Fulfillment companies are responsible for the handling of inventory, order processing, and shipping activities of another business. These fulfillment companies work on a third-party, outsourced basis. When companies choose to let fulfillment companies handle these aspects of operations, the industry can focus on other vital areas, such as marketing and product development. As a result, businesses achieve maximum efficiency in their processes. They’re able to ship the most orders to customers, with the least possible cost.
To learn more about third-party fulfillment companies, here are some of the ways how they are helping businesses:
- Lowering Operational Costs
One of the most significant expenses of any business has to do with the operational costs. This refers to the costs that are inherent in the operation of a business. This includes, for instance, rent, utilities, and even the salaries of your employees.
When you hire a fulfillment company, your company can maximize profits by lowering operational costs. 3PL services, through logistics, are more efficient. Though costly, it’s still going to be cheaper in the long run, than having to do the order processing and shipment process yourself. Through a fulfillment company, you’re able to cut down on the following expenses:
- Renting/building a warehouse
- Managing the warehouse facility, including electricity bills
- Salaries of employees handling the warehouse facility and operating the shipping process
- Cost of logistics
Generally, the costs involved in hiring a fulfillment company are as follows:
- Initial set-up fees. This refers to the process of getting the inventory from the supplier and up to the customer.
- Receiving and intake fee. This includes all the costs related to the management of inventory.
- Storage fee. The cost of the space your products take up in the warehouse.
- Order fulfillment chargers. This refers to the pick and pack fees.
- Shipping charges. This accounts for the cost of shipping, which is paid for by your buyer.
- Kitting and return fees. This is the extra charge for products that need assembly before shipping. Often, this expense is also passed on as an added cost to the buyer.
- Account management fees. This covers the expense of managing your account.
- Better Application Of Automated Technologies
Businesses today are living the dream of industries in the past. All thanks to technology, many processes have now become automated. Although costly to purchase and apply, these result in the overall efficiency of the company.
Other benefits of the application of automated technologies include:
- Improved ergonomics. This reduces bending and reaching by presenting the right items to the operator at the best and most ergonomic height.
- Increased productivity. Picking and packing speed is faster. Labor costs are also reduced.
- Better control of inventory. Improves the release of information about current stock.
- Space savings. Smaller horizontal space is needed in a warehouse, as the vertical space can be maximized.
- Higher accuracy. Less human error is committed.
- Faster output. Order turn-over is faster.
- Exposure To Alternative Methods Of Order Fulfillment
Through the skill and expertise of fulfillment companies, businesses are also exposed to alternative methods of order fulfillment. This means that companies are now able to go through a trial-and-error approach to see which among the order picking processes results in a faster turn-over of the orders to the customers.
Examples of these alternative picking methods include:
- Wave picking. This is also called parallel picking. All order zones in the warehouse are picked simultaneously. Items from each zone are matched to create completed orders.
- Batch picking. Multiple orders are grouped into smaller batches. This usually means that you’re grouping them between four and twelve orders.
- Zone picking. This refers to the process of breaking up multiple orders into individual sections or zones.
- Faster Customer Fulfillment Process
After a customer has made an order, you’ll want to be able to deliver as soon as possible. Especially when you’re selling perishable goods. Customers don’t want to have to wait for a long time before their orders arrive.
A fulfillment company helps businesses achieve faster and better customer fulfillment processes through the following means:
- Employing an efficient order receiving system process
- Complete integration of the details of the customer such as name, mailing information, specific orders and requests, packaging instructions and shipping method
- Complying with bulk orders more efficiently
Conclusion
The core of the service of third-party fulfillment companies has to do with receiving the business’ stock, organizing and storing it in their warehouse, then finally shipping it to their customers. By doing these functions, they’re taking a massive chunk of workload off the hands of their business clientele.
Businesses can then focus on other operational aspects, such as marketing and advertising. Order fulfillment may seem like a simple task, but when not outsourced, it can take up time, effort, and pile up expenses for a business as well. With these benefits, you’ll see that the end goal of hiring third-party fulfillment companies always is to achieve the best and most efficient results for the business.
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