After your company makes the decision to outsource fulfillment there are some important things to consider when evaluating the right company to work with. Full-service fulfillment companies bring your product to market quickly and consistently. They become a crucial part of your supply chain. This makes it critically important to consider what you want to achieve by outsourcing fulfillment and monitor the services you work with to ensure they are meeting your expectations.
Consistent Lead Times
The greatest benefit of using a fulfillment service is that it allows you to bring your product to market with consistent lead time. When your customers can rely on your business to deliver on time it builds customer confidence and leads to customer retention. Fulfillment services deliver products to wholesalers or directly to customers, so it is important to understand these services capabilities and limitations to avoid anything reflecting poorly on your business.
Avoid this by working closely with the company that you are using to outsource fulfillment. Be sure to continue to keep track of shipments to customers and wholesalers and confirm that the products have arrived in a timely fashion. By doing this you can be confident that commitments to your business and your customers are being met.
The goal of these services is to ease the burden of conducting business but if the company is not staying on top of your orders it may lead to more harm than good. Setting up a reporting schedule and having regular communication will allow you to work through the potential issue together before they become a problem.
This communication has to work both ways though. Best practice is to let your fulfillment company know your projected sales and growth goals. This is especially true of companies that offer products with seasonal demand. Your fulfillment service may be working with clients who make similar products and therefore have similar demand. By giving your fulfillment company a good estimate of times when you may need greater capacity you can decrease the likelihood that bottlenecks will lead to longer lead times.
Ability to Scale
Another benefit of outsourcing fulfillment is that doing so allows operations to scale with greater flexibility. The right service to help with fulfillment is one that will have the capacity to grow along with you.
Communication will be key in this regard once again. Before committing to any agreement, get as much information as possible about the company that you will be working with. Ask questions such as Does your company have excess capacity? What are your plans for expanding capacity in the future? Does your growth model fit our company’s future needs?
Contracts like these are the start of a relationship and it is crucial to make sure that you do not make commitments to customers that you are unable to keep because capacity was not available when your customers demanded it. When outsourcing fulfillment, be sure that the company you are working will not just meet your demand today but through the length of the agreement.
Most people outsource their fulfillment because of the cost savings they can realize by doing so. Full-service fulfillment companies have access to lower cost shipping since their volume with individual carriers is normally higher. They also have the infrastructure in place to manufacture and package products in bulk, which can represent major cost savings to the businesses that they serve.
If you are aware of what your future capacity needs may be, some companies may be willing to work out a better price on initial orders if you agree to increased capacity in the future. Be sure that you have carefully considered all the factors that contribute to your business’s growth before committing to this type of agreement as there may be penalties incurred if you do not expand production as quickly as you had expected.