Are you spending too many hours packing boxes and shipping orders? Does your house look more like inventory storage rather than your home?
It may be time to transition to using a fulfilment provider. Dean Johnston, founder of The Hubb, an ecommerce fulfilment centre. Having started and scaled multiple ecommerce brands himself, Dean saw a gap for a bespoke fulfilment service that didn’t cost the earth.
Dean joined me on episode 81 of my podcast Start, Scale Succeed to share everything you need to know about using a fulfilment provider.
When should you start using a fulfilment provider?
- As a founder you need to understand why you started your business.
- If you started your business to grow a team, manage a facility etc then fulfilment is probably not on your radar.
- If you started your business to work more flexible hours, have a bit more balance, earn a good living, then you are more likely to want to use a fulfilment centre.
- If you are sitting there with a garage full of stock, and can’t use your dining table for dinner because you are packing orders there, that is when you will want to make the switch.
- You don’t have to wait until this stage, we have startups who have used a fulfilment provider from the off, and have never packed an order, so you can build it in from the get go.
- The other cue is when you realise you are spending all your time focusing on fulfilment, and not on growing your strategy and taking your brand to the next level.
How can brands build in working with a fulfilment provider from the beginning?
It will depend on your fulfilment partner. At the Hubb we allocate a percentage of our capacity to start ups. If you are a startup founder, we will look at things a bit more flexibly in terms of costs, making sure that they know their product margin, and build in the fulfilment cost. The main charge is storage, so we will work with you to minimise their storage, maximise their replenishment rate, and understand how their inventory management works as well – that is something that is often overlooked in the start up phase.
Is there a threshold of the size of business you need to be in order to use a fulfilment provider?
Larger centres, like Amazon will have this, but at the Hubb we look at the founder, what you are trying to achieve, and produce a solution that fits around that. We have capacity for people at all stages of their journey – some people are doing a handful or orders a month, some people are doing hundreds a day. It’s very different but all possible.
How do fulfilment provider costings work?
There are a variety of costings and scales. These can include:
- Inventory storage
- A one-off pick fee
- Possibly a smaller item pick fee
That’s the most common method, because it scales with your average order value. Make sure you have that margin built it.
There are a multitude of different pricing models, we can do it as a percentage of the sales. For instance for gifting companies we find that the pricing model for first pick, second pick etc doesn’t work very well, because you could be picking 5-30 items and suddenly the price is prohibitive. In this case a fixed box fee works well. These are all things to discuss with your fulfilment provider.
What should you ask about when looking for a fulfilment provider?
Insurance
A lot of people assumed that their stock will be insured, whereas in fact you are responsible for your own insurance
Get to Grips With The Actual Facility
You want to get the best understanding of the set up that they’ve got, how they will be handling your stock, what that looks like on site. Try to get a physical tour, or at the least a virtual tour of the facility.
Understand what access you will have to the software
- Do you have access to the software so that you can make edits and changes to the order?
- You will still have customer service emails come to you. If once the order is made, it’s in the fulfilment provider’s system and you don’t have access to it, it will cost you a lot if the item is then shipped, and you have to arrange returns. The ability to access and edit orders is vital.
Find out how the returns process works
- Do they have a return process?
- If they do have a process, what is the cost for the return to be processed and put back into stock?
- Some products will have different requirements for returns such as fashion.
- Is your stock getting put back in generically so then when it is sent to the next customer, it is not the right postal and delivery experience for your brand?
- Make sure that you are not getting shoehorned into what they do – work out what you need, start from there and see if they can accommodate you.
There is a trend with fulfilment centres that returns are either becoming very costly or unavailable. There are companies now which just do returns management, and a lot of bigger brands are using those rather than processing the returns themselves. But they do tend to have an entry level requirement as well as the number of returns, so it is a step too far if you are a start up or mid sized business.
What should you expect from your fulfilment partner?
They should be caring and flexible. Businesses have to adapt really quickly to launch more complex products such as bundles and kits. You don’t want a fulfilment partner who is static – it didn’t arrive in that format so we can’t ship it.
A lot of product businesses do market fairs around Christmas time and need to pull out a large amount of inventory, so the traditional pricing model doesn’t work for them, because it would cost a fortune to remove stock to do a fair and then return it again. So have a conversation around what the pricing can be to accommodate this.
Take time to understand the team culture of your fulfilment partner, the vibe, the people, what their staff turnover rate is. If people are staying there a longtime, they are happy which means your postal experience will be looked after, they will care about your products
Find out how long brands stay with them – if they aren’t happy to share this information that is a tell tale sign that there may be issues. See if you can speak to other existing clients.
Other useful questions to ask include:
- Do they have a minimum order that you need to fulfil?
- How do they handle returns?
- What data and reports can they provide you with?
They’re in charge of your inventory, and it may integrate with your platform like Shopify. Inventory management reports of Shopify aren’t as clear as they could be – they’re very sales focused from the front end. So having a system that you are plugged into that gives you visibility of what inventory is on hand, what’s allocated to orders, you back orders, pre sales etc will give you a clear visibility of what your stock holding looks like. Most importantly you will be able to forecast, because that sort of reporting will allow you to calculate your stock cover based on your sales rates.
How do you ensure that your fulfilment centre deliver the unboxing experience that you would deliver if packing it yourself?
At The Hubb, during onboarding, we ask the client to create a video of themselves packing an order, then supplement that with a few images of the finished product. We then internalise this, break it down and build up process cards that sit on the packing terminals, so that every packer can see how the finished product needs to look internally, once it is closed and then ready with a shipping label. We can include tissue paper, stickers, bows, handwritten gift notes etc.
What other information does a fulfilment provider need from you?
It’s not as much as you may think. The main thing we need clarity on is how many orders you process on a regular basis.
Once we’ve got an understanding of what your business looks like and the size you are operating at, the rest takes care of itself.
Everyone thinks that I can’t outsource in my business, because only I know how to do this, but if you have a process we can capture that and replicate it.
How do you go about switching fulfilment providers?
Most fulfilment centres work on service level agreements rather than contracts. A 30 day notice period is pretty standard.
If you are considering switching, the first thing I would do is arrange a call with your account manager or someone with seniority at your current provider, and ask for an open and honest conversation about the issues you are experiencing, and provide them with an opportunity to correct course.
If that falls through then you will need to look elsewhere. Don’t think that you are trapped in a fulfilment centre – it will cost to move, but weigh up how much more time you are spending on the issues that they are generating – in the long term it may be more costly to stay.
Fulfilment centre moves are one of the easiest to do, because the stock is already prepped, barcoded, labelled etc. There is some kind of identification for the stock, which makes it much easier for your new provider. From a transitional point of view 90% of the work is done before your stock is moved – the tech integrations will all have been done.
With the last 3 fulfilment centre moves that we have done at The Hubb, there has only been 1 down day for the client. You have your transit day when it is exited from the old provider and arrives at the new one, then we put in a weekend team so it gets processed into stock, and we are sending out orders on Monday. So it is a really fluid process. It’s much easier than you may think.
What issues might a fulfilment provider be causing?
1 Picking accuracy
- This is where they are sending the wrong items out, in the wrong colours, wrong sizes etc. Fashion can be more challenging because the items have complex sizing such as waistband size, height etc.
- If it is not managed properly this can be costly
2 Stock accuracy
- If the provider books in your stock incorrectly, you could sell something that technically doesn’t exist. Then obviously you’ve got to cancel the order and let the customer down.
- Make sure you understand these metrics from your provider – when you contact a fulfilment provider they should be able to tell you their picking accuracy percentage.
For example the Hubb’s error rate is 0.0009, which means just 1 in 100, 000 picks contains errors.
Thank you so much Dean. You can find out more about The Hubb here. You can listen to the full podcast here.
I hope that this post helps you to continue on your journey to success and if you need any extra support then check out my free resources on my website, follow me on Instagram, subscribe to my monthly newsletter or get in touch at nicole@thebuyerandretailcoach.com
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The Buyer and Retail Coach is a global retail expert with over 18 years experience working in the industry as a buyer and head of buying for companies such as Primark, M&S, and George at Asda, developing and sourcing a broad range of products from Lingerie to Health & Beauty and driving strategies and innovation.
Having worked for the big blue chips, Nicole Higgins now brings that expertise and experience to entrepreneurs and SME’s to help you make your product ideas a reality, scale your business, and increase your bottom line and profits.
