Learn Fulfillment Basics Here!
This site is brought to you by the National Mail Order Association (NMOA) www.nmoa.org
This site is meant to provide basic information on order taking and fulfillment and to provide contacts for companies that need a service to warehouse and distribute their products for them.
WHAT IS ORDER FULFILLMENT?
When our founder first went into business for himself, he didn’t know what ‘fulfillment’ even meant. After a few useful online business courses, which he brags cost him only $40 because he used web discounts, he became a self-educated expert in the field.
Although fulfillment companies provide services for manufacturers and retailers, most people associate fulfillment companies with the delivery of products for mail order related companies. And it is in this context that this information is geared.
Order fulfillment can be defined as the process of receiving a request for information, an order for a product or service, either by telephone, fax, mail, or the Internet and recording the event by entering it into a database and handling a financial payment for the product or service. Then, shipping the product and/or literature to the buyer to complete the transaction.
Since the bulk of orders are taken by telephone through inbound call centers, order taking and fulfillment go hand in hand, and many people assume that one company handles both processes.
Although some fulfillment companies do have an in-house call center they are usually limited in nature and used mostly for customer service after the sale. Inbound telemarketing (order taking), is best kept separate and handled by specialists who have state of the art equipment, trained telephone operators, and 24 hour/7 day per week coverage.
Fulfillment companies will usually have a call center they like to work with and can make a recommendation. But the client will have the final say on what he wants done, who does what and with whom. A client my want to deal with just one company, so in these cases he would ask the fulfillment company to prepare an estimate/bid for the entire process using the fulfillment centers preferred call center.
Whomever takes the call will, in most cases, electronically pass the order to the fulfillment company, who then processes the credit card, picks, packs and ships the product(s) to the customer. Note: Sometimes the call center can process the credit card before passing on to the fulfillment company. Most fulfillment companies also have a plan in place for accepting mail orders, web orders, fax orders and handling returns, refunds and exchanges.
Some large fulfillment companies can provide a number of related services as well.
Receipt of goods.
Full Pallet Distribution
Full Case Distribution
Pick and Pack for Retail Replenishment
Spare Parts Management & Distribution
Lot/Date Code Tracking
Cross Dock Shipping
Return Goods Processing & Breakdown
Customized Management Reporting
Bar Code Labeling
OTHER FULFILLMENT CENTER CAPABILITIES:
Most marketing efforts are designed to create sales or at least an interest in the product or service being marketed. The most successful marketing programs are the result of careful and thorough analysis of what motivates the buyer to make the purchase. Much of the information known about the consumer comes from data collected on the order form.
Therefore, in addition to the above activities, the fulfillment center will also capture demographic and consumer opinion information from the customer via survey information sent in on the order form. They may also provide assembly services, or collate literature, or package the order to prepare it for shipment. By establishing discounts with package carriers based on volume, fulfillment companies can pass along to the ultimate consumer significant savings in shipping costs not available to individuals or non-central shipping points.
OTHER USES OF A FULFILLMENT CENTER:
The ability to obtain valuable consumer preference data via processing orders/requests has long been used by marketing people to develop effective programs to increase sales. Prospect lists are created by enticing the consumer to respond by offering “on package” promotions or advertising popular items at a discounted price if a special coupon is used to make that purchase. Rebates are often used to obtain customer names when mass merchandising a consumer product. Fulfillment centers have the ability to capture these names when the coupons are redeemed and issue rebate checks or send back promotional items or just literature. The overall objective in all of these programs is to identify the customer for future marketing activities.
CHARGING THE CONSUMER:
The comprehensive fulfillment service will offer financial services such as credit card processing, installment billing, check or money order intake, electronic depositing, sales tax charging, and reporting all of the above. The most effective direct response programs offer the consumer the option of paying by credit card as a convenient and efficient way to take care of their purchase. A special bank account called a “merchant account” must be established by the retailer before credit cards can be charged for the consumer purchase. A fulfillment house can assist in giving the retailer names of banks that offer merchant accounts and will take their application.
The resources of a fulfillment center are storage space, trained personnel, and an inventory/order processing system. Most direct response programs involve at least one of these elements and usually all three to some degree. Managing these resources is a separate and distinct business from the marketing and manufacturing function and is usually compromised if the novice attempts to do them all – something has to suffer.
Many direct response programs involve products that might be returned for one reason or another. The fulfillment house can help set up a procedure for handling returns with a manufacturer’s existing returned goods department and coordinate the inventory system so counts are accurate.
By utilizing the combined resources of the inbound telemarketer and the fulfillment center, the direct response retailer receives the best of both worlds and gives themselves the best chance to succeed.
WHAT CHARGES CAN YOU EXPECT ON AN ESTIMATE FROM A FULFILLMENT COMPANY?
What it costs to process and fulfill orders surprises many marketers when they first start looking to outsource their order taking and fulfillment. Many times this is because they have not broken out these costs in their day-to-day operation and they really don’t have a clear idea of what it’s costing to take and process an order.
Here are the major items you can expect on an estimate from a fulfillment company not including inbound call center order taking costs.
1. Customer service calls: Inquiry/No order and Status Check: (Usually billed by minute.)
2. Exchanges or Lost Order Refilled (Usually flat fee.)
3. Returns Requiring a Credit. (Usually flat fee.)
4. Sales Reports. (Usually 1 free per month with small charge for more frequent reports.)
5. Label and Invoice Receipt. (Usually small flat charge.)
6. Pick and Pack: Higher cost for the first item, and a lower cost for each additional item in same pack.
7. Set up costs. Entering products (SKU’s) with descriptions and other product data into database. (Usually billed by hour.)
8. Minimum fulfillment charge per month.
9. Receiving of Products into warehouse. (Checking/Counting Inventory. Charge per packing slip and per SKU.)
10. Warehouse and storage: (Usually by pallet. With possible additional Sq. Ft. charges for pick and pack rack space.)
11. Packaging materials. (Usually at cost.)
12. Shipping costs. (Usually at cost.)
13. Possible security deposit for monthly shipping charges. Mostly dependent on average monthly shipping volume.
In most cases you will be required to carry your own insurance on inventory.
Telephone order taking will also need to be figured in. You can expect a setup charge and a per minute fee for taking orders. The set up fee will vary depending on how many products (SKU’s) you sell and if the operators need any special training to sell your product. If you’re using a toll free number, a per minute long distance fee will also come into play. You can figure at least a 3-minute average order time per order, depending on what information you want the operator to capture and if there are up-sells. You can also expect a minimum monthly charge for order taking.