Order fulfillment is an essential component of any business – eCommerce or brick-and-mortar. Third-party logistics providers (3PLs) serve as the operational arm of many brands and merchants by providing order fulfillment, shipping, freight, and value-added services such as kitting, bundling, and returns processing.
With such a variety of services, finding the right 3PL partner is often a tedious task. This is complicated even further by customized fulfillment pricing. Fulfillment cost options will vary from 3PL to 3PL, making comparison pricing difficult.
At AMS Fulfillment, we are frequently asked, “What are your order fulfillment costs?”
The answer isn’t as simple as a brand or a merchant would hope – “AMS Fulfillment pricing is custom based on many determining factors – it’s unique to your business!”
The response is an exacerbated “I just wanted to see pricing…”
We understand the frustration but bear with us – AMS’s goal is to provide our clients with clear, concise, and transparent pricing. Here is a breakdown of what is included in fulfillment costs:
When onboarding with an order fulfillment company, a significant amount of work and labor is needed on the 3PL’s part. To provide it, these nine determining factors that we mentioned will be explained in further detail below:
Setup fees are typically a one-time payment. The Setup or Onboarding process should be in-depth and detailed depending upon a brand’s order fulfillment requirements. This process is vital to a successful, mutually beneficial partnership. Without a positive onboarding experience, a merchant and 3PL can often find themselves at odds.
The onboarding process should involve several representatives from the 3PL and the merchant including Operations, IT, Client Services, and Finance. Having a clear objective from the onset will make this process seamless and beneficial. Setup fees vary by 3PL, but when done properly, they lay a strong foundation for a great partnership.
AMS’s Set up fees include Client Service setup, IT integrations, and Operation facility configuration and training.
Receiving is when the 3PL accepts your products in their warehouse, validates item counts, inspects for damage or concealed shortages, and in some cases provides carton labeling services.
Inventory accuracy is critical to merchants. With warehouse space becoming more expensive, knowing how much product is on hand and where it is located in the facility is essential.
Inventory accuracy will save time and money in the long run. Brands can track what products are selling and at what rates; this helps with keeping proper inventory levels.
The process starts with the inbound receiving process. Partnering with an order fulfillment partner, you will experience the highest quality of accuracy and technology available.
With us, receiving is often billed at an hourly rate but can also be transactional by carton, pallet, unit, and/or container. We at AMS have a strict receiving policy that includes verifying products for:
Inbound receiving is part of the fulfillment costs and merchants should ensure that their 3PL excels in receiving a merchant’s inventory.
Pick and pack fees are sometimes referred to as fulfillment charges and are incurred when an employee enters the warehouse to pick and pack orders for your product, label, and shipment by various carriers.
Pick and Pack fees can vary depending on the order. Pick & Pack Specifications such as SKU count, item dimensions/weights, dunnage requirements, and overall pack-out requirements have an impact on the fulfillment cost.
If the order is a B2C order, there are standard transactional rates at the order and unit pick level. B2C orders are generally straightforward in terms of pricing, and fulfillment partners often generate “waves” of orders. A wave is when the 3PL generates a picking list for multiple orders and arranges them in efficient batches based on pick methodology, so warehouse workers have the most efficient path to picking and packing product.
Many 3PLs are not equipped to handle a significant amount of B2B orders. B2B order fulfillment is a much more labor-intensive and time-consuming process. Due to the variations in B2B order picking specifications (bulk/carton, unit picking at store level, full pallet pulls, routing compliance requirements…etc.), B2B fulfillment orders have a different fulfillment fee structure.
B2B orders are larger, often palletized shipments. B2B orders require specific systems, processes, and knowledge within the warehouse operation and additional routing compliance documentation. Picking and packing B2B orders requires more time and may also require material handling equipment.
AMS Fulfillment specializes in B2B orders and, unlike most 3PLs, can handle 100% of a brand’s B2B order fulfillment needs, including international!
B2C and B2B orders generally have different transactional pricing. When reviewing order fulfillment partners, it is crucial to ensure that they can handle both B2B and B2C orders for omnichannel sellers, and, more importantly, ensure there are no limitations on what they can handle for B2B!
As part of your fulfillment costs, storage fees including SKU count, carton dimensions, and item quantity per carton, are charged based on the amount of square footage your product occupies. Storage fees can vary depending on your product need – you can expect to pay more for temperature control.
The other consideration when it comes to storage fees is peak season. Unlike other 3PLs and Amazon, AMS does not charge peak-season storage fees. This can be a huge saving during one of the busiest times of the year. Be sure to inquire about peak-season storage costs.
Special kitting or assembly projects are often a key part of a brand’s operational needs. A great example is kitting shampoo and conditioner together for a custom product or bundling a set of SKUs together into a special box or package… both of which often result in a new SKU after the assembly services are performed.
If you have several kitting projects, work with your 3PL to decide how to approach the projects. Sometimes, it makes sense to assemble products directly into shippers and avoid pre-kitting, and sometimes it makes sense to kit in advance, much of which depends on the number of kits that a brand can pre-build in anticipation of sales. AMS Fulfillment works with you to determine the best, most economical way to handle your kitting projects.
Fulfillment costs for kitting and assembly are quoted on a cost-per-kit basis after running time-motion studies for the specific assembly project.
Over the years, packaging has become part of the “customer experience”. So, it’s not surprising that merchants have been using custom packaging materials more. Packaging materials can include everything from custom outer cartons (the shipping box or shipping bags), inner carton packaging, and cushioning.
Packaging material, whether standard or custom, is not typically included in fulfillment costs.
Fulfillment companies stock several standard packaging materials in common sizes and often utilize custom packaging that is specific to brands or customers. Ensuring that your products fit efficiently into their standard packaging sizes can help keep fulfillment costs down.
Many merchants have turned to custom packaging over the years to increase brand recognition and awareness, enhance the customer experience, and prevent product damage in the case of fragile items. Custom packaging can be seen as an extension of a brand’s values.
For example, if an eco-friendly apparel company wants to use eco-friendly packaging, it may turn to custom packaging. As a Certified B Corp, AMS Fulfillment uses eco-friendly packaging, whereas many other 3PLs do not.
When it comes to packaging, working with your 3PL on the best option for your company can keep your fulfillment costs down.
According to the National Retail Federation (NRF), consumers returned more than $816 billion of merchandise in 2022. Online return rates for 2022 were 16.5% while brick-and-mortar returns were only 8.9%.
The NRF further stated that approximately 10% of returns were classified as return fraud. Return fraud includes used, non-defective merchandise and shoplifted merchandise – some of which is attributed to “organized retail crime.”
With such staggering numbers, it is apparent returns can negatively impact a merchant’s bottom line. For this reason, a merchant’s return management process must be efficient and cost-effective.
AMS Fulfillment has a dedicated team to handle your return management/reverse logistics specifications, including item refurbishment and QC. With experienced personnel in place, we handle returns efficiently – whether it’s consumer returns or retail returns.
Technology plays an important role in reverse logistics. Our sophisticated software manages the physical return as well as timely consumer and merchant credits.
Returns management is usually an add-on to the fulfillment cost and can be billed hourly or per unit. Make sure that your selected 3PL has the technology, dedicated teams, and capabilities to handle your returns.
Shipping costs vary based on the size, weight, destination, carrier, and service level of a packed order. Fulfillment companies like AMS negotiate carrier rates based on shipping volume – the more they ship, the bigger the discounted rates. This is one of the biggest cost advantages of outsourcing your order fulfillment.
At AMS, we also select the most cost-effective fulfillment cost-per-order method for every order based on the package characteristics along with a brand’s goals for days in transit.
Carriers calculate shipping costs on the greater of actual vs. dimensional weight (DIM). DIM formulas also vary by carrier, adding some complexity to cost calculations, which we manage easily through our rate-shopping software. A brand can safely assume that the smallest box and lightest weight box will have significantly lower shipping costs.
For example, a 4x4x4 one-pound box will cost less than a 10x10x10 one-pound box. Ensuring your product is packaged in the smallest box possible is one way to keep shipping costs down.
Outbound shipping will often be the largest fulfillment cost on your monthly invoice. AMS Fulfillment uses rate shopping technology and AI to determine the lowest-cost shipping method that meets a client’s goal for days in transit. By using this technology, we save a tremendous amount of fulfillment costs for the brands we serve with outbound shipping fees.
Account Management fees cover additional services performed to keep your account functioning smoothly. It is typically added to your monthly invoice as a monthly flat fee and covers administrative costs such as B2B retail routing, handling customer service inquiries, launching special operational projects, setting up new order channels, or other incidentals associated with fulfilling your orders.
AMS provides full-service fulfillment services and is a partner to the brands we serve. Our Client Services Team is second to none as they communicate, engage, and serve our clients as their Operational Arm!
AMS Fulfillment cost pricing is customized to ensure our clients receive the best possible fulfillment and shipping rates for their warehousing and order fulfillment needs.
Unlike other fulfillment companies, AMS’s invoices clearly break out all fees so you know your exact fulfillment costs and how they apply to the services we are performing on behalf of our valued clients. There are no surprises when it comes to our invoices!
AMS Fulfillment is not like other fulfillment companies. When you outsource your fulfillment to us, you gain a trusted operational Partner that is invested in your success.
Contact Us today to see how we can help you outsource your fulfillment at the most competitive price points!