If you’re finding it difficult to keep up with shipping and fulfillment demands with an in-house arrangement, you may be ready to upgrade to a third-party fulfillment center. In this guide, we’ll cover how to recognize when you’re ready for this step, where to go next and a comparison of fulfillment options.
What is a fulfillment center?
A fulfillment center is another company that provides services to help you meet your customer’s needs. Depending on the company, they might offer very specialized services such as custom labels, and printing but the most common services for a fulfillment center are warehousing, inventory management, picking, packing, and shipping. Smaller-scale fulfillment centers may offer a vast array of custom options, while larger companies are focused on repeatability and keeping costs efficient.
Who is a fulfillment center for?
It may surprise you to know the range of clientele that a fulfillment center can service. There are fulfillment centers for yarn shops, quilt designers, knitwear designers, companies with subscription boxes, and companies that have many products. 60% of ecommerce companies outsource at least part of their fulfillment services.
When do you need a fulfillment center?
It is common for small businesses to be home-based or have a storefront with limited square footage. And it makes sense to get everything, including fulfillment of online orders, started in the same space. But as a business grows, the space and labor needed to keep up with ecommerce and product distribution can begin to take away from the tasks that you and your team do best. When you find yourself having to choose between allotting your own or an employee’s time to fulfillment vs. marketing or sales growth it’s time to consider a fulfillment center.
Jenny Rushmore of Cashmerette shared a bit of her experience transitioning from in-house to fulfillment center:
“I moved to an external fulfillment house, GHE Fulfillment, a year ago, and it’s been one of the best things I’ve ever done for my business Cashmerette. Until then, I had a studio in downtown Boston and my employees (and sometimes myself) did all the fulfillment. This created a lot of logistical challenges including constantly running out of space as we launched new products (we had to hire off-site storage and co-ordinate boxes coming to and fro), and particularly during COVID, it became more challenging when I was out of the country and then had employees not available, leading to last-minute scrambles to ensure there weren’t long gaps in fulfillment.
I haven’t regretted it for a second: I no longer think about logistics at all, my customers get their parcels much much faster than previously, and the cost is significantly less than what it cost me to have a studio and employees doing the work. This has then enabled me and my team to focus on other projects, and grow our profit over 6 fold in the past year.
When does a fulfillment center make financial sense?
This is a question that only a business owner and their accountant can truly answer. But you can begin to get a sense of how practical fulfillment services are for you by running some simple numbers. Start by calculating how much fulfillment is costing you while it’s in-house. Remember to include the overhead costs, labor, and a percentage of employee benefits. You can compare this number to the rates you receive from companies that you are interested in working with to give some perspective. If the fulfillment center cost is higher than your current in-house costs, consider the variables that might affect your return on investment.
- Is there more potential for growth with a fulfillment center that would make the cost worthwhile?
- Will you see increased sales if your shipping is faster and more accurate?
- If the fulfillment center doesn’t lead to growth, what are the financial implications for withdrawing?
Pros of using a fulfillment center:
- Seasonal and overall scalability
- More time for you to focus on higher-level tasks
- Streamlining speed, accuracy
- Perfected customer experience
Cons of using a fulfillment center:
- Less control over the process
- Loss of customization
- Costs can quickly add up
- Loss of personalization
There are several fulfillment centers that are particularly familiar with craft businesses. See our resource list for specifics about each one including costs, timing, and other essential information for getting started.
Contributor
Carrie Miller is the textile artist and designer of the Natural Luxury collection. She specializes in botanical dyes, handweaving, and silk painting. Carrie is also a marketing consultant and writer who lives to be in the mountains near her home in Colorado.
