As the demand for both B2C and B2B ecommerce continues to grow, the demand for the highly productive ecommerce fulfillment warehouse grows too. According to the United States Census Bureau, ecommerce revenue reached $792 billion in 2020, accounting for 14% of all retail sales. This is up from just 7.3% in 2015, demonstrating the rapid growth of online sales in recent years, especially during the pandemic.
Consumers and businesses alike expect rapid order processing and quick shipping, along with digital communication every step of the way. Add in the need to keep fulfillment warehouses running safely 24/7, which makes the case for ensuring you are working with the right fulfillment partner.
What is an Ecommerce Fulfillment Partner?
An ecommerce fulfillment partner is a company that provides a fulfillment house and usually many other 3PL services. According to Red Stag Fulfillment, “a fulfillment house is a location or business whose purpose is to support fulfillment operations. That means they’ll give you a hand with your inventory and order management, from receiving inbound goods and storing them to pick and pack services, as well as carrier management and last-mile fulfillment support.”
Evaluating Your Needs
Before exploring the best fulfillment partner for your needs, you should consider many factors. First, what is the reason you are considering an ecommerce 3PL? Think about answering the following questions:
- What do you hope to accomplish / what are your goals?
- Are you running a fulfillment center in-house and running out of space?
- Is your daily volume too much to handle with your current setup?
- Are you forecasting growth that demands a more scalable operation?
Putting together these pieces and having a concrete goal in place before you research ecommerce fulfillment companies will help you narrow down the right one.
Fulfillment Factors to Consider
Fulfillment houses provide a service to store and move your products for you. You want to be sure they have a record of efficiency, productivity, and safety. Some factors you may want to consider are their technology and automation capabilities, their adaptability as it relates to moving different types of your stock, what volumes they are currently moving, the ability to communicate with them easily, and of course, the cost.
Our friends at Red Stag Fulfillment created this handy Fulfillment Company Questionnaire. They created this after their experience interviewing numerous potential fulfillment providers. This framework should serve as an aid to your team when considering a potential fulfillment partner.
Click this image to be linked to Red Stag Fulfillment’s free questionnaire to aid in your fulfillment house decision-making process.
Technology and Inventory Management
When evaluating an ecommerce fulfillment partner, be sure to look into what technology, automation, and other software platforms they are using for inventory management or order fulfillment. You should always have a window into what stock you have moved, stored, and returned, if they are handling returns.
We spoke with Red Stag Fulfillment’s Director of Content, Nikki Sneed, about this topic.
“Inventory management is paramount to the success of any ecommerce business. Knowing how much inventory you have in stock at any given moment, where that stock is, and how quickly it can arrive at your customer’s doorstep can mean the difference between making a sale and losing a customer. That’s why constant, transparent communication between your fulfillment partner is of the utmost importance. At Red Stag Fulfillment, our technology and processes allow you to keep track of your inventory and manage it seamlessly between our warehouses.”
–Nikki Sneed, Director of Content, Red Stag Fulfillment
Typically, 3PLs will include a certain percentage range that they can commit to accurately (or in this case, inaccurately) manage your inventory within their contracts – a shrinkage allowance. Shrinkage refers to stock that is lost or broken by the fulfillment house. For most fulfillment companies, this shrinkage allowance is anywhere from 2% to as high as 10%.
“You should look for a fulfillment partner that understands the ecommerce business and values the same things you do. For example, Red Stag Fulfillment was founded by ecommerce owners for ecommerce owners, so we know exactly what matters most to you: that your orders arrive to customers quickly and accurately. We built this into the very fabric of RSF and it’s apparent in our fulfillment guarantees. You don’t want your products arriving late or damaged, disappointing excited customers, or lost or damaged in the warehouse, causing you to eat the loss in profit. Ask your potential fulfillment partner about their accuracy statistics or what percentage of shrinkage they allow. Ideally, you want to partner with someone that has a zero shrinkage allowance, like Red Stag Fulfillment, so that lost inventory is no longer a worry.”
–Nikki Sneed, Director of Content, Red Stag Fulfillment
Ecommerce Fulfillment Inventory Specialization
What types of inventory is the 3PL you’re considering specialized in working with? Some ecommerce fulfillment houses may be better with micro-components while others are perfect for heavy and bulky stock.
For example, aftermarket webbing supplier and sister company to Adrian’s is Tennessee Webbing Products, which stores heavy narrow fabrics by the pallet. For each pallet, they require that all webbing rolls are pinned, shrink-wrapped and clearly labeled to prevent issues during shipping as well as ease of handling by the customer. Because of the nature of the material, it must be carefully moved mostly by forklifts and seldom handled by employees..
On the flip side, you can have lightweight small items, like for an online fine jewelry retailer, that need both delicate handling and high security due to the risk of dealing with expensive products. And lightweight large items, like empty drums or lampshades, require both large storage areas as well as fragile shipping cartons with lots of infill. Specifically for large and lightweight items, you also have to consider shipping costs based on DIM weight calculation.
“At Red Stag Fulfillment, we specialize in large, oversized, and/or heavy items, or items that require specialized packaging or handling. Office chairs and stand-up paddleboards, for example, are particularly large items that require large amounts of warehouse storage space and specific packaging and infill to ensure they arrive undamaged. On the flip side, we are also able to work with small yet heavy items, such as glass candle holders or ebike batteries, which require not only specialized picking, packing, and handling, but also must be stored carefully, meeting all hazardous material storage and shipping requirements.”
–Nikki Sneed, Director of Content, Red Stag Fulfillment
Last Mile Considerations
Datexcorp defines the last mile this way: “Last mile delivery is defined as the movement of goods from a transportation hub to the final delivery destination…The focus of last mile logistics is to deliver items to the end user as fast as possible.”
According to Technavio’s recent study, the last mile distribution market in North America is expected to expand by $44.88 billion between 2020 and 2024, growing at a CAGR of over 14% over the forecast period. You can download Technavio’s Last Mile Infographic here.
Since 2-day shipping has become the preferred norm for businesses and consumers alike, many companies struggle to keep up with the costs of the last mile, especially because end customers expect accurate order picking, secure shipping, and fast delivery. Many 3PLs can help with this as they have contracts with the world’s largest carriers and low rates they can pass along to their customers.
As explained by Red Stag Fulfillment in this blog post: “The location of your fulfillment warehouse is one of the most important aspects of order fulfillment. It’s also one that many eCommerce companies get wrong… A better fulfillment strategy is to ship from one or more centrally-located warehouses. With just two warehouses in strategic locations, your orders can reach 97 percent of Americans within two days.”
Ecommerce Fulfillment Partner Costs & Savings
Working with a fulfillment house may seem pricey at first glance, but you can often be profitable working with them in the long run, especially if you’re forecasting growth. Often, there are cost savings across the board in many areas, including cost per order, reducing capital outlays, and reduced time-to-customer shipping costs.
3PL cost is typically determined based on the number of pallets received, storage of inventory (how long and how much), their pick and pack services for your items, and any light assembly or kitting services you may require.
“One of Red Stag Fulfillment’s core values is transparency, and this is reflected in our pricing philosophy. We want our ecommerce clients to view us as a true partner, not simply another bill to pay. That’s why with RSF, you only pay for what you need. It’s also why if we aren’t the right fulfillment fit for your product, we’ll tell you upfront and give you a referral to another fulfillment partner.”
–Jake Rheude, VP of Marketing, Red Stag Fulfillment
Facility Safety Record
Does the fulfillment house you are considering has a solid record of facility safety? The easiest way to know is to ask them. Most facilities are transparent with their safety data, as warehouses are required to record and/or report certain types of incidents, including fatalities.
In fact, OSHA has a significant amount of data available so you can have insight into inspection data. Specifically, you can look up the Top OSHA Penalties by State, which began recording in 2015, as well as Fatality and Catastrophe Investigation Summaries, which are developed after OSHA conducts an inspection in response to a fatality or catastrophe.
Many fulfillment houses choose to use rack safety equipment for their picking operations. This can cut down on both injuries and product loss within their facility. In this video, you’ll see Adrian’s Sliding Rack Safety Net, which is used on picking bays to protect inventory and workers in fulfillment warehouses. Some warehouses use Rack Safety Straps to protect the back of their racks and we offer free samples so you can find the perfect fit.
Final Takeaways
Deciding to work with an ecommerce fulfillment provider can seem intimidating at first, but once you break it down into small steps and map out a method of deliberation you can easily compare the pros and cons of each 3PL company.
Be sure to consider their technology and automation capabilities, their adaptability in moving various types of inventory, the volumes they are currently moving, the ease with which you can communicate with them about orders and other business, facility safety, and lastly compare costs.
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