If you’re considering delegating eCommerce order fulfillment to your business partners, you’ll probably be faced with a big variety and possibilities of choosing a fulfillment center. This means that before handing over your inventory and order shipment to another party, you will have to select a reliable, always ready-to-help provider of high-quality fulfillment services.
When choosing a new business partner, an important factor is not only the service quality and communication, but also the price. In the case of 3PL services, the cost is determined by many variables.
What determines the cost of fulfillment services and how is it calculated? Before presenting an offer, most 3PL providers will ask you some key questions that will decide the fulfillment cost.
Look through these questions before asking for a quote from your potential 3PL logistics partner:
1. How many different products do you have?
Before teaming up with your 3PL provider, decide how many different SKUs (stock keeping units) you will offer to your future buyers in the USA. If you’re just starting out in the USA eCommerce market, it’s advised to test the potential of different goods or their categories for 2-3 months. It’ll allow you to efficiently evaluate which products might have the biggest success in the new market.
If you’re selling clothes or other textile products, note that different colors or sizes of the same model are treated as separate SKU, i.e. separate products. A fulfillment warehouse needs this information in order to know how much space is required to stock your items and in order to properly prepare for it.
2. How much has the number of your orders increased over time and what are your future sales predictions?
It’s no secret that the USA is one of the biggest eCommerce markets in the world. Fulfillment centers emerged there to help eCommerce businesses to reach and successfully serve a big client base.
We can compare this system to a watermill. When there is enough water, it turns the wheel, and all cogs inside spin at their own speed, doing their job and producing results. But when there is too little water, the mill doesn’t work as well as it could. Similar amounts of resources are consumed, but the efficiency is low, thus increasing the prime cost.
All professional 3PL fulfillment centers know and can inform you of the average number of orders you need for the benefit to outweigh the costs. The same logic is applied in trade. By increasing the load, economies of scale are achieved, i.e. the costs are optimized and the profit grows. That’s why everyone, including traders and providers of fulfillment services, wishes to see graph spikes in eCommerce sales predictions.
3. How many different products on average do you have in one order?
As long as 3PL logistics haven’t been fully taken over by robots and other innovative solutions, in most third-party warehouses, orders are still collected by people who are paid an hourly wage. Therefore, the order processing or collecting fee will depend on the number of orders an employee is able to fulfill through a set period of time.
It comes naturally that the orders of 1-2 items are collected and packed faster than those which contain 5 different products. The customers always choose the goods they want and how many of them they’d like to. In this way, eCommerce businesses discover which products are the most popular. Thus, one of the ways to reduce the order collecting fee is to offer the products combined into sets or bigger quantities of the same item. It’s a different way to promote sales by concentrating 70-80% of the assortment into a few main products or their combinations which become the best-selling.
4. What is the average weight of your order?
Most fulfillment centers collaborate with USA carriers, such as USPS, UPS, DHL, and FedEx, so that by combining shipments they could achieve quantity savings and offer cheaper shipping rates to their clients. Some carriers specialize in shipping small parcels (up to 2 or 5 kg). Others offer better rates for shipping packages of non-standard weight. You can use services of several carriers for packages of different size categories.
When sending an inquiry to providers of fulfillment services in the USA, you’ll have to indicate the average weight of your orders. Your future 3PL fulfillment partners need this information to present an accurate offer.
Do note that, contrary to European shipping companies, USA carriers usually give only the base price and additional fees can be added to it. These additional fees may include:
- Fuel surcharge. This fee is applied at all times. The sum of the fee changes every week, month, or quarter and can be found on the website of the carrier.
- Residential surcharge. It is applied when the recipient’s address is within a residential area. Unfortunately, it’s impossible to know beforehand if the address belongs to this category. This fee can vary from one-digit to a double-digit percentage.
- Peak surcharge. This fee is usually applied starting from mid-October to the end-December. Most of the USA’s major sales happen during this period. Carriers (e.g. Amazon’s services provider) hire additional employees to process a temporarily bigger amount of orders that sometimes can increase several dozen times. Because of this, extra fees are calculated which, in 2021, amounted to 0,5-2,00$ per order.
5. Other questions and general information
Mutual trust is one of the key factors when choosing a new business partner, therefore, don’t be shy to present your products in more detail.
Share how you pack your orders for shipping internationally, what proved right in your practice and what could be improved. What kind of packaging does not provide enough protection or, on the contrary, protects your goods from damage? Do your orders sometimes contain batteries, dry ice or other elements that would require special treatment during transit?
These details will help the fulfillment center to better understand your business needs and to offer the most advantageous eCommerce fulfillment solution. What’s more, it’ll let the 3PL services provider give you the best price offer so that the business expansion and trade in the USA would be like a cakewalk for you!
If you wish to learn more about fulfillment services or to get a quote, get in touch with the professionals of this field, such as HappyParcel. Our experience in the USA 3PL logistics will ensure an easy start of your business expansion in the new market without hurting your pocket.
