Online Seller’s Guide to Order Fulfillment Services Pricing

November 26, 2019 by Amware Fulfillment

If you’re in the market for order fulfillment services, there’s one question that’s probably at the top of your list: What’s it going to cost?

As is often the case, the answer is “it depends” – on lots of things.

order fulfillment services pricingOne sign that you’re dealing with a top-quality fulfillment company is the depth of fact gathering it goes into as part of the pricing process. Yes, it creates some work for you. But, it results in the most accurate order fulfillment services pricing. Better to nail an accurate estimate from the start than to have to explain to the boss three months in that the price is going up 25%.

The following chart includes questions your potential fulfillment partner should be asking – all presented in a convenient table format that explains the rationale behind each question. If the fact-gathering process seems daunting to you, not to worry. Fulfillment providers can assist you with the process to minimize your time and effort, while still getting to a highly accurate estimate you can confidently share within your organization. 

What 3PLs need to know

 

Why we need to know it

Describe the products.

  • How many are there?
  • What are their precise dimensions in terms of length, width, weight and height?  
  • How many of each SKU is in each case?

 

 

Your 3PL’s engineers will need this data to determine how much storage and picking space will be needed, whether or not your inventory can be stored vertically as well as horizontally, how strong your racking needs to be, and how large a pick front is required.

Are any of your SKUs fragile or hazmat?

 

Some products are more work- and storage-intensive than others, including fragile and hazmat goods. Both have complex storage and handling requirements that will impact order fulfillment services pricing.

What’s the ratio of palletized vs. floor-loaded shipments?

  • Are floor-loaded deliveries shotgun loaded or cleanly separated?

 

The receiving phase of fulfillment can be a huge bottleneck if all of its nuances are not accounted for. In order to get an accurate bead on the labor, time and space required to receive shipments, a 3PL needs to know as much as possible about how efficiently goods were packed and staged by suppliers and vendors farther up the supply chain. 

What is the SKU makeup of your inbound shipments:

  • Average number of SKUs per shipment?
  • # of pallets or cases on average created from each inbound shipment?
  • % of cartons or pallets that are mixed SKUs vs. single SKUs?

 

The more individual SKUs you have per shipment – and the less stratified those SKUs are – the longer it will take your 3PL to offload them properly. Detailed responses to this question will help prevent unexpected dock delays and unwanted sticker shock later.    

Does your inbound receiving process require more than a basic general inspection?  For example:

  • Does product need to be bar coded or labeled?
  • Will a quality audit be needed?
  • Will photo evidence need to be collected?

 

The tasks mentioned in this question can increase everything from dock-to-stock time to product touches (and the corresponding expense).

Do you have any products that require special storage, stock rotation or handling processes?

  • Will you need space that is humidity or temperature controlled?
  • Will you need us to ship out First In/First Out or First Expired/First Out?
  • Will your products require lot control or serial number capture?

 

Your responses to these questions could impact everything from where a 3PL proposes to store your product (and how much that storage will cost) to what kinds of technology purchases and other capital improvements will be needed before a go-live date.

What is the average weight of your standard pallet or carton?

  • Can pallets be stacked? If so, how many of them can be stacked?

 

As a 3PL works to find the most-effective configuration, it can only do so if it has detailed information like this. For example, the weight of a product may lead to the use of different, more durable racking than currently used.

How many unique SKUs will be in storage?

 

Unless it’s going straight from the dock to your pick line, each SKU you sell must have its own unique slot or bin in a fulfillment center. More SKUs equal more space requirements (and expense). Precise data here will ensure accurate order fulfillment pricing.

What’s the ratio of B2C vs. B2B orders?

  • How many B2C orders do you ship each year?
  • On average how many lines are there per B2C order? How many units?
  • On average, how many packages or boxes are there per B2C order?
  • What % of your orders ship with just a single SKU?
  • How many B2B orders do you ship each year?
  • How many of your annual B2B orders are picked and shipped as cases? As pallets?  As units?
  • On average, how many pallets are shipped on an outbound B2B order?

 

Before a 3PL can calculate a realistic cost per order – which is a major component of order fulfillment services pricing – it has to clearly define what a typical order means to your company. The good news is that existing service level agreements may contain much of the detail that’s needed, so share those with your 3PL.

Are there any special or value-added services your orders require? For example:

  • Do any of your orders require kitting? If so, how many unique kits must be built? Are kits built to stock or on the fly?
  • Do any of your orders require retail compliance tasks, such as unit labeling or carton labeling? If so, how many of your retail customers require this?
  • Do some of your orders follow different shelf life allocation rules than others?

 

One of the most common scenarios that can alter the accuracy of a 3PL’s quoted fulfillment price is failing to account for all of the work needed before an order is ready for shipping, especially work that is considered to be above-and-beyond the scope of standard order picking. When a 3PL asks questions like these, it’s trying to be extra sure the scope of work is accurately defined.

Does your company have any special release days or promotional spikes that drive order volume up on a regular basis? If so, how significant of a spike?

  • What are your sales volumes by month?

 

The more information your 3PL has about your peaks and valleys, the better it will be able to protect you from unnecessary extra expenses such as expedited shipping, last-minute temporary staffing, or overtime – and major delivery delays.

Describe the current process for order packout. For example:

  • Do you enclose a packing slip with each order – and can it be modified by our company vs. having to be replicated exactly?
  • Are there any marketing inserts such as coupons or flyers that have to be enclosed? How often do those inserts change?
  • Are there items made of glass or other fragile materials that require a more careful packout? If so, how do you handle them?

 

Whether you respond with a verbal description or decide to supply pictures or videos instead, this is probably one of the most important questions you need to answer in detail, because the packout stage is usually when the most product touches (and fulfillment expenses) occur. If the input you provide here is complete, the result will be accurate pick and pack pricing that’s fair and equitable. But if it isn’t, pricing accuracy can diminish considerably.

What types of packaging and dunnage materials do you use?  For example:

  • Do you use boxes? Padded mailers? Polybags?
  • Do you use craft paper? Air pillows?  Tissue paper?  Something else?

 

A little added emphasis on this area can save big money in long run, and not just in the warehouse. Your packaging and dunnage materials can impact everything from how long it takes to complete a packout to the cost of weight-based parcel shipping.

Please describe your current process for returns:

  • % of your orders returned each week?
  • # of cartons or items in a typical return shipment?
  • RMA number required?
  • Desired processing time for returns?
  • Damaged inventory processes?

 

Your 3PL needs to ensure that it has properly estimated the space and staffing required to process returns, which are typically far more work and systems-intensive.

What is the monthly velocity of each SKU?

 

As your 3PL’s engineers work to design the most efficient configuration for your pick line, it’s critical for them to understand which items are fast-movers (and when they move). Even though this question may seem similar to the earlier one about peaks and valleys, this added level of detail will enable an optimal warehouse layout and more cost-efficient picking.

Describe your ideal method of integrating your order flow with a 3PL’s systems?

  • How will orders be placed?
  • If orders will be placed via order feed, what type of feed will it be (SOAP, EDI, JSON, FTP drop off, custom)? 
  • Do customers require inventory and order/shipping confirmations? If so, via what kind of feed?
  • Do customers allow backorders? If so, should they be shipped complete or shipped partial?

 

Seamless order flow is critical to a successful onboarding process. You absolutely don’t want to give short shrift to systems integration and how data will flow between your systems and your 3PL’s systems. Start early, test and re-test. Systems requirements may impact order fulfillment pricing, so the quicker you address any issues, the better.

 

Embrace the detail in the pricing process

With the right data in hand, 3PLs can usually knock out an accurate price estimate pretty quickly. The data gathering may take a little time on your side, but it’s well worth it if the goal is accurate order fulfillment services pricing. You want a 3PL partner that is thorough. If the provider does not push for the detailed data mentioned in this guide, definitely ask about the company’s pricing methodology. Generic pricing does not work in the fulfillment industry, as each account has nuances that will impact pricing. 

If you are asking for price estimates from multiple providers, remember to provide each with the same set of data or it will be hard to make an apples-to-apples comparison.

Order fulfillment is a detail business, so embrace that detail. The more data a provider has, the better its ability to design a solution that completes pick/pack/ship tasks in less time using the least amount of space.

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Filed Under: Logistics Outsourcing, B2C Fulfillment, fulfillment operations, order fulfillment