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5 Tips for Shifting From Brick-and-Mortar to E-Commerce Sales

Brick And Mortar Offline Store To Online Commerce ShoppingWhile a number of brick-and-mortar stores are facing closure, Amazon and other e-commerce sites have experienced record sales. Rick Stein of the Urban Decision Group notes 30,000 store closures in the past five years. In the first few months of 2020, 2,000 have closed with an additional 15,000 more expected by the end of the year. At the start of 2020, department stores occupied 30% of all mall space. Fifty percent of those stores anticipate closures by the end of 2021.

Can Brick-and-Mortar Stores Survive?

Although some stores have reopened, many retailers aren’t able to survive business disruptions for extended periods of time. When asked about the possibility of closing permanently, there are varying tolerances for how long businesses can survive interruptions:

  • 5.63% will survive less than one month
  • 26.28% will survive 1-2 months
  • 34.07% will survive 3-5 months
  • 17.62% will survive more than 5 months
  • 16.39% are not concerned

From mid-March to mid-April, Stein surveyed 500 retailers. According to his research, 40% of apparel retail may never re-open as well as one in five restaurants. Through this time of social distancing, consumer behavior and shopping methods have taken a drastic shift towards online purchases. People who never before made a purchase online have now become familiar with researching products before making a purchase, checking reviews, and enjoying the convenience of home delivery.

Retail Sales by Category

As retail stores began to re-open in May, the Wall Street Journal reports sales rose by 18%. While this number is encouraging, YOY sales for May were still down 63%. YOY sales for April were down 85%, showing a slight improvement for May.

E-commerce Trends

In 2019, e-commerce transactions accounted for 12% of all sales during the last quarter of the year. 8% of all grocery sales are online. There was a 65% growth in online grocery sales between March and May 2020, however, retailers continue to work through operational complications and costs to improve efficiencies for these services. Beginning in March 2020, many small retail stores turned to Shopify and other ecommerce sites to facilitate online sales. Shopify alone saw an increase of 62% in new online stores between March and April.

Even as businesses began to re-open, retail outlets struggled to fill store shelves with inventory, especially the most desired items. Apparel and electronics categories have traditionally fared well with online purchasing. With closures and out-of-stock conditions, one in four people reported shifting to online purchases for restaurant meals, hygiene products, health products, and cleaning products. Mastercard reported 22% of all retail purchases in April and May were e-commerce transactions.

Prior to March 2020, the concepts of “social distancing,” “contactless delivery,” or “safer at home” were foreign. In a relatively brief period of time, these terms became part of everyday vocabulary. Many businesses were forced to close while others drastically changed operations to remain open using new methods of conducting business. The new normal includes face masks, enhanced cleaning practices, and adjustments to sales processes and procedures.

Changes to Shopping Patterns

PPIQ (Path to Purchase IQ) cites a few reasons why some continue to make in-person purchases. These include: 33% making purchases based on needs for immediate consumption; 29% resorting to old habits and aversion to new methods of buying; and 26% preferring to view products prior to making a purchase.

Those who continue to shop in person are taking more time to carefully plan trips. Shoppers stock-up on purchases and take time to make lists to limit their total number of trips. Fifty percent of people are trying to make quicker trips to get in and out of retail stores as quickly as possible when only 13% had this goal prior to the pandemic. The crisis also expedited online grocery shopping to levels that otherwise wouldn’t have been achieved for another three to five years. The shift to online purchases for grocery has spread to other retail businesses and will likely continue post-COVID.

There is a greater need for businesses to find new and multiple ways to operate and sell their goods to address the varying needs and preferences consumers share. Omni-channel retailers offering both e-commerce and brick-and-mortar sales are likely to be the real winners in the future.

Opening an Online Store

There are a number of decisions and steps to take to begin selling products online. Here are a few things to consider when selling your goods directly to consumers:

  1. Find a reliable technology platform to power transactions. These systems will help with inventory management as well as facilitating online ordering.
  2. Integrate ordering with your website, but also consider selling through social media accounts and online sales sites like eBay.
  3. Determine what policies, practices, and services you want to include. What is your return policy? Will you include any guarantees on satisfaction? What type of shipping or delivery services do you want to offer?
  4. Develop a marketing and advertising plan to promote your products. Create posts for social media, consider boosting your content through ads, incorporate email marketing, and develop a strong SEO program.
  5. Determine who and how you will pack and ship your orders. Plan for growth and consider outsourcing your fulfillment to a third party. Product Fulfillment Companies can take the hassles out of inventory management and processing your orders for delivery. This will allow you to focus more on building your brand and your business.

With changing times and much uncertainty in today’s business world, it’s more important than ever to be open to changes in your organization and operations. “We all must adapt and adjust to the current and frequently-changing environment in order to be successful. E-commerce fulfillment firms like PFS are making a number of adjustments to workflow and staffing as a result of the shift towards e-commerce orders,” said Jason Martin, Co-Founder of Product Fulfillment Solutions.

B2B vs B2C eCommerce: Same but Different

Everyone is shopping online these days. Even before the pandemic of 2020, business buyers were making the move to buying more and more online. Statista puts global B2B eCommerce over $12 trillion in 2019. That’s over four times the size of the B2C eCommerce market, which was a little over $3 trillion. While everyone may be doing it; they don’t all do it the same. There are clear differences between B2B and B2C buyers. Both sets of buyers may have some of the same expectations, but their shopping habits and behavior are quite different. That’s why their customer experience needs to be different and tailored to their wants and needs. 

What Both B2C and B2B Buyers Want

Before we delve into differences, let’s look at what both B2B and B2C buyers want in their eCommerce experience. Because they do have some commonality. 

Mobile Ready. Both B2C and B2B buyers are not tethered to desktops. So, they want a great experience whether they are on their smartphone or laptop. Your website should perform flawlessly on any device with any browser. Mobile searches exceed desktop ones and 51% of people 16-64 purchased a product using their mobile phone in April 2020.

Rich Content. B2C and B2B buyers are looking for solutions and searching for answers to their problems. They want in-depth product information. A pretty picture and 50-word product description just won’t cut it anymore. Both types of shoppers want access to user and product manuals, how-to videos, live or AI-enabled chat, use and case studies, FAQs, user forums, and as much information as you can provide about your product or service. 

Self-Serve Model. It’s important to provide all of this rich content because what buyers of both stripes really want is a completely self-serve model. They don’t want to pick up the phone or send an email. Customers demand speed and they want answers now! And 70% of customers expect your website to include a self-service application. So, provide order tracking, order history, return authorization, and other common customer service tasks directly from your website.

Frictionless Experience. What do the items above have in common? They all work together to create a frictionless experience. Now that’s what customers really want. So, give them one-page checkout, multiple payment options, easy reordering, and chatbots for inquiries. Consider your menu structure and make sure your design allows someone to purchase in as few clicks as possible. Every form they must fill out and every click they must make creates friction. If you provide site search (and you should) be sure to include an autofill function.

The Different Shopping Habits of B2C and B2B

So, while B2C and B2B may have some expectations for customer experience in common, they have quite different shopping habits.

Shopping Habits of B2C Buyers

B2C buyers may not even set out to make a purchase. They may see an ad on social media, receive an email offer, or just be simply surfing the net.

They tend to make purchases based on emotion. That makes them more receptive to advertising and marketing efforts. They might see a new product and think “that’s something that I might enjoy”.

B2C buyers tend to make more one-off purchases than B2B buyers. They aren’t looking to establish a relationship; they just want a product that they might not even know existed an hour ago. And they don’t usually buy in large quantities.

When it comes to cost, the B2C buyer doesn’t negotiate cost but price may be a major factor in their purchase decision.  And when it comes to making the purchase decision, this shopper generally isn’t obtaining the approval of others to make the purchase. They simply pull out their credit card or enter their PayPal information and complete the purchase.  

Shopping Habits of B2B Buyers

B2B buyers usually start their purchase journey with a search for product information. They take their time gathering information because they usually have defined product specifications in mind. Potential products must be measured against these specifications. They may be looking for items that must be customized to their needs

There’s little to no emotion in a B2B purchase. Advertising and marketing efforts revolve around resolving pain points. This buyer is making a well-researched rational buying decision and from start to finish, the sales cycle is long.

That’s because B2B buyers tend to purchase the same product again and again. They are evaluating the vendor as much as the product. The relationship is important and they are generally looking at post-purchase support as well. To this buyer, the purchase experience is even more important than the price.

And, when it comes to price, the B2B buyer is accustomed to negotiating a price based on volume and frequency of purchase. This buyer expects their prices as well as freight and payment options to be customized to their needs. They generally evaluate multiple suppliers at one time. Then when it comes time to make the purchase, a B2B buyer usually must obtain approval from others. 

How eCommerce Meets the Needs of B2C and B2B Buyers and Sellers

eCommerce must adapt to meet the different needs of B2C and B2B buyers and one size doesn’t fit all situations. 

eCommerce for B2C

B2C buyers are just as happy shopping on a marketplace like Amazon as they are on a company’s website. B2C sellers need to offer multiple channels for eCommerce. If you have brick and mortar stores, your eCommerce strategy should align. Options like buying online and pick-up in-store and location services that can send push notifications when shoppers come inside provide the type of personalized attention retail shoppers love.

Eye-catching graphics and design are a must to catch and hold the attention of B2C shoppers. Remember these are impulse buyers and eCommerce allows you to convert interest to a sale right away. 

If they don’t convert, the eCommerce solution should provide ways to capture abandoned carts and turn them into completed sales. 

For consumable items, a subscription model combined with eCommerce keeps repeat orders coming in and makes cash flow even more predictable. 

Don’t underestimate the power of social media to fuel B2C eCommerce. Whether you operate separate storefronts on Facebook or Pinterest or use social to keep the sales funnel full, your eCommerce strategy must include a social component. 

A B2B eCommerce platform must integrate well with your social channels, have a robust CMS, offer multiple payment options (credit/debit and PayPal) with a secure checkout, be easy to get up and running quickly. Some software as a service (SaaS) options like BigCommerce or Shopify are easy to implement but lack the ability to customize workflows.

eCommerce for B2B

B2B buyers are looking for a different type of personalization. They want custom catalogs and price lists that are tailored for their account so be sure to show this buyer their pre-negotiated prices when they log-in. You may need to create different storefronts for different verticals. 

For visitors that aren’t yet customers, an automated RFQ workflow will allow shoppers to get accurate quotes quickly.

Because most business purchases involve more than one buyer, it’s important to allow your users to define the roles and permissions that align with their internal practices. 

Because most purchases are repeat sales, by providing quick order forms, accepting CSV file uploads, and order from sales history functions, buyers can place their orders quickly and accurately without the need to speak to a sales rep. 

The secure checkout for B2B eCommerce should support multiple workflows. Most business purchases aren’t paid for with a credit card at the time of purchase. So, options for establishing a line of credit and paying on terms must be provided. Your eCommerce solution will need to integrate with partners that factor your receivables, check credit, or perform other financing services.

Speaking of integration, in B2B eCommerce, the ability to work and play well with other solutions is essential. B2B buyers may want to use EDI or punchout catalogs and you’ll need to integrate. Your eCommerce solution should seamlessly slide into action with your ERP, WMS, PIM, CMS, and other business software. 

B2C and B2B eCommerce are Different – So Are Their Solutions

As you can see, while B2C and B2B buyers have some common expectations, their actual transactional needs are very different. B2B is much more complex than B2C.

B2B eCommerce solutions need to be built from the ground up for how companies do business with each other. B2C platforms repurposed for B2B just aren’t up to the job. So, when you look for a B2B eCommerce solution be sure to look for:

  • Support for multiple business models – B2B, B2B2B, B2G, and B2C – as your business strategy changes, your eCommerce solution should change with you.
  • Ability to handle unlimited SKUs is imperative – with multiple warehouses or stock locations, so don’t be limited by the number of SKUs your solution can process.
  • CRM integration or inclusion – your solution must either include or integrate with a CRM to increase the productivity of your sales and marketing assets.
  • User-defined roles and permissions – make like Amazon Business and let your users set limits on their authority to purchase.
  • Robust workflow engine – your solution should conform to your business, not the other way around. Make sure you can define workflows.

There are many eCommerce solutions on the market today. If your digital strategy includes B2B eCommerce, make sure your solution is B2B ready and not repurposed B2C.

 

Warehousing and LTL Shipping – Key Factors in Selecting a 3PL Partner

LTL Freight WarehousingChoosing the right 3PL partner is critical to saving your company time, money, and potential headache. Whether you are a B2B or B2C oriented company, be sure to understand what to look for when selecting a partner for your warehousing, supply chain and logistics needs. Have a clear definition of what you are looking for, your product details, and what to check off in terms of the service offering that will help you save time and money. Below we dive into a few factors to consider when you are shopping for 3PL services – especially in cases where you ship larger, LTL orders.

Product Needs Must Match 3PL Service Offering

Before even shopping for an outsourced 3PL service provider, define your wants and needs for your product, the specifications, and what is working and not working in your current fulfillment process. Identifying friction points helps your 3PL provider understand where they can help and what services they can provide to alleviate the challenges you have faced in the past.

Furthermore, knowing your product dimensions, pallet size, turns, shipping destinations, average order size, and more provides you and the 3PL companies you are looking at more detail into how they can serve you. This will provide proper alignment for you and the outsourced 3PL service provider and save you a lot of time and opportunity cost going forward.

LTL Shipping and Impact on Supply Chain

LTL shipping is typically a must for companies that ship larger orders. While shopping for warehouse logistics services, ensure that your 3PL provider offers tightly controlled LTL shipping services, as it has multiple benefits:

  • LTL Shipping Reduces Cost – If your shipment does not need FTL (full truckload) freight shipments, ensure you utilize LTL. “LTL enables shipments from multiple companies on one truck, which benefits your company as the shipment is divided amongst each company based on their own respective cargo weight. Additionally, this reduces the amount of handling vs. parcel shipping,” noted Brandt Jensen, CEO of Interwest Transportation, an asset-based 3PL that specializes in FTL and LTL freight warehousing.
  • Freight or Cargo is More Secure – LTL freight is loaded onto pallets most of the time. Additionally, a pallet typically is wrapped – reducing the amount of wear and tear, rubbing, etc. from contact with other freight within the trailer.
  • More Options for Service – within LTL shipping, options for service such as lift gates, inside pickup, special handling, freeze protection, and more are offered to ensure further security and ease of transport.
  • Tracking is Improved – Most carriers provide real time tracking for picking, stops, and delivery status. Having a palletized shipment is easier to track and simplifies the workflow process.
  • Reduces Emissions and Carbon Footprint – LTL shipping provides reduced emissions as it maximizes each truckload by combining multiple company’s shipments into one freight shipment. This reduces the amount of trucks on the road and helps reduce our carbon footprint, as well as your 3PL provider’s footprint overall.

The Importance of Warehousing, Freight Fleet, and Carrier Relationships

Warehousing, an in-house trucking fleet, and good carrier relationships are all pivotal to maximizing your relationship with your 3PL service provider. Each will save you time and money as there is less handling and the shipper can quote out various carrier options to choose the best value for you. While you can continue to manage your LTL freight carrier relationships, there are multiple benefits to finding a 3PL company that has its own LTL shipping division and/or has existing carrier relationships and ships high volumes of orders.

  • The importance of Warehousing – choosing a 3PL provider that has a powerful WMS (warehouse management system), the ability to rack or stack, as well as process returns is especially important to your entire supply chain. Ensure that you can track inventory, place inventory where needed, and that the warehouse has the processes in place to reduce handling and pick and pack fast for expedient delivery.
  • A 3PL That Owns Their Own Trucking Fleet – this cuts cost directly out of the shipping process. One less company means one less company to pay for handing and for their margin – which therefore increases your company’s margin. Common LTL discounts can reach 45-50% off published rates for 3PL companies that have preferred rates with carriers, and discounts can be significantly greater if the 3PL has its own fleet. Choose a 3PL that has its own fleet for freight delivery, and your P&L will thank you.
  • A 3PL with Carrier Relationships – multiple carrier relationships mean more options for a shipment to choose from, so you can get the best value from your 3PL provider as well as each shipment. If you have varied product and varied order quantities, this helps get the best value and cost on a per shipment basis. Once again, your P&L will thank you.

The Impact on Your Operating Expenses & Bottom Line

Knowing your product and order details, while ensuring your 3PL provider has a full service offering including LTL shipping, full warehousing capabilities with a powerful WMS, various relationships with carriers, and their own trucking fleet will help you save a large sum of money on your shipments, operating expenses, and therefore improve your bottom line. Before shopping for 3PL services, ensure you know your product, your current fulfillment process, and what you are needing across your supply chain.

7 Reasons Your Brand Needs Value-Engineered Packaging

Packaging supplies play an essential role in every business that sells a physical product.

Keeping your products safe and appealingly presenting them are the two core functions of custom packaging – be it primary or secondary packaging.

But all too often, finding the best packaging solution is left to the last minute and an ‘adequate’ packaging solution is implemented in the form of off the shelf packaging. While these standard packaging products get the job done, it’s costly to scale and ends up burning a lot of your cash.

That’s where value-engineered packaging comes in.

In this article, you’ll see what exactly value engineering in packaging is, as well as 7 reasons that your brand should consider using it.

But first, let’s outline the basics:

What is value-engineered packaging?

Value engineered packaging is packaging that’s made from the ground up specifically for your product.

Materials, size, shapes and assembly processes are all individually assessed with your product, your fulfilment process and your brand’s values in mind.

The overall goal of value-engineered packaging is, believe it or not, to provide value in the form of optimised packaging by reducing your packaging costs.

Value engineered packaging lowest costs by assessing the way your packaging solution performs a number of roles, such as security, branding, and space optimisation.

Here’s how value-engineered packaging can help your business save money and perform better:

Reason 1: It lowers your unit costs

A simple packaging audit takes into consideration the existing materials, logistics and construction processes around your packaging. Cost savings are found by assessing the performance of your current packaging solution in these fields and then improving upon them.

For example, your product may be using both primary and secondary packaging when of a more robust form of packaging primary packaging may suffice.

This more robust material may fit more pieces onto a single pallet, thus keeping costs down even more.

As you can see from the two examples above, value engineering has both direct and indirect cost savings for your business.

Reason 2: It weaves sustainability into your DNA

Your brand may very well have sustainability and eco-friendliness at the core of what it does and therefore want to implement sustainable packaging.

If you’re delivering even the most carbon-negative product in single-use plastic packaging, you’ll do nothing other than disappoint your end consumer.

But using a packaging engineer, you’re able to work the cost-effective and environmentally friendly materials into your packaging.

Experienced packaging consultants stay on top of the latest materials technology and work with suppliers that can implement the ideal sustainable packaging solution into your brand, while also balancing costs.

The result of such a process is environmentally friendly packaging that helps your brand stand out and is marketable as complementary to your product and brand.

Reason 3: It improves your image

The effect your packaging has on your customer is best understood when you think of your packaging as another marketing channel.

When your customer has your product in their hand, they want reassurance that they made the right choice. And your packaging is the ideal place to remind your customers why they brought from you.

Take a brand that everyone is familiar with, Apple.

The brand’s image is one of sleek, modern sophistication that places emphasis on minimalism and cutting edge design.

And these sentiments are mirrored on the packaging of all their products.

iPhone packaging is understated, and either black, white or the same shade as the product. There’s little to no gimmicks on the external packaging, but rather the understated design is left to do the talking.

And this is the opportunity that tailor-made packaging can bring.

If your brand is overstated, loud, colourful and ‘in your face’, then these branding strategies can be worked into your packaging design.

Similarly, if your brand uses an understated design like Apple, higher-quality materials can be used to invoke the sense of touch into the buying process.

Reason 4: It saves you in shipping & logistics

Shipping and logistics are a two-time expense for your business.

Firstly, from the manufacturer to you, and secondly, from you to the end customer.

Passing on delivery costs to your customer is quite common, but studies show that customers now expect free shipping.

So by engineering your packaging so that it is as light as possible and uses space as best it can, you’ll minimise both these costs.

Custom sized packaging performs best when going from your warehouse to the end customer.

That’s because it takes up as little space as possible, be as lightweight and safe as possible – and all this by using the smallest area and volume as necessary.

Reason 5: It’s a good insurance policy

Keeping your products safe throughout the transportation process is essential, as returns for damaged goods can be costly.

Using a variety of software, experience and engineering principles, packaging engineers can analyse the existing structural weaknesses of your packaging.

From there, materials can be added or swapped or internal structures redesigned.

But if you’d prefer to keep your existing packaging, an experienced packaging engineer can make that work for you, too.

Void fillers, in the form of custom tissue paper or kraft paper, are a viable option, but they are an extra expense and create more work to implement.

To make the most of your current packaging solution, consider using a custom insert.

Custom inserts designed to hug your product and prevent any movement are an effective way to make your existing packaging safer.

Reason 6: It saves space in your warehouse

Whether you use your warehouse or a 3rd party fulfilment centre, space comes at a premium. Packaging that doesn’t store well lessens the amount of space you have for other merchandise, thus negatively affecting your fulfilment processes and cashflow.

By value engineering your packaging, your storage restrictions influence the design of your packing.

Saving space may come in the sense of shortening one edge so that more pieces fit on one pallet, or even go as far as replacing a corrugated cardboard box with a custom mailing bag.

Reason 7: It speeds up your fulfilment process

Value engineered packaging can have another positive effect on your warehouse operations. By working with your existing machinery or manual assembly possibilities, your packaging engineers can build an efficient assembly process into your packaging.

As your packaging is being designed from the ground up, engineers can remove the need for glue or tape without sacrificing structure performance.

Over to you

Value engineered packaging looks at your current solutions and potential packaging solutions under a detailed microscope then finds the best possible solution and works it into your business operations.

These tailor solutions also present better branding opportunities in the sense of a more memorable unboxing experience.

The overall result is custom packaging that keeps your packaging expenses down without sacrificing performance.

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Bio:

Phil is a bearded Australian living in Warsaw, Poland. When he’s not marketing Packhelp’s sexy boxes, he can be found trying to kill his houseplants or writing for his blog Expatspoland.

Everything You Need to Know About Barcode Scanning Technologies

Barcode scanning is a critical part of the overall inventory management, fulfillment and shipping process that doesn’t seem to get as much attention as other warehouse functions. Without it, warehouse operations are subject to human error, leaving receiving, inventory, fulfillment and shipping errors with a chance to flourish. But when barcode scanning technologies are implemented and used properly, warehouse staff can operate with extremely low levels of errors – which is critical in our world of high-stakes e-commerce fulfillment and delivery.

The entire fulfillment process (receiving, inventory management, fulfillment, shipping and returns) can completely fall apart if all of these processes and procedures are subject to human error. In order to minimize errors to an acceptable level, bar code scanning technologies must be implemented. Bar code technology is vital because it allows you to automatically receive inventory, manage inventory, and pick and ship products with computer scanning rather than a set of human eyeballs (which are very prone to error!).

Barcode Scanning Technologies

Barcoding has gained mass adoption in warehousing because the cost of implementation is often very low and effective use of barcodes avoids errors and speeds up routine tasks.

While it is possible to encode all types of information in a barcode, in warehousing and retail the vast majority of barcodes are being used to quickly and accurately identify items. A string of numbers and or letters unique to each product is encoded in the barcode. When scanned, the scanner decodes this identifier which ensures the correct item is processed during receiving, counting, picking or packing. The barcodes themselves and the identifier encoded therein is not very useful on their own, but they become useful when coupled with a plan and a system that is often managed by the software you’re using.

Choosing Barcode Software

If you are planning to utilize barcodes you’ll want to choose software that has barcode support integrated directly or verify there is a suitable integration with an application (app) that can provide the scanning features you require.

Scanning functionality will ultimately come from one of three places. First, it may be part of an app that you’re currently using, like a receiving process in an inventory application that utilizes barcode scanning. An example of this would be receiving inventory in QuickBook’s SOS Inventory or Finale Inventory. Second, there are also warehouse management and shipping applications that become the central inventory hub or inventory “master” in addition to managing orders and creating shipping labels. They are likely to include multiple scanning functions including receiving, stocking and pick pack verification. An example would be SKU Vault’s inventory management software.  Third, there are applications that focus on specific scanning functions, like Pick and Pack verification and inventory receiving or cycle counts. These apps can add a number of scanning functions to your existing workflow. An example of this type of app would be GroovePacker.

If you are in the process of selecting apps for your workflow you can compare the cost of using a few integrated applications that include the scanning functions that are important to you and going with an all-in-one WMS that “has it all”.

Using an All-Inclusive Inventory Software Versus a Barcode App

Jumping into a larger application or suite that includes every possible scanning feature will be costly and may be unnecessary depending on your current needs. It’s also likely that while it meets all current requirements, there will be one or more areas where another solution would be preferable.  As with any business application or system it’s often wise to focus first on the items with the greatest potential return or cost savings now and in the foreseeable future. Since packing errors always result in a direct, tangible cost and poor customer experience, pick and pack verification is probably the first scanning feature you’ll want to incorporate. Eliminating shipping errors will immediately improve your inventory accuracy which will reduce out-of-stock scenarios and the customer service related to back-orders. Once errors are eliminated you can further increase inventory accuracy by using scanners for receiving and recounting tasks as well.

On the surface, it may seem less than optimal to have a number of apps working together to provide the functionality you need. Years ago, this was certainly the case because communication between systems was limited and often required custom development. Now, however, API’s make it much easier and more reliable to send the relevant data from app to app. This gives you the flexibility to use the best app for your needs in each of your business processes. When you outgrow one of the apps in your stack you can make a change without changing your entire system.

When integrating multiple apps there is a tendency to strive for a “complete” integration, and to integrate every data point possible. The opposite approach may serve you much better. Narrowing your focus to the data that will actually be needed by each app in your specific use case will greatly reduce the complexity of evaluating potential integrations.

The system as a whole should be carefully considered and the functions of each app understood. Only after the requirements and functions of each app are clear, is it possible to determine if the existing API’s will allow the data that each app requires to be sent and received as needed. On your own this would be a complicated task, which is why it is key to choose software providers that can provide knowledgeable support staff. Their suggestions and insight will be invaluable as you hammer out the workflow. Even when it’s clear that everything should work “in theory”, you’ll need an opportunity to test end-to-end and verify that everything is communicating as needed before making any commitments. A trial of 30 days should be sufficient. If you’ll be setting up multiple apps you should ask each provider when their app should be setup in relation to the other integrated apps. This can lead to a much smoother setup and give you more time to test with actual orders.

Let’s take a closer look at how barcode scanning can be utilized in these inventory and quality control operations.

Pick and Pack Verification

Barcodes are often used to verify items during the pick and pack process to ensure ordered items are all shipped accurately. Due to the high costs of mis-ships, this preventative scanning step is one that many shippers feel is critical. If your items are not already barcoded you’ll need to decide between barcoding individual items (more work upfront) and barcoding bins (more error prone).

There are a number of workflow options for implementing scanning in your fulfillment process. Initially, you’ll want to determine when in your workflow the verification should occur. This will impact the rest of the scanning process. The two main options are Scanning During the Pick or Scanning During Packing. Scanning can be done during both pick and pack, but if either of these are properly implemented, accuracy should be so high that the time required to add a second scanning step is not warranted. If you are planning to implement pick pack verification and you are looking to explore the various workflow and process options, see Pick Pack Barcode Verification Workflows for an in depth look at these considerations.

Receiving Inventory

Scanning items as they are received ensures that the correct item is being added to inventory. For example, three cases of one dozen units have arrived and the quantity is being recorded. In a manual process the items could easily be attributed to the wrong SKU. When using barcodes for receiving, the software is recording what was received and the SKU being updated is selected by scanning the barcode on the physical item. This ensures that inventory for the correct item will be updated. Your inventory or accounting system that generates purchase orders may include a receiving process that utilizes barcode scanning. If not, scanning can be done in any application that integrates scanner input in the receiving process and which can sync or export the updated inventory counts for your inventory system.

Stocking / Replacing Inventory

After inventory has been received and accounted for it will need to be stocked in your warehouse for easy picking later. Returns that can be resold will also need to be replaced in the correct location to complete the return process. Accurately stocking and replacing inventory is essential to your pick pack accuracy if you are scanning bins during picking rather than scanning individually barcoded items.

The process of scanning during stocking or replacing usually involves a scan of a product barcode which has been applied to the bin. If the items are not individually barcoded the process will likely involve keying in the SKU and then scanning a barcode on the bin to verify the stock location.

Recounts / Cycle Counts

As with the receiving process, the barcode scan in the counting process ensures the correct item is being updated when a count is conducted and entered. In a manual process, it’s far too easy to record an updated count for the wrong item leading to confusion and potential out-of-stocks.

Barcode software uses a scan to find and display the correct item so an accurate adjustment can be made every time. If item locations change often, each bin ID can also be encoded in a separate barcode. This bin barcode can be scanned to quickly enter a new location for a product that’s being moved. It’s also possible to have the scanner count each individual scan. In other words, each barcode scanned can be logged on the scanner itself and the total for each barcode can be output after the scanning is complete. This particular operation can be done by many scanners without additional software. The file generated by the scanner can be used to update the software being used to track inventory.

Generating and Printing Barcodes

Registered Barcodes may be purchased from resellers or directly from GS-1. It is important to have registered barcodes if you plan to sell to distributors or wholesalers that will put your products in retail locations. If your barcodes are to be used internally for inventory and packing verification, you don’t need GS-1 codes and therefore can use any value you like. In this case, using the SKU is a popular choice as the product SKU is unique for every product and variant. It is recommended to use all uppercase letters for SKUs and barcodes generated from the SKU to avoid case issues.

Some applications that handle barcoding can automatically generate barcodes from your product SKU and allow you to print barcodes in a standard format. If none of the apps you’re using have this functionality, there are a number of apps dedicated to printing barcodes in various layouts and formats, such as the popular program BarTender. For initial test runs, you can use an online barcode generator.

Thermal printers are a great choice for printing barcodes as their output is easily scannable and there is no possibility of ink smudging and making the barcode unreadable. One caveat is that thermal printed barcodes will fade over time if stored in a hot environment.

Business-Specific Quality Control Scanning Requirements

Preparing to use barcode scanning with your products tends to quickly identify any abnormalities in your product data. For example, you may have previously input barcodes provided by a manufacturer so they would be ready for scanning. It is during the implementation of barcodes that it will come to light that the manufacturer used the same barcode for all variants of a particular item. Since the variant SKU’s are different physical items and must be distinguished from one another, unique barcodes will be required.

In addition to helping you identify and resolve issues like these you may also find that the way you package or sell items requires more specialized scanning features. Let’s look at a few common cases where additional scanning features are either required or can improve the efficiency of your workflow and operations.

Kits, Cases & Multi-Packs

Pre-defined kits of specific items allow you to group and sell many items together. Customers love kits and they are a great way to increase your average order amount. Unfortunately, kit complexity often leads to packing errors, especially if you have multiple variations of a kit.

If you sell kits or plan to, you’ll want to be sure your pick and pack verification software includes support for kitting. If your products are ordered by the case or if you often use pre-counted packs to fulfill larger quantities of the same item, you will likely want features that allow you to type in the quantity being added (rather than requiring that each item to be scanned) and to define multi-pack barcodes that can add a predefined quantity of the item on each scan.

Configurable or Dynamic Bundles

If you allow the customer to choose between several variants that are part of a bundle you’ll need to verify your shopping cart is able to pass the selected SKUs to your scanning software so they can be properly verified. An example might be a desktop computer. Purchases can choose different amounts of ram, hard drive size, and a graphics card. The SKU for each of the selected options will need to be included as a line item in the order for verification to be possible.

Lot, Batch or Serial Number Recording and Reporting

There are many instances where companies may be required to do a recall for specific lot or batch numbers. Tracking these on the sales end may be difficult or impossible depending on your current software. Lot or batch numbers of the individual items in every order can be easily recorded during packing verification if the software supports it. In addition to recording the batch number with a separate scan, some dedicated scanning apps can recognize both the product barcode value and the lot number while they are part of the same barcode label. This makes it possible to verify the product and record the lot number in a single scan. Orders containing lot numbers can then be exported and archived so they are available in the case of a recall.

Multi-Box Scanning

If you often pack orders into multiple boxes and generate per-box packing slips you know how tedious and manual this operation can be. Since boxes are chosen during packing it’s possible to implement packing verification software that will allow you to record items by box and generate a packing slip that meets your needs.

Planning Your Scanning Process

When it comes to packing verification the most essential feature is a well thought out scanning process. It should be designed to be easy to use and fool-proof, so mistakes are prevented amid rush and distraction in a chaotic warehouse environment. Features like productivity metrics for your packing team are nice but not essential. What is essential is that you take the necessary time to plan out every step to ensure the highest level of quality over your entire inventory, fulfillment and shipping process.

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

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.