Fulfilment refers to the execution of all activities involved in a customer order and associated with order processing. Fulfilment costs therefore typically include the costs of goods receipt, storage, picking, value added services and shipping. The more complex the supply chain, the higher the costs.
What Do Fulfilment Costs Depend On?
Typically the following factors impact fulfillment costs:
- Product properties such as their category, dimensions, weight.
- Order attributes (for example SKUs per order, the number of items in order etc)
- Shipping method (express or standard, European or worldwide). With the Amazon same-day delivery widely available in Europe and US, online merchants on other platforms are hard-pressed to offer similar fast delivery experience to their customers. This of course comes at a price.
- Additional services such as additional packaging, enclosing fliers or offering returns handling.
Basic Fulfilment Costs Breakdown
Goods receipt
The price for goods receipt depends mainly on how the goods are delivered to the warehouseman. Palletized goods are often easier to handle than non-palletized goods. Single-variety cartons can be staged as-is. Mixed cartons must first be sorted. This has an impact on work hours for the warehouseman. And in turn is reflected in the final price for the service.
Storage
The monthly price for fulfilment depends mainly on the type of goods and the type of warehouse required as a result. Do you have temperature-sensitive goods such as medicines or food? Then a cold storage will be necessary, whose higher building costs and energy costs will be reflected in the price. If there are a large number of SKUs for your project, the storage will be more complex, more space-intensive and therefore also more expensive.
Picking
The price for picking depends on the number of picks required, as each pick of a SKU from the warehouse represents time and costs for the warehouseman. The more different SKUs and thus items to be picked, the higher the costs for Pick & Pack. After the simple composition of the orders, there is the possibility to use additional services.
Special Value Added Services & Extras
For the fulfilment centre customer, special services result in additional costs, but these can bring great added value. Depending on the provider, different value-added services are possible: from simply enclosing a flyer with a discount code, to packaging in tissue paper, to completely taking over returns management.
Shipping
Generally, the cost of shipping depends on the size and weight of the package and thus the nature of your products. For small items such as jewelry or books (up to 1 kg and 5 cm in height) there is the possibility of cheap shipping as merchandise mail. For oversized goods like furniture, the shipping cost will be correspondingly higher. Some fulfillment service providers can offer you partially advantageous shipping conditions, which they negotiated with the corresponding shipping service provider beforehand.
How to Optimize Fulfilment Costs?
Businesses can leverage several potential solutions and strategies to optimize their fulfilment costs and realize significant savings, bolstering their bottom line and becoming more profitable over time. At high level these include:
- Optimizing your facility’s layout and internal processes
- Rethinking packaging and shipping
- Incorporating omni-channel fulfilment
- Embracing automation and technology.
Waredock helps companies put together a distribution network with whatever their storage, order fulfilment and transportation needs are, short-term or long-term. We offer fast quoting from a network of suppliers. Let us know how we can help you.
