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What Are Fulfillment Services? Full Guide

Let’s begin by asking the most basic question… what are fulfillment services? Fulfillment service in its most basic form is the service of warehousing, picking, packing, and shipping products for companies that sell online and from store to store. Companies will no longer take on the tasks of warehousing, picking, packing, and shipping their own products. Instead, they will work with an order fulfillment services company. This company will receive the products and manage the shipping. This will allow the companies to focus on selling the products instead of managing the logistics.

To use fulfillment services, a company must store their product inventories at the fulfillment center of their choice. The seller’s technology will be connected to the fulfillment center. This will allow the fulfillment center to know what items have been ordered. They will locate it in the warehouse, prepare it for shipping, and ship it to the customer. Fulfillment centers handle products and provide eCommerce fulfillment services for online stores and business-to-business, brick-and-mortar stores.

There are a variety of fulfillment centers available. Some require an online store to manage their store through certain platforms, some are integrated with certain logistics services, and some are independent and full-service fulfillment services companies. Later we will describe the services provided by full-service fulfillment companies. Fulfillment centers, whatever their services, eliminate a seller’s need to warehouse, store and ship their products.

To clarify what is meant by order fulfillment services, we will list the types of fulfillment:

  • A company can fulfill orders in-house which means they hire employees to do the job. The products are kept in the company’s own warehouse facility.
  • The company can opt for outsourced fulfillment. This involves selecting a fulfillment company to manage warehousing, storing, packing, and shipping. Outsourced fulfillment is increasingly being utilized by the online store.
  • The third would be hybrid fulfillment, in which the in-house and a fulfillment center are both used.
  • The fourth is drop shipping, where there is no need to manage stock.

What Does Fulfillment Do? Advantages & Disadvantages

First, we will focus on the advantages. Chances are a company’s ability to process orders will not be as fast, efficient, or accurate as the fulfillment service company’s process. Fulfillment companies are fully focused on managing the warehouse and streamlining the order process.

The staffing cost will likely be lower, and all tasks that are involved in staffing, such as benefits, paychecks, taxes, and so forth will be handled by the fulfillment company. So, faster order fulfillment services and savings on staffing are two important advantages.

The online store that utilizes a fulfillment center will find that it can offer customers a much larger selection of products since they don’t have to maintain the inventories, and the fulfillment center will have expertise in inventory management. Another advantage is scalability. Sellers can scale up and down along with seasonal changes, with the fulfillment center handling thousands of orders if sales increase.

One very important advantage to sellers of utilizing a fulfillment services company is the fact that they no longer have to focus on fulfillment, and instead, they can work on improving their products, marketing their products, building their online store, developing their brand, and so forth. This allows the seller to focus on growth and development.

Shipping with a fulfillment company will be less costly as the fulfillment company has relationships with carriers and methods of finding the lowest cost for the service required. The online store that wants to offer 2-day or 3-day shipping, or free shipping to their customers will be able to achieve the speed and the cost advantage that fulfillment companies provide.

What are the disadvantages? The fulfillment services come at a cost. There will be fees to receive and warehouse, fees to integrate the technology, and fees to process the orders. The advantages have to outweigh the cost, which for millions of sellers, they do. Also, the seller gives up a certain amount of control, and therefore the choice of which fulfillment company is an important one.

For sellers considering outsourcing their fulfillment, finding the right fulfillment services company really does depend upon their needs. There are fulfillment centers that handle warehousing, pick and pack, shipping, and returns, and there are full-service companies that handle much more. The online store should think about its current needs and how those needs could change in the future, and then undertake research on order fulfillment services.

What Is a Fulfillment Service Provider?

fulfillment service provider - AMS Fulfillment

Let’s take a moment to point out the difference between warehousing and fulfillment. The terms are sometimes used interchangeably but they have differences. Warehousing is when a company stores products in its warehouse for an extended period. Warehousing providers are most often utilized by wholesalers.

Sellers who sell wholesale or business-to-business and deal with orders in huge quantities will sometimes seek out a warehousing provider. Sellers will lease warehouse space for cost savings rather than buy their own warehouses, and the companies that provide this space are providing warehousing.

Fulfillment centers provide fulfillment warehousing, sometimes limiting the amount of business-to-business as their warehouse space is utilized by several eCommerce clients who need products picked and packed, and shipped. The fulfillment warehouse that handles business-to-business fulfillment will have the space to store and process large orders.

Full-service fulfillment centers do process both, typically high-volume products. If a seller does both the online store and business-to-business, the seller should make sure their fulfillment company does not limit the amount of business-to-business fulfillment they provide.

The difference between warehousing and fulfillment warehousing, at its most basic level, is that warehousing is the storage of products long-term. Fulfillment warehousing companies will handle large orders on a scheduled, less frequent time frame with orders shipping freight, and boxes wrapped on a pallet in most cases. Fulfillment warehousing will also store smaller amounts of products for a shorter amount of time and move the products through in individual labeled packages to the consumer.

All fulfillment centers will receive inventory, store it in the warehouse, pick and pack the products and ship them to the customer. Some will handle both the large orders on a less frequent time frame as well as the smaller amounts at a shorter time frame. The ones who handle both, as well as other services, will be called full-service.

Breakdown of Full-Service Fulfillment

A full-service fulfillment center will offer services that truly make it possible for the online store to focus on its products, marketing efforts, and growth – all else is covered by its order fulfillment company. We’ll list the services, and then describe some of them.

Like all fulfillment companies, the full-service company provides receiving, warehousing, picking and packing, and shipping. In addition to these services, we have inbound shipping, inventory management, order management, kitting, and assembly, and returns management. Value-added services include shipping, labeling, cross-docking, freight forwarding, freight consolidation and deconsolidation, customs brokerage, business process services, customer service, and excellent technology.

Inbound Shipping & Receiving

Inbound shipping refers to shipping the products from the manufacturer or seller to the location of the fulfillment center. Once that is achieved, the receiving process begins. When the products are shipped, the seller will provide full information on what SKUs have been shipped, when they are expected to arrive, and how much of each SKU is in the shipment.

inbound shipping and receiving - AMS Fulfillment

Before the arrival at the warehouse, the warehouse management system (WMS) will enter the information and prepare to receive the products and verify the numbers. The order fulfillment services company will do a count of the boxes received and of the contents. Once the count is done the fulfillment process moves on to putting the products in the designated spaces, and this is where the WMS guides the storage according to a very intelligently designed inventory management system.

Picking & Packing

Customer orders are received from the online store. The WMS (Warehouse Management System) locates what needs to be picked and packed. Automated verification processes are then carried out. Finally, the fulfillment center employees start the picking process. They do this by scanning the SKUs to ensure they are handling the correct items in the right quantities. Once the orders are picked, the products are brought to the packing station.

The packing stage involves making sure the product is protected with the right materials, also called dunnage. The packaging will either be selected by the fulfillment center, or it will be custom packaging, chosen and provided by the online store. A fulfillment services company will be very cognizant of how to keep shipping costs low by choosing the right size of packaging. So, the focus is to protect the product and keep shipping costs down by choosing the appropriate size. The order fulfillment company may use biodegradable and earth-friendly packaging, and if that is the case, it is a big plus.

If the seller uses custom packaging for branding and customer satisfaction, the fulfillment company will utilize that. Custom packaging could include both inner-carton packaging material and the actual shipping box. An online store will want its customers to seek out their brand, so branded packaging is a way to create brand recognition and increase sales.

Kitting & Assembly

Kitting is something sellers do to increase revenue and also to sell slow-moving products. For example, if you buy shampoo from the online store, they will offer a special where the customer can get another product with it, like a conditioner. The conditioner might not be selling well, but the customer will be attracted to the bundle.

The fulfillment process will be to put the different SKUs together for the seller, and this is called kitting. They might shrink-wrap the products together or put them together in a custom box. Kitting is an additional service provided by a full-service fulfillment center. The process falls into the category of inventory management.

Assembly is the assembling of a kit – getting the components of the kit from stock and assembling the components into a kit. Bundling is a similar process to kitting, but rather than sending two or more different products, the bundle will contain two or more of the same product. This is sometimes what an online store will do to clear out inventory – doing a special sale of buy one get two of the same SKU, or buy two get three. It might be done to clear out discontinued products. Once again, inventory management.

Managing Returns

A full-service fulfillment company will provide management of one of the most difficult and unpleasant parts of selling – returns. An order fulfillment services company that handles returns will do so with a dedicated team of employees who will follow the seller’s directions as to how they want their returns handled.

In most cases the product will be processed, the refund authorized, and the product will be prepared for resale. If it is undamaged and needs only re-packaging, that will be quickly done and the product will be put back on the shelf. If the product is faulty and can be repaired, repair will be done according to the directions of the online store. In some cases, the product is not fit to be repaired or re-sold. In that case, it will be recycled properly or scrapped.

managing returns - AMS Fulfillment

Valid returns need to be handled quickly, as some products are seasonal and they need to be back on the shelf quickly. A fulfillment company with excellent management of returns will reduce the cost damage to the online store. It is also important to know how the fulfillment process for handling recycling and disposal. Environmentally conscious companies will have a recycling process and try to recycle rather than dispose of it if possible.

Value Added Services (VAS)

There are quite a few detailed services that a full-service fulfillment provider will do for the seller. Does the product need to be shipped with special routing requirements? That is a VAS. Things like re-labeling, validating barcodes, carton labeling, and re-packaging can be done for the sellers. Quality control and quality assurance are very important for some sellers – that can be done as a VAS. Industry-specific services may be needed. For example, products from the fashion industry may need to be hand-tagged, have hangars inserted, and so forth. These and more services can be provided by a full-service fulfillment service.

Business Process Services

It can take a great burden off the shoulders of an eCommerce business to have its business processes and even customer service handed by the fulfillment services company. This can set the seller free to handle product development, sales, and marketing as the fulfillment service will handle back-office functions. In this case, the seller will have to collaborate very closely with the fulfillment company staff, as the fulfillment service will be acting in partnership with the eCommerce business.

The back office includes quite a few services. First of all, a team will build profiles, and prepare for order entry. Accountants will handle the accounting and do financial and operational reporting. Another team will handle inbound customer service. The fulfillment process includes handling all methods of payment processing, EDI fulfillment management, and order routing.

Back office fulfillment services include operations support, inventory allocation management, eCommerce development, sales rep support, commission payments, and more. Back office support or business process services do make the fulfillment company a business partner to the eCommerce business.

Shipping Services

One of the main reasons online sellers contract with an order fulfillment services company is for the shipping savings that can be achieved by the fulfillment company. Cost savings would be primary along with accuracy and reliability. One of the reasons for savings in shipping is that the options have greatly expanded in the past ten years.

When a seller contracts with an eCommerce fulfillment services company, they go through a very thorough onboarding process where the shipping options are discussed and decisions are made. Shipping options at one time were UPS, DHL, FedEx, and USPS, but within the last ten years, the options have expanded. An online store will make decisions on a greatly expanded list of international, national, and regional carriers.

With the expanded list of carriers may come lower prices and faster delivery times. The fulfillment service may use rate-shopping software to find the best option. Based upon the location of the warehouse and the location of the customer, the carriers will be analyzed and the fastest and least cost will be used.

Shipping services are rendered on an order-by-order basis. A full-service fulfillment company will operate as an arm of the seller, its client. This is done with every client and it is one of the true benefits of outsourcing fulfillment. The fulfillment process will audit every transaction for invalid fees, and they will verify that the shipment was accurate and on time.

Because of the business they provide, the fulfillment company will get excellent rates from the carriers. Finally, full-service order fulfillment will include freight forwarding of both less than a truckload or full truckload, cross-docking, freight consolidation and deconsolidation, and customs brokerage. There are many benefits to shipping services.

One point that should be made about shipping is to mention something that is almost a prerequisite for any fulfillment services company – accommodating clients who want to offer 2-day shipping or 3-day shipping. It takes a truly fast, accurate, and experienced fulfillment company to provide 2-day shipping at a competitive price. The best ones will be good at it. Customers are demanding it and online sellers need to offer it to be competitive.

Technology – Label Services

The shipping label has gone through some changes, and nowadays it is full of information, increasingly vital to the shipping process. The shipping and logistics team will handle hundreds of clients, providing the right shipping label for domestic and international delivery. Each company will have requirements related to the fulfillment process and the team needs to be accurate. For this, they depend on the right technology.

A good fulfillment company will have a top-notch warehouse management system (WMS). The team relies on the correct shipping label to be generated. To keep the technology top-notch, the fulfillment company should have an in-house IT team. The system has to protect the data as well as have the right zone requirements, text, and barcode in place. The label is broken down into zones that have to have specific information including the carton content. The technology has to be top-notch, and your full-service fulfillment service will be at that level. As said, shipping is one of the predominant reasons sellers utilize fulfillment services.

In addition to labeling, technology is vital to many more elements of the fulfillment process. The technology of the seller and the fulfillment company will be fully integrated. Fulfillment company technology is integrated from pre-sale to post-order and for this reason there needs to be an in-house technology team. The team will have developed highly functional operating technology for automated order inputs, inventory control, and order fulfillment. Vital to this service is data security, confidentiality, and processing integrity.

Inventory Management Services

inventory management services - AMS Fulfillment

When sellers send inventory to the warehouse, the warehouse management system must have accurate information as to the amount of inventory and the status of it. Controlling hundreds of thousands of SKUs is the task of the WMS and the Inventory Management Team. The fulfillment process team must follow strict procedures with checks and balances for receiving, putting away, pulling orders, location replenishment, bin moves, and cycle counts.

The bottom line is following the rules of the operating system, and researching any problems to make sure the system reflects accurate numbers. Essential processes involved will include inventory set-ups, cycle counts or full physical inventories, syncing of data between the fulfillment company systems and those of the seller/client, accurate information on inventory available to sell, and security of the inventory.

Order Management Services

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format between business partners. The fulfillment process of managing orders relies heavily on EDI. The technology allows companies to pass information on order shipping and inventory, accounting, eCommerce, order management, and warehouse management systems.

Some orders ship from available-to-sell inventory; there are routed orders that are held for pickup and then, within a delivery window, they are shipped; and there are drop ship orders that have strict rules and timing requirements, and so on. Some of the EDI transactions include labels, purchase orders, acknowledgment to confirm receipt, advance ship notice, order acknowledgments, and order change requests. Order management services are complex and depend upon excellent technology.

Additional Order Fulfillment Services

In addition to the services we mentioned, we can add customer services and IT support. Some full-service fulfillment companies offer, among their services, a call center for clients including email support and social media customer support, and they offer IT support. These additional services take significant burdens off of an online store and allow them to focus on scaling and growing their businesses.

Looking Into AMS Fulfillment

why ams fulfillment - AMS Fulfillment

If you are an eCommerce seller or a business-to-business seller there is a company that offers all of the services – a truly full-service company. Among the many advantages to choosing AMS Fulfillment is the fact that this company has been in business for more than 20 years and a great deal of the management and executive staff have highly valuable experience.

Let’s take a quick look at what this company provides its clients:

  • AMS assumes the role of the business partner and operational arm, and this in itself is a significant advantage. The company manages the previously described tasks, allowing its clients to focus on growth, product development, marketing, and so on. AMS is quite proud of its client services team, the highly trained and experienced account management associates, and its fulfillment technology, managed by a skilled in-house team. The client support is exceptional and dedicated.
  • Another significant advantage AMS offers is the fact that the company is bi-coastal with warehouses and offices in Los Angeles, near the ports, and in Pennsylvania and Delaware, near ports. These locations allow the company to lower shipping costs and speed up delivery times.
  • AMS takes pride in its experienced staff, technology, highly advanced warehouse management system, accurate inventory control, channel familiarity, scalability, the full-service model it provides, the process the company has fine-tuned concerning onboarding, and its B Corporation certification.

AMS Is a B Corporation

B Corps are for-profit companies dedicated to using business as a force for good. They aim to meet the highest standards of social and environmental performance, transparency, and accountability to their stakeholders.

The employees of the company are considered stakeholders. The B Corporation will not only offer fair pay and benefits, but as in the case with AMS, the B Corp will offer educational opportunities, training for advancement, a focus on diversity, equity, and inclusion, and a very strong focus on warehouse safety.

Unlike traditional companies, B Corps are legally required to consider the impact of their decisions on all stakeholders – clients, employees, communities, and the environment. AMS is proud to contribute to the betterment of the world as a B Corporation.

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