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Breakdown of Ecommerce Order Fulfillment

November 19, 2010 Leave a comment Go to comments

What are the different service and cost components of packing and shipping with a 3rd party fulfillment operation?

If you are an online retailer thinking about partnering with a 3rd party order fulfillment warehouse to handle your pack and ship operation you should understand the different categories of service a typical fulfillment house will provide.

This includes the process of receiving your goods into their warehouse. It begins with a thorough inspection of the product as it arrives to ensure there is no damage and the exact products and quantities match what is expected based on your direction and the Bill of Lading. On an ongoing basis it is important for the provider to maintain and report accurate inventory numbers. Storage requirements depend on the product but can include the facility maintaining a temperature controlled environment, custom racking, or on-shelf storage. Receiving and Storage rates are generally billed as either a per pallet cost, or a per package cost depending on the product.

An integral part of the fulfillment process is how orders get transmitted from you to the facility. This can happen as part of the integration set up with your ecommerce logistics software, EDI, or sometimes even a fax. As the orders are received, they are placed in a box or picked. The Order assembly costs are typically based on a flat per order cost that includes the cost of packaging the first item, and then an additional charge for additional items on that same order.

This would include the cost of the carton the order is shipped in, any material used to protect the product in the box, as well as the person’s time to construct the carton. These costs may or may not be included in the Order Charges detailed above. Remember, most of the costs for an order fulfillment operation are people’s time so each “action” takes time which is money.

The packaging expenses that go into preparing an order to be shipped (printing and affixing the shipping label, taping the boxes, etc.) are covered by the per Order Charge. But obviously one significant additional cost is for sending the package with FedEx, UPS, and USPS. If you have one, it is often preferable to use your company’s own account number and most fulfillment providers should allow you to do that. The order fulfillment company may offer a better contract with one of these small parcel shippers and be able to provide you will some additional discounts.
Here is a usefule article on Social Media for Logistics.

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