This article provides considerations and best practices for selecting an ecommerce shipping fulfillment service provider.
Last Published: 5/22/2017


Instead of shipping products yourself, you could pay a fulfillment service provider to ship and fulfill your orders for you. Paid fulfillment services (also called third-party logistics, or 3PL) may be something to consider because it will free your time from focusing on shipping and will allow you to concentrate on other areas of your ecommerce strategy.

Fulfillment services typically work in four steps:

  1. You send your inventory to a fulfillment warehouse for storage.
  2. When a customer or business makes a purchase from your site, the fulfillment service is notified through your site.
  3. The fulfillment service then packs and ships your product to the buyer according to your specifications.
  4. The fulfillment service alerts you when it has completed the process and provides any pertinent details (tracking numbers, updated inventory counts, etc.). Each time an order is placed through your site, steps 2 to 4 are repeated. 
Most fulfillment services can be integrated into your ecommerce platform so that an order is fulfilled and shipped with no effort by you.

 

Benefits of eCommerce Fulfillment Services

  • Automatic order fulfillment. You no longer have to worry about shipping and fulfillment. You’ll spend more time on running your business.

  • Cheaper shipping. Because of the large quantities that they ship, fulfillment services are often able to receive discounted shipping rates, which could save you or your buyer money.

  • Cheaper storage. In some cases, storing inventory with fulfillment providers could be cheaper than renting your own warehouse to store your products. Make sure to research storage and verify any price advantages, because this benefit is often geographically contingent.

  • Grow and shrink storage as needed. Fulfillment services are incredibly scalable. You are able to expand and contract space and labor as needed and on demand.

  • Additional services. Many fulfillment services offer product assembly and kitting, as well as many other services.
     

What to Look For in a Fulfillment Service
 

The numerous fulfillment service issues to consider include these:

  • What are the monthly costs? How much does the service charge per shipment?

  • What size company does it cater to? Some fulfillment providers explicitly state that they work best with smaller companies that don’t move bulk volume.

  • Do the services have a shipping application program interface (API) or software to obtain and compare shipping rates from various carriers? Ideally, your fulfillment service will be able to shop carriers to pick the cheapest one and to save you and your buyers the most money on shipping.

  • How many fulfillment locations does the service have and where are they? You want your fulfillment warehouse to be located close to your customer base. If most of your customers and businesses are ordering from California but your warehouse location is in Vermont, then shipping will be more expensive and take longer.

  • What is the return policy? You want to be sure to know how your fulfillment service will handle returned products.

  • What is the error rate? No fulfillment service is perfect, yet you should inquire about the rate at which the fulfillment service ships the wrong products or ships to the wrong address.

  • What ecommerce platforms is the service able to integrate with? The ability for a fulfillment service to be fully integrated into your ecommerce platform is almost essential. It will mean much less work for you and much greater efficiency for your orders.

  • Does the service have a drop-shipping application? Drop-shipping has emerged recently as a new, low-capital way to conduct ecommerce. With drop-shipping, a business does not keep the product it sells in stock. Instead, when a buyer purchases a product from the business, the business purchases the product from a third-party manufacturer or fulfillment service, which then ships the product directly to the buyer.  If interested, see if your fulfillment service offers this option.

  • Does the service have inventory management services? Ensure that your fulfillment service has a way of reporting your inventory to you and notifying you when inventory is low.

 

Prepared by the International Trade Administration. With its network of 108 offices across the United States and in more than 75 countries, the International Trade Administration of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



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