How to find an ecommerce fulfillment center — Ultimate Guide Part 1
Written by Darius Banasik
November, 20 2019
Have you ever looked for a vendor whose service is supposed to make your life easier, but ended up more confused or disoriented after reading their proposal, especially when comparing it to their competitors?
We recently came across this issue with an apparel ecommerce brand that is killing it online.
After running into problems with their existing ecommerce fulfillment center they were looking to switch and obtained four proposals from different, reputable, ecommerce fulfillment centers (or 3PLs, Third-Party Logistics vendors).
The proposals they received were full of conflicting information on pick and pack fees, returns processing fees, and showed rate charts for lighter and smaller products than they were shipping, effectively misrepresenting the real rates they would pay on their invoices.
They reached out to ecomBLVD.com to help them make sense of it.
Upon reviewing the information, it became clear our client was part of the problem.
They hadn’t shared all of their numbers with the vendors. What made it worse was that they shared different numbers with different vendors. Effectively sharing more information with some, and not enough with others.
It quickly became clear that this was a great example of junk in = junk out.
No matter how busy your ecommerce brand gets, we definitely recommend spending some time pulling together information about your business and presenting it in a format that is easy for ecommerce fulfillment centers to understand.
The more information you give them, the more accurate their quotes will be, and the happier both sides will be with the partnership. If you select a warehouse without providing them with the proper information about your store, you’ll end up paying for it in the end.
It’s always a good idea to avoid “invoice shock” after selecting your ecommerce fulfillment center, but when you don’t know your numbers, it’s pretty much guaranteed!
We see these mixups all the time. That’s why we’ve put together some basic information that you should have ready before you reach out to any ecommerce fulfillment center. This ensures you’re both comparing apples to apples and not apples to oranges.
Selling online means that your ecommerce data is spread across multiple platforms, but which platform holds the “source of truth”? If you update data in one platform, does it do a two-way sync with all other platforms? Is one platform more accurate than another?
This is a super important term that you should become familiar with as your company grows and evolves. This Forbes article by Brent Dykes does a nice job of laying out what it means for companies to organize their data.
Make sure you consider where your ecommerce data is stored and how it’s accessed. For example, Shopify handles credit card transactions, so that becomes your source of truth for how much money your store transacts. Your email list is in Mailchimp, so you’d go there to check its size and segmentation. So far, so simple.
However, what if your inventory management software and Shopify don’t always sync up, and you have to go to your software for SKU inventory data? Or your shipment data is in Shipstation because that’s what you’ve been using to generate labels, but Shipstation doesn’t sync to your software. There are countless places where different programs don’t communicate and data gets lost or mistakes are made.
The overarching point here is to recognize those failures of communication and make sure you get “source of truth” data from the right places. That way when you pull reports, you are sure they are an accurate reflection of what is happening with your ecommerce store.
Your SKU list is something that communicates to your ecommerce fulfillment partner the number of products you have, as well as quantifiable information about those products.
You should make sure to pull this information from wherever your source of truth is for SKU lists.
Ecommerce fulfillment warehouses need this information because it will help them understand the requirements of working with you. Typically they want customers with the least number of SKUs and the highest volume of orders because that makes their job easier.
Imagine if you sell one SKU 1,000 times daily, they could literally set up a pallet of your product next to a packing table and have a guy pick from right next to it. They don’t need to walk, just stand there and pick those orders.
If that is your scenario, great, you can totally negotiate your picking packing fee with the ecommerce fulfillment warehouse and save money.
However, if you have 2,000 SKUs and are doing 50 orders a day, the ecommerce fulfillment warehouse will need lots of shelving to store all your products. They may even need to reorganize their warehouse in order to accommodate adding you to their existing picking patterns. This, in turn, can make negotiating for your picking packing fee a little harder.
Order / Transaction History
The number of orders you process per day, week, and month is something else your ecommerce fulfillment partner will care about.
You definitely don’t need to give them all the details, but they will need to understand what type of client you are. Are you starting out and doing 10 orders/day, or are you taking 1,000 orders/day? You will be treated very differently by different ecommerce fulfillment warehouses depending on this.
During ecomBLVD’s Pre-Qualification process, we go through all the ecommerce fulfillment warehouses we work with to understand which vendors want to work with startups, and which ones only want established players. So make sure you pick the right one… (or email us and we can help!).
Ship To Information
Where you ship your orders definitely matters. What does the distribution of orders look like? Are you shipping 75% of your orders to the west coast? Then you need a west coast ecommerce fulfillment warehouse.
Have this information handy as it will dictate the location of your warehouse. There are huge price implications that you will bear as an ecommerce seller if you get this wrong. Especially if you sell products over 1 lb, as the shipping rates go way up.
Anything under 16 oz is the same rate anywhere in the US (this changed in 2019 with a variance of 12–16%):
But as soon as you go over 16 oz, the price differences get crazy:
Where you ship from/to is probably going to have the largest impact on cost, so you definitely want to get this right. Always shoot for finding a fulfillment partner closest to your largest market!
Shipping Carriers you are using (and how much you are currently paying)
Find out from your current fulfillment partner which carrier you are using, or look at your bills, as they should state that information.
There can be a benefit misalignment between the agreements an ecommerce fulfillment center has with its shipping carriers, and your specific shipping needs.
An ecommerce fulfillment center can have great rates with a shipping carrier that ships large and heavy shipments but lack good, low-cost options for smaller shipments. That’s bad news for you if you have lightweight shipments since you will have limited shipping options and higher costs for your products.
For example, you could ship a product that is over 1 lb, and, as mentioned above it’s super expensive if you’re shipping cross-country. However, your ecommerce fulfillment warehouse ships mostly products under 1 lb so obviously they will not have good shipping rates for you.
Additionally, not all ecommerce fulfillment warehouses have all of the shipping options available in the market. There will be lots of cases where a warehouse is tied to a particular shipping provider and that relationship may not be the best one for your customer base. We see this repeatedly with ecommerce sellers that have a large percentage of international orders.
Going international compounds this problem because a fulfillment center may only have DHL and UPS or FedEx as the main shipping options for international shipments. However, there are another 20 or so smaller operators that specialize in certain package types, or certain regions of the world. For example, DHL, UPS, and FedEx have a hard time shipping to China, while some great China-only carriers can handle those shipments for you at a 30-50% discount.
Conclusion — Take some time to know your numbers
There are numerous ways you can save money and increase efficiency when shipping your products, but they all start with you knowing your own business’s data and accurately conveying it to potential ecommerce fulfillment partners.
When you go into business with another company, they want to work as efficiently and cost-effectively as you do, and can only work well if you give them the tools to do the job right.
So start by getting to know your business.
- What information do you need to provide to a fulfillment center?
- Where are your single sources of truth for those datasets?
- How are you conveying that information to ecommerce fulfillment centers?
By asking yourself these questions and finding the answers, you can develop a playbook for your business that lets you access critical data in moments, trust it to be reliable, and present it to new partners so they can give you a realistic idea of the cost of doing business with them.
If you need help with the process or have feedback on our article, reach out to us at ecomBLVD.com or to us at email@example.com.
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