Inventory Holding Costs: Definition, Costs an
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Without order fulfillment, supply chains and eCommerce would simply not function. Effective order fulfillment is essential to more than just getting orders out of the door and is a central component of maintaining positive customer relationships.
However, like all things, fulfillment can come with high costs due to the several stages of picking and packing, processing, inventory storage, and shipping. Luckily for you, there are several ways that you can keep your fulfillment costs low with the help of 3PL.
To help you optimise your order fulfillment cost and get the most out of 3PL, we’ve compiled this complete guide. In this article, we define fulfillment costs and 3PL, as well as a breakdown of common 3pl order fulfillment costs.
Order fulfillment costs refer to the standard fulfillment fees to receive inventory storage, store inventory, process customer orders, pick and pack, and shipping orders out to their final destinations.
The fulfillment cost represents how much companies need to spend for their orders to be handled at each stage of the supply chain. Order fulfillment fees can also represent the space products need, with additional fees for reverse logistics. Reverse logistics refer to processing return orders from customers.
3PL in logistics stands for third-party logistics. This is where a company uses another business to outsource fulfillment, warehousing, and distribution. There are specific companies that offer these services to help companies save money and warehouse storage space.
This is particularly useful for small businesses that don’t have access to an extensive logistics network or a fulfillment center.
Third-party logistics and fulfillment companies can help with fulfillment by speeding up the process to pick and pack orders and processing, ensuring that your customers receive their orders on time.
Take eCommerce Shipping, for example. Our proprietary platform and dashboard offer businesses seamless fulfillment and order management.
Through our platform, users can easily connect to their online store, secure inventory in our warehouses, and know that we’ve got packing and shipping under control.
Fulfillment pricing models can be complex, especially if you don’t know what’s included in those fulfillment costs. Calculating the average fulfillment cost is also tricky, as fulfillment companies charge significantly different rates depending on their services.
To help, we’ve broken this down to help you understand how companies calculate fulfillment costs:
Onboarding costs are setup fees and refer to the price a fulfillment provider charges to connect your online store to their platform. This is an investment, but considering the long-term total fulfillment cost you’ll save using a third-party logistics provider, it’s worth it!
eCommerce Shipping makes the integration process easy for all users! We offer a seven-day free trial, so you understand the true value of your investment before you spend a cent!
Using a 3PL warehouse to store inventory is going to cost you. How much storage fees are will depend on the model they operate. This can either be per SKU or unit. Alternatively, some 3PLs may charge a flat rate for their storage space.
3PLs will also charge for receiving your products so customers can order directly from their warehouse. Receiving costs account for both the acceptance and storage of inventory.
This price also depends on individual third-party pricing models. Some will charge a cost per order, flat fee, per unit, per product, per pallet, or even an hourly rate.
Pick and pack is a critical process in fulfillment, referring to warehouse operatives collecting ordered items from shelves. Most commonly, fulfillment providers charge on a per-pick basis, meaning you’ll have to pay a pack fee for picking each product in a single order.
However, some 3PLs may include a pick and pack fee in their storage fees or omit these altogether from their fulfillment service cost.
Packaging is an essential part of painting your business in a positive light. An excellent way to do this is by providing custom packaging. However, this can cost more per order.
Alternatively, the 3PL you partner with may provide standard packing materials like boxes and protective materials to ensure your items arrive in good condition.
The associated costs with packaging will depend on the company. Some may include protective materials like bubble mailers at an additional cost, whereas some fulfillment providers might include this in their flat rate pricing for total fulfillment cost.
If items need additional services like assembly before shipping, you can expect there to be additional fees. Kitting fees refer to any special considerations that the fulfillment provider needs to consider during pick and pack before they send the item for distribution.
This part of the fulfillment process is subjective to each company, so it’s hard to determine the average cost per order for this stage. Some 3PLs may attach additional labor costs for this stage.
Shipping costs are one of, if not the most important, part of fulfillment costs. The shipping cost refers to the amount of money it will take to send a customer’s order to their doorstep.
This amount will depend on individual 3PLs’ partnerships with shipping providers. At eCommerce Shipping, we have productive relationships with Australia Post, Sendle, and Zoom2u.
Our specially negotiated price models offer significantly lower fulfillment costs and heavily discounted shipping rates. This helps you maximise profits and keep fulfillment costs and shipping fees minimal.
We hope you understand that partnering with a fulfillment company effectively lowers your fulfillment fees and mitigates additional fulfillment costs.
If you outsource fulfillment with eCommerce Shipping, you’ll have access to our expert-level inventory management, account management, product forecasting, efficient shipping, and so much more.
Contact us today to learn more about how we can take your fulfillment duties off your hands!
To help you understand fulfillment costs, we’ve answered some frequently asked questions about fulfillment costs so you can approach this with clarity:
Order fulfillment expenses refers to the process or a journey that products go through from inventory storage to their destination. Fulfillment cost per order refers to inventory storage costs, the pick and pack fee, labor costs, warehousing, and shipping costs.
Fulfillment pricing models will vary depending on the methods and companies you partner with. Additional costs around custom packaging or shipping distance can make a difference to fulfillment pricing.
3PL stands for third-party logistics companies that take on the responsibility to fulfill orders on behalf of another company. Outsourcing fulfillment means they process orders, pick and pack, store inventory, and ship orders out to customers.
Here are some of the benefits of using 3PL fulfillment providers: