Fulfillment Fundamentals: Making Service
Consider Size, Scale, and ServiceIn fact, put that last one first, because making service is the most important aspect when it comes to order fulfillment. How any change will impact service levels (and the associated costs) is a vital consideration and should drive your decision, with the size and scale of your business as key contributing factors that inform it. Despite our obvious bias towards our industry, it's fair to say that any business with the desire to scale should consider outsourced order fulfillment from day one. That does not mean you should outsource day one, but that a plan to execute fulfillment in the near and medium-term should exist. In short, you need to have an idea of what will happen once you can no longer justify a lot of your time and attention on this part of your business. Many great products, with proud owners who want to ship direct to consumer, fail to consider the value of the item they are shipping. You may be in for a rude awakening regarding fulfillment costs when you look to outsource and, because many people fail to factor in the true value of their own time, it can be very hard to go from spending a perceived $0 to the newly assumed cost per order fulfilled by a 3PL. A top-selling item can quickly turn into a loss leader in this scenario. Your business can make service but is clearly going to struggle to make a profit. At the other end of the scale, what if order volume grows tenfold overnight? This isn't as unrealistic as it sounds to some, given the power of social media to drive sales sharply up with little notice. The day you wake up to 10 times your daily order volume is going to be a rough one if you haven't asked yourself "what will it take to get this stuff out the door and into my customers’ hands reliably?’ As we've talked about in previous articles, the process of selecting a 3PL, developing the right relationship, and getting it up and shipping takes some time. This is when the complexity and dynamic nature of actually making service hits home. The important thing is to have a clear idea of what volumes you can accommodate and when it's time to seek outside, expert assistance. The enduring lessons, in our experience, have a lot to do with the physics of throughput and expected levels of service. Every e-commerce customer feels entitled to received an extremely high level of service and who are we, the humble provider, to disabuse our clients of this? But there are significant costs to the fulfillment activity, both to the 3PL, client, and possibly even the end customer. Holiday spikes and other challenges to load-balancing play a very real role in our industry, and need to be clearly discussed from the outset to manage both resources and expectation. The more fulfillment provider and client are on the same page from day one, the more likely we both are to make service that meets and exceeds expectations on a consistent basis. In summary: you don't have to outsource the second you see a spike in orders, but you do want to plan for those instances and understand the levels at which you'll no longer want to go it alone if they continue.
So You've Decided to Outsource Your Order Fulfillment...First and foremost, let's set some expectations: outsourcing does not mean immediate or error-free service. Even professional fulfillment providers experience errors and disruption, as you'd expect in a dynamic industry that involves forecasting, resource allocation, and variable demand and delivery scenarios. In the words of our CSO and co-founder Thom Campbell: In the words of our CSO and co-founder Thom Campbell:
"If anyone tells you that they offer 100% on-time, accurate order fulfillment, run. You have just met a pathological liar, or someone who does not understand the numbers underlying their own business."Some of the first questions we're often asked when looking to determine whether we are a fit include:
- How much space do you have?
- How many orders do you ship daily?
- What staffing levels and shifts do you run?