This article originally appeared in the 2018 September/October issue of PARCEL.
The parcel shipping world is growing dramatically, and it will only continue to grow as consumers get hooked on the ease of ordering their needs from the living room couch. How do you take advantage of this growth and best position your company to get return business off the internet? Fulfillment!
Recently, I attended a function where several mothers and teachers were seated at my table. I listened to them talk about back-to-school readiness and how they juggle everyday life with a career, being a mom, and running a household. Every single one of them mentioned that they order a lot of products online in order to cut down on the number of errands that need to be run all over town. They were discussing several websites that they like, and the common factor was the service and ease of ordering and receiving. One participant mentioned a website that had good bargains, but she would never order from it again because it took three weeks to get her order.
Certainly, a company that is solely e-commerce must get a “click” in order to sell a product online, but that’s only the first hurdle. The rubber hits the road, so to speak, when the order is delivered correctly and efficiently.
Are you tracking your on-time deliveries? What about the accuracy rate and cost per order? These three things are very important in determining whether your team could hinder your success or augment it. If your team struggles and your numbers aren’t very good, it’s time to look at other options in order to build your business and grow your company. These other options could only be temporary while you build a team that can deliver on the promised service.
The Amazon Opportunity
A hot topic in today’s ecommerce trends is FBA. If you don’t recognize that acronym, then you probably aren’t listed on Amazon. FBA stands for Fulfillment By Amazon. Your products are listed on the Amazon website, and when someone purchases the product, Amazon fulfills the order. As Amazon’s customer, you determine how much stock should be sent to Amazon, but Amazon determines which facility the stock will be sent to and how much will be sent. Another option from Amazon is Seller Fulfilled Prime (SFP), which puts you in more control of your destiny. Your product is listed on Amazon as prime shipping. When purchased, you must ship it within the promised two days. Shipping labels must be purchased from Amazon. If you don’t perform, your product will get de-listed. Not surprisingly, there is a lot of fine print and things to consider on every option. Just like every other third-party logistics provider (3PL), Amazon will penalize you for extra touches, extra labeling, and rework.
The other option is a 3PL or 3PF (third-party fulfillment company). Don’t be misled; there are many 3PLs that also do fulfillment for e-commerce companies. There are many important things to consider when selecting a 3PL company because this partner will be a critical piece of your business strategy. One significant factor is their reputation for execution. Do they have experience in the e-commerce world, and how much? If you are an apparel company, for example, does the potential fulfillment partner have experience in that industry? The second thing that is very important is location. If 80% of your business is on the east coast, selecting a 3PL in the western part of the country is not optimal. You need to dissect your business and determine from what part of the country you could provide the most customers with two-day shipping. That will be a prime location for the 3PL.
If you are smaller and just starting out, you may be able to leverage a 3PL’s parcel shipping rates. A mid- level to large 3PL would be able to negotiate better rates thanks to the sheer volume, and the savings alone on parcel shipping may justify going to a 3PL versus setting up a fulfillment center yourself. This highlights why it’s critical to research the best partner based on your company’s personal criteria and business profile. Once you have found a few that are possible contenders for your business, it’s time to request a proposal for your business.
It will be extremely hard to compare two potential partners because each 3PL has a different way of charging and figuring accessorial charges. Still, try to drill down as much as possible to get them as comparable as possible. Selecting a partner should not just be on price. The culture of your company and the culture of your partner should be a good match. You’ll be able to discern if the cultures match by doing site visits and talking with references.
If you elect to go the build-your-own route, be sure that all executives in your organization view this step as a critical piece of business strategy and not just a warehouse. Companies that succeed in e-commerce either do a great job at fulfillment or were smart enough to find someone that does.
Susan Rider, President, Rider & Associates, can be reached at email@example.com.