harmony?

A great 3PL WMS keeps your operations synchronized and streamlined, bringing harmony to your warehouse.

User-Friendly for Easy Training

Your employees shouldn’t need to spend weeks training on your WMS in order to use it effectively. During your 3PL WMS search, look for interfaces that are clean and simple. If it’s easy to use, then you’ll have no problem implementing the system across your warehouse operations.

When you bring in temporary warehouse employees during an operations surge (like the holidays), they should be able to easily grasp your WMS as well. Minimizing their lead time increases their effectiveness during their time working for you.

A System That Grows With Your Company

Your business development department is hard at work generating new business. Marketing and sales are sure to be qualifying and disqualifying leads every day. Every time you land a new client your foothold in the industry grows. You’ll be able to pursue bigger clients.

This means more revenue for you, but also a higher demand on your resources. Look for a WMS that won’t flinch if you need to add a new warehouse (or five). Do you want to take your company international? Any WMS you choose should have no trouble adding an overseas warehouse.

Remember This When Looking For Your 3PL WMS Solution

You want flexibility, scalability, and a WMS that’s innovative. You don’t have to compromise on any of those wants and needs. You can find a great 3PL WMS that’s perfect for your business. Keep your challenges and business priorities in mind during your search for the perfect WMS.

Schedule some demos, and ask the hard questions. If you don’t ask them now, then you’ll get your answer later, likely during a crisis. There’s a warehouse management system out there that can help your company grow. You can count on it.

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

Your Best Options for FBA Prep And Long Term Storage

Amazon Long Term Warehousing and PreparationAmazon is a beast. They pull in sales of over $51 billion dollars a year with a net profit of $1.6 billion. They’re lucrative because they are always innovating. Amazon’s most recent venture promises to prep your stuff. The company now offers a full range of packing services called FBA (Fulfillment by Amazon) Prep. But are they really the best option out there for your business? And do they have your best interests in mind?

What is FBA Prep?

Fulfillment by Amazon (FBA) has packaging and prep requirements for any product that lands in their fulfillment centers. Their sentiment is that when units are properly packaged and prepared it reduces delays, saves on cost, protects your product while stored, and enhances the customer experience.

Previously, Amazon required you to prepare inbound shipments and goods in certain ways, but they didn’t provide a service to help facilitate these preparation services. But now Amazon has some warehouses that are being dedicated to packing and prepping for FBA. They essentially prepare products to send to Amazon DC’s. Amazon then does all of the shipping.

However, some of these requirements can be very restrictive and they will not ship your product if they don’t conform to their policies. Therefore, it’s always best to double check rather than losing revenue. You might also consider looking into a third-party fulfillment center to see what their requirements are. They may necessitate cheaper materials that could make all the difference in the world for your budget.

How Does FBA Prep Work?

If you decide to use FBA Prep, Amazon will pack all eligible products for a per-unit fee. After enabling the service, you choose Amazon to prep the products that you ship to fulfillment centers. Once you build a shipping plan, Amazon will provide an estimate of fees based on those schematics. So, the process can be a tad lengthy, and you have to jump through a number of hoops.

Then the FBA Prep process begins. Consider the following:

Ticketing

When it comes to ticketing, Amazon still expects the vendor to not only create shipping plans but print the labels too. This is so they can track the inbound shipments. A third-party vendor may make it easier on a business by creating the plan themselves.

Bundling

Rather than bundle units, Amazon has been known to break them up when necessary. As they state on their site “Your qualifying units may be split into multiple additional shipments.”If you seriously need bundled shipments, Amazon may not be the best choice.

Bubble Wrapping

Amazon will ship glass and other fragile items. The FBA Prep service includes bubble wrapping and labeling.

Stickering Shrink Wrap

Amazon does not shrink wrap anything. They bag the following: liquids, apparel, fabric, plush, textiles, baby products, small, and adult. If you seriously need your product shrink-wrapped, a third-party fulfillment center might be your best choice.

Cross-Docking

When you have Amazon prep your products, FBA Label Service may be applied to certain items and you will be charged a fee. Same with anything that requires an Amazon barcode. There have been issues with Amazon surprising people with hidden label fees, so keep your eyes peeled.

Third Party Fulfillment Centers Offer an Alternative to FBA Prep

Amazon is not the only place to offer a prep and pack service. Many third-party fulfillment companies also have this on the menu. And by working with another fulfillment center you may save on overall costs. Amazon is notorious for hidden and “surprise” fees. These tacked onto your order could cripple a budget. Oftentimes, third party fulfillment centers will offer preparation services for FBA at a reduced cost as opposed to using Amazon’s prep service.

Furthermore, using a third-party fulfillment centers offers a host of other benefits. First, these outsourced fulfillment services enable multi-channel shipping through other online platforms. So, if you do business on your own website, or other marketplaces like e-bay and Etsy, it’s ok.

Finally, using a third-party fulfilment house allows you to avoid Amazon’s dreaded long-term storage fee penalties.

What is Long Term Storage Avoidance?

Surprisingly, Amazon doesn’t want you to overstay your welcome. The company will charge you a fee if you store at their warehouse for too long. It’s referred to as the “FBA long-term storage fee.” On the 15thof every month the company conducts a cleanup of their inventory.Inventory that has been in fulfillment centers for 181 to 365 days incur a long-term storage fee (LTSF) of $3.45 per cubic foot.

Items that have been in US fulfillment centers for more than 365 days on the inventory cleanup date incur a long-term storage fee of $6.90 per cubic foot. And it goes up from there. This is what leads to long term storage avoidance. Nobody wants to work with Amazon if they can’t afford to store their stuff.

There are many programs and apps you can install that will use data based on SKUs to help you identify long-term stock issues. Additionally, if you think an item will take a long time to sell, wait until just after the 15thto list. This will give you the maximum time.

Of course, you can avoid all of this noise by working with a third-party fulfillment center. The long-term storage fee is mostly unique to conglomerates like Amazon and is rarely something you would see with traditional third-party warehouses. Long term storage fees are a serious business and why risk having your stuff held hostage?