Optimized logistics are the backbone of every online store today. With increasing growth, shipping costs are also increasing. Sooner or later, every store operator will have to decide whether they want to outsource fulfillment or set up a solution themselves. We have the answers to the most important questions that will help you with your decision and your search for a partner.
Contents
- What does fulfillment mean?
- What do fulfillment providers offer?
- Why is professional fulfillment important in e-commerce?
- What are the advantages of fulfillment outsourcing?
- When is it worth looking for a fulfillment partner?
- What are the selection criteria for a fulfillment partner?
- How much does a fulfillment service cost?
- Conclusion
What does fulfillment mean?
Fulfillment is a logistics term that summarizes all the processes that take place in the background during order processing. A fulfillment process specifically includes the following process steps:
- Goods receipt
- Storage
- Order processing (Pick Pack)
- Shipping
- Returns processing
- Customer service
- Analysis and reporting
Good fulfillment providers can relieve online retailers in all these areas and set up individual logistics processes for them. For you, this means more time for your core business.
What do fulfillment providers offer?
E-commerce fulfillment service providers are companies that specialize in efficient warehousing, packing and shipping, as well as returns processing. As a basis for this, they also have extensive IT knowledge and can therefore set up interfaces to stores and digitally map process steps.
Fulfillment providers are therefore experts in IT and logistics and usually have modern facilities and systems for the best possible process efficiency. They also have a broad network of various pallet and parcel shipping service providers, enabling them to provide the optimal carrier solution tailored to the product range and the desired shipping time. This also makes next-day delivery offers to end customers possible.
Why is professional fulfillment important in e-commerce?
If you want to be successful in online retail today, you have to offer your customers an all-round excellent shopping experience. This is no easy task, as the demands of online customers in terms of store usability and delivery times are constantly increasing. Players such as Amazon, Zalando and Galaxus in Switzerland have long since set the standards with their services that customers expect from smaller stores today.
A key aspect of this is the post-purchase experience, i.e. the customer experience after the purchase. This includes processes such as professional, fast and reliable order processing as well as a returns option and a quick refund.
Successful online stores need an interesting product range, targeted marketing, good customer service and reliable logistics processes. And the last area in particular will inevitably tie up more and more resources as success and sales increase. Unprepared, large order volumes can present store operators with a huge challenge.
Setting up your own logistics takes time, knowledge, infrastructure and personnel. Long-term planning is the key to success. The infrastructure should be expandable, the staff available and the processes scalable. Non-optimized logistics can lead to an increased error rate, which in turn affects the store’s reputation.
"With a fulfillment partner, stores benefit from efficient and customer-friendly processes and scalable storage locations right from the start. This can have a positive impact on the customer experience and gives store operators long-term planning security. In addition, there is no need to search for staff, which frees up a lot of time for the core business and also saves on recruitment and wage costs."
Peter Egger, VP Growth
What are the advantages of fulfillment outsourcing?
In e-commerce, customer satisfaction is the key to success. Fulfillment partners understand this principle and offer services that help you to improve the customer experience in a targeted manner. This not only makes you more competitive, you can also save money depending on the situation. These are the key benefits of a partnership:
- Save time: By eliminating logistical tasks, you can concentrate fully on your core business. By having more time for your product range and marketing, you can continue to develop your store without any worries.
- Shipping offer: Thanks to a large carrier network, a fulfillment partner gives you the opportunity to offer your customers various delivery options such as next-day, 48-hour or sustainable shipping. With a partner, you also benefit from more favorable shipping conditions and comprehensive order status updates.
- Personnel planning: The search for logistics staff is very time-consuming. Seasonal peaks such as Cyber Weeks or Christmas business usually require additional staff. A fulfillment center has everything it takes to ensure reliable processing even with fluctuating order volumes.
- Scalability: Another major advantage is the flexibility of the warehouse. Fulfillment partners often offer scalable storage spaces that can adapt to a growing product range. This allows you to plan your product catalog more freely without having to worry about available space.
- Expansion: A service provider can also help you expand across the border. For example, if you sell in a country with a customs border, a local warehouse can save you a lot of customs costs. You can also take local trends into account and build up specific product ranges.
- Transparency: A fulfillment offer also includes a dashboard for your inventory. This means you have a digital overview of your stock, orders and their status at all times.
- Returns: In addition to fast shipping, fulfillment partners can also handle returns processing. In these cases, the service provider ensures that returns are processed quickly and stored again ready for dispatch. This means your goods are ready for resale more quickly and your customers benefit from a faster refund. On request, some service providers can also refurbish your returned items so that they are as good as new.
- Cost savings: If you compare the variable costs that service providers incur per parcel with the fixed costs for their own warehouse, personnel and software costs, service providers are more cost-effective with just a few hundred orders per month. In addition, the costs per order for service providers fall as volumes increase. The more a store grows, the more attractive the prices become.
Reading tip: Find out like the German jewelry retailer Julie Grace successfully entered the Swiss market with a local fulfillment successfully entered the Swiss market with a local fulfillment solution.
"With a fulfillment outsourcing partner, you get three main things: time, space and freedom. Ultimately, these can be the very factors that help your store achieve long-term success and scale."
Peter Egger, VP Growth
When is it worth looking for a fulfillment partner?
There is a point in time for every online store when it can make sense to consider outsourcing fulfillment. There is no general answer as to exactly when this is. However, there are clear signs that signal the right time:
- Increasing order volumes: In most cases, a fulfillment solution is only worthwhile from around 250 orders per month. Below that, it is advisable to process the orders yourself. However, if you anticipate explosive growth for your store, outsourcing may make sense even before that.
- Storage space: Scarce warehouse resources alone are no reason to outsource fulfillment. However, if you are running out of space, you should consider your forecast. If your store continues to grow rapidly, a fulfillment provider can offer you the flexibility you need to hit the ground running. With a scalable warehouse, you can expand your range without any worries.
- Return rateIf your business has a lot of returns, it may be worth outsourcing fulfillment earlier. This is because returns mean double the effort. Service providers can then take over the outbound and inbound process for you.
- Expansion. If you want to enter a new market, working with a service provider is worthwhile in most cases. International shipments are much more expensive individually and customs declarations are complex and time-consuming. With a warehouse solution in the destination country, you not only avoid individual customs clearance, you also reach your local customers faster.
- Marketplaces: Being represented on marketplaces is a must in today’s e-commerce. However, marketplaces have strict service level agreements (SLAs) with regard to shipping and returns processes. If marketplaces are an important sales channel for you, working with a service provider could pay off for you. Some fulfillment partners specialize in marketplace SLAs and can provide you with a worry-free connection.
- clientele: If you are operating in a highly competitive market, excellent services such as long order times, express deliveries and free returns are all the more important. If you don’t have the know-how or time to set up your own logistics and meet other points from above, you should consider outsourcing.
Reading tip: We show you which measures you can take to reduce your returns rate.
Are fulfillment providers also worthwhile for small companies?
Effective fulfillment is extremely important for small online stores. Peter Egger also confirms this: “There are now standardized fulfillment solutions for smaller stores that allow them to benefit from fast processes and optimized prices. In addition, the lower package prices offered by various shipping providers are also attractive for small stores. On the whole, a fulfillment partner can therefore also be the more cost-effective option. Stability, cost efficiency and time savings can ultimately provide the necessary stability and help the store to grow further. And here is another advantage: providers with scalable solutions simply grow with the business. Fulfillment providers can therefore also be advantageous for smaller stores.”
Well thought-out warehousing, targeted inventory monitoring and cooperation with a reliable shipping service provider can be sufficient in the initial phase of smaller stores. But even working with a service provider can be worthwhile, as Peter Egger explains: “Reliable and professional shipping builds customer confidence, increases customer satisfaction and can lead to positive recommendations. Efficient processes can also reduce costs and error rates and improve the entire supply chain.”
Reading tip: Find out how the Start up Shop Meistermesser with fulfillment outsourcing got off to a flying start.
What are the selection criteria for a fulfillment partner?
There are many criteria that can be used to select a fulfillment partner. You should therefore inform yourself well about the products, services and prices of the individual providers before signing a contract.
Before you start looking, you should ask yourself a few questions: What exactly do I want to outsource now? What else do I want to outsource in the next few years? Which services do I need exactly? What is my budget?
You can change your provider again later, but this can be very expensive under certain circumstances. Choosing wisely can save you a lot of trouble. You should therefore pay attention to the following points:
- CapacityDoes the provider have the necessary storage capacity and personnel resources to handle your product range and order volume?
- FlexibilityDoes the service provider offer scalable storage space and expandable services? A service provider should also be able to cover your future needs.
- Integrations: Does the provider have an interface to your store system or does he have the know-how to program a new interface?
- ReliabilityHow long has the provider been on the market and what kind of customer base does it have? A provider with many years of experience and well-known customers in its portfolio often has more reliable processes.
- Industry: Does the provider have experience in handling your product range? Not all providers are equally specialized in all sectors.
- CommunicationHow is the communication with the provider and do I have a personal contact person for my concerns? A good exchange is central to success on both sides
- EquipmentHow well is the provider technically equipped? Failure protection and data protection are important points for a secure supply chain.
- Automation: To what extent is the provider automated? Automation enables even more efficient processes with a lower error rate.
- Transparency: To what extent is the provider able to inform you about the fulfillment of SLAs and KPIs? Do they offer sophisticated tools for monitoring your stocks and deliveries?
- Terms and conditionsWhat conditions regarding shipping time, shipping discounts and tracking services does the provider offer? Are there also additional services that can be booked (later) (e.g. storage according to best-before date, returns processing, customs services for expansion, etc.)?
- CostsHow is the price made up? What are the basic costs, the integration costs and the variable costs that depend on your order volume.
- Liability: Also clarify who is responsible if errors occur in the process or goods are damaged or lost.
Find what you are looking for: Smart and digital fulfillment solutions for small and large stores.
"Experience is one of the most important factors when selecting fulfillment partners. A provider with many years of experience and good references in their portfolio will also tend to offer you better conditions."
Peter Egger, VP Growth
How much does a fulfillment service cost?
The question of the fulfillment costs of third-party providers cannot be answered in general terms, as many variables are included in the calculation.
It is best to contact the service provider directly and request a transparent quote that is tailored to your store. The following components will affect your package price:
- Warehousing
- Number of SKUs
- Service level grade
- Order volume
- Postage costs
- Pick & Pack fees (process costs)
- Packaging costs
- Add-ons like
- Supplements
- Individualized cardboard packaging
- Storage after best-before date
- Storage of fragile items
- Detailed returns processing
Also note that there are providers who demand a minimum service fee for variable costs. This means that you pay at least the processing costs for 200 orders per month, for example – even if you don’t have that many orders.
Fulfillment calculator.
Use our online calculator to work out how much a fulfillment service will cost you.
- Detailed information about your product range and shipping requirements
- 100% non-binding and free price calculation based on your details
- Get an instant price estimate for your customized set-up
Conclusion
Sooner or later, every successful online store operator will have to ask themselves whether they want to set up their own logistics or outsource this part of the business. While in-house logistics processes give you more control, with an external provider you benefit from highly efficient processes from day one. And, it can even be cheaper.
Fulfillment providers offer online stores the security they need to concentrate fully on their core business and further develop their business. At the same time, online stores with professional fulfillment processes can offer their customers a good service and thus improve their brand reputation. Working with a fulfillment partner can therefore prove to be very profitable. When outsourcing, it is important to get the timing right.
With around 50 years of experience, the MS Direct team can help you build efficient fulfillment value chains and connect to new markets with a customs border in Europe.
True to our motto “Every order is a fulfilled promise”, the satisfaction of your customers is also our top priority. That’s why we rely on fulfillment solutions that are tailored to your needs and can be easily scaled. With one of the most popular store systems, you can be up and running with us in just a few days.
Let’s take off together.