There’s a reason why home improvement contractors don’t hand you an estimate at your first meeting. Without knowing anything about your home – how it’s constructed, the plumbing, the electrical and your desired renovations – a generic pricing list is useless.
It’s similar with fulfillment services. Your company, its products and its customers are all unique. In the same way that no brand has the exact same attributes as yours, no brand has generic fulfillment requirements for their direct-to-consumer orders.
That’s why standard costs, price sheets and generic order fulfillment company pricing have little value. When third party logistics providers (3PLs) provide itemized pricing for various functions without knowing anything about your operations, it can lead to inaccurate budgets and uncomfortable discussions with the boss when actual costs sail past estimates.
Order fulfillment company pricing is, at its core, pretty simple. It must account for the space to store the product and the labor to process orders. But the costs for these two elements are dependent on dozens of variables.
Accurate pricing requires providers to ask questions and account for these variables in their pricing tools. What kinds of questions should providers be asking? Our eBook on How Does eCommerce Fulfillment Pricing Work? covers a lot of them.
So, if generic pricing for fulfillment services is misleading, why is it a thing?
Because people like “easy” and some providers play into that desire with a simple, fill-in-the blank approach that promises instant price estimates.
Don’t fall for it. Your fulfillment warehouse is one of your biggest cost centers. You want accurate, and most times that requires a disciplined approach that digs into the details.
Any provider of fulfillment services that’s been around and had significant client engagements, knows “back-of-the-envelope” approaches to order fulfillment company pricing are futile. But by asking an eTailer the right questions and applying experience and analysis, they can provide a realistic estimate for what you need. They can also provide invaluable perspective that helps lower your costs and prepares you for any contingency ahead.
If a 3PL initiates pricing work before a detailed analysis of your operation and requirements, that’s a red flag that the price may be only preliminary and, therefore, inadequate for apples-to-apples price comparisons between competing providers.
Common questions about order fulfillment company pricing
Will providing the same data to different 3PLs lead to a straightforward pricing comparison?
Even if you provide competing fulfillment providers with the same data, it still might not be a straightforward comparison. The reason is that different fulfillment companies will calculate their base rates differently. A good example is that one provider may build certain accessorial costs into their base rate that others might not. The secret for how to compare fulfillment costs across competing providers is to dig into the details once a proposal is submitted.
How does a 3PL’s warehouse location factor into pricing?
The storage and labor rates for the same services will be different based on the market, which affects the operating costs of a 3PL. Scrutinize 3PLs’ locations with that in mind. With commercial real estate prices higher than ever, location is one of several important reasons why ecommerce fulfillment services can cost too much.
Should eTailers be comparing the cost of outsourcing fulfillment services with insourcing?
You certainly want to ensure outsourcing yields a cost advantage, but frankly the cost advantage of outsourcing fulfillment are well established.; A 3PL delivers lower costs by sharing the overhead of an operation across all its customers. The areas where overhead is shared include facility management, warehouse labor, systems investments, and common areas like office and dock space. All of these in-house overhead costs add up and can quickly surpass the fees associated with outsourcing fulfillment to a third party.
Is running a multi-channel operation going to complicate my pricing?
Not if you are dealing with 3PLs with a track record of managing multi-channel distribution. They’ll know how to price fulfillment for B2B and B2C fulfillment in all its different forms. Every channel has distinct requirements. Not only do you not want a 3PL without multi-channel chops stabbing at your pricing – you don’t want them handling your business. Learn the details of how 3PLs handle multi-channel fulfillment in this eBook.
Will there be much variation in shipping fees?
3PLs with more volume will pass on better rates to you, so look for a partner with buying leverage with parcel carriers. Strategy figures in also. For example, using USPS for final mile and leveraging low-cost regional carriers can significantly lower shipping costs. Learn all the ways 3PLs can lower shipping costs.
Embrace the details of order fulfillment pricing
Order fulfillment company pricing is detailed work. You should embrace these details because it will ultimately yield an accurate cost estimate. If you skirt the details, it may save just a little time during the 3PL evaluation process. But you’ll spend that time and more when rates must be renegotiated down the line.
Got questions about order fulfillment pricing? The experts at Amware are ready to dig deep to provide answers. Reach out.