When is a Good Time to Hire a Fulfillment Center?

As your business grows, the need to hire a fulfillment center becomes apparent. It happens almost organically but there's some key indicators as well.

By Team SHIPHYPE Updated February 20, 2023 Published November 30, 2020
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When is a Good Time to Hire a Fulfillment Center?

When it comes to running your business, you’ve got a lot on your plate. Sometimes, minutia can get in the way of more pressing issues, leaving you to juggle too many things at once. Thankfully, there are ways to simplify your business and allow you to put the focus back on things that are truly important. One of those solutions? Hiring a fulfillment center for your business’s fulfillment needs. But how do you know when it’s the right time to hire a fulfillment center, and what are the benefits of making this move? Here are some facts to consider when considering outsourcing your fulfillment operations.

Do You Need a Fulfillment Center?

The first question you should ask yourself when considering hiring a fulfillment center is ‘do I need a fulfillment center?’ Fulfillment centers are more than just warehouses. They offer many services that you may not even realize - services that can help take a lot of stress off your shoulders.

Just a few of the services you can elect at a fulfillment center include everything from storage to picking, packing, and shipping your merchandise. These services enable you to free up valuable space at your own physical location and leave the work of shipping your merchandise in capable hands, eliminating the need for extra staff to handle these functions. Furthermore, many fulfillment centers can offer specialized services such as customer service and returns, so someone is always there to assist your customers.

So, how do you know if you need a fulfillment center? If you find yourself handling fulfillment needs when you should be handling other responsibilities, you may benefit from outsourcing your fulfillment to a fulfillment center rather than performing these tasks in-house.

Advantages of a Fulfillment Center

There are many advantages of outsourcing your operations to a fulfillment center. For example, warehousing your merchandise in a fulfillment center can free up valuable space that may be needed for other functions of your business. In addition to storage, fulfillment centers can offer dedicated staff to handle your fulfillment operations, eliminating the need for you to hire and train extra workers.

Another advantage to using a fulfillment center is the negotiation of lower shipping rates. Because fulfillment centers ship at such a high volume, they are able to acquire lower shipping rates and can pass those savings on to you. They can also handle the details of customs and other shipping fees so you don’t have to.

Fulfillment centers also offer picking and packing services, with highly trained staff who will pack your goods and provide your customers with a professional presentation when they receive their merchandise. Because they are shipping professionals, fulfillment center workers can package goods in such a way that reduces damage and keeps shipping material costs low.

Costs Associated with Fulfillment Centers

Another factor to consider when choosing a fulfillment center is the cost associated with such services. Here are a few fulfillment fees you should factor into your budget when considering switching to a fulfillment center.

Setup Fees

When you first sign on to a fulfillment center, you can expect to pay a setup fee to begin services. Though the actual fees vary from center to center, estimates range between the hundreds to thousands of dollars, depending on the size of the fulfillment center and of your account. Smaller centers tend to charge lower fees, while larger generally fall on the opposite end of the spectrum. Generally, the highest cost associated with setup fees is the fee to connect your website’s online shopping cart to the fulfillment center. This may require the expertise of an IT professional who may need to be outsourced if your fulfillment center does not have this type of worker on staff.

Intake Fees

Intake fees are the fees your fulfillment center will charge to accept orders from your supplier. This fee covers everything from receiving your inventory to unloading, organizing, inventorying, and cataloging and storing your merchandise at their facility. Most fulfillment centers charge intake fees either by the hour, per SKU, per order, per pallet, or per box depending on your arrangement with the fulfillment center.

Storage Fees

Another fee you will incur at a fulfillment center is a storage fee. This is for the physical space your merchandise takes up in the warehouse. You can store inventory by pallet, cubic foot, or bin, depending on what you are storing, and prices will vary depending on which option you choose. Storage prices are influenced by location, product volume, and any special warehousing requirements that may be needed to store your merchandise, such as refrigeration. Fees are assessed each month so if your inventory changes, your rate may be different from month to month.

Pick and Pack Fees

Pick and pack fees are the fees associated with locating the inventory to be shipped and packing it to be shipped. This may also include packaging materials to ship your merchandise, but some fulfillment centers charge extra for packaging, so be sure to ask when receiving your estimate. 

A pick and pack fee may also vary depending on how much merchandise is included in a package, and if you need other materials such as free samples or coupons added to the package.

Shipping Fees

The next fees you will incur are shipping charges. These are the charges the fulfillment center passes on to you for actually shipping your merchandise. Here you have the option of providing your own shipper or using the fulfillment center’s shipper. Often you can get lower rates through the fulfillment center, but you give up some of the control you would have when using your own shipper with this option. Be careful here, as you could still incur fees from the warehouse for using your own shipper.

Kitting and Return Fees

Kitting and return fees are the fees charged by your fulfillment center to either assemble shipments or process returns and handle customer service for these returns. Kitting fees are generally charged hourly depending on the complexity of assembly and the fulfillment center itself. Return fees include return shipping, inspection for damage, and returning items to inventory if resaleable.

Account Fees

Account management fees are assessed to your account for management and customer service services. They are generally accrued on a monthly basis in the form of a flat rate that will vary from center to center.

The Bottom Line

Outsourcing your fulfillment can be a great solution for your business, saving you valuable time and money with the right fulfillment partner. 

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