E-shops grew during Covid, increased their stock and invested in large warehouses. When the e-commerce market started to fall, companies were left with unused and unnecessarily large warehouses. One of the ways to use free spaces is fulfillment. Thanks to it, these companies offer free space to other e-shops, and both sides make money from it. You will learn everything important about fulfillment in the article.
What fulfillment is
Companies that offer fulfillment provide their warehouse space to other companies and at the same time ensure all logistics for them, i.e.:
- receipt and storage of their goods,
- completing, processing and packing their orders,
- transport and distribution to the customer (through the shipping partners of the fulfillment provider),
- often also handle complaints and returns,
- provide customer support
- and inform their customers about the status of the goods (received, sent, delivered, etc.).
Fulfillment providers usually charge separately for goods receipt, storage and order processing. The prices for receiving one pallet and processing one shipment usually range around a few tens of crowns, but may vary depending on the specific market.
Advantages of providing fulfillment
First of all, the company will cover unused capacities, both warehouse and human. Thanks to fulfillment:
- companies make maximum use of warehouse spaces that are unnecessarily large for them,
- they use the capacity of warehouse workers, so they do not have to make layoffs,
- they gain a new source of income.
Fulfillment providers are most often approached by newly emerging e-shops that do not have their own halls because they are too expensive for them. Alternatively, they want to offer quality logistics services, so they delegate them to an experienced third party. However, it can also be successful e-shops that have a narrow range of goods, and therefore their own warehouses are not worthwhile.
Advantages for companies that use fulfillment
When the logistics for the e-shop is handled by a third party, there are advantages such as:
- more time for running the e-shop,
- better services for customers (e.g. an overview of the movement of goods, triple checking of goods or faster processing of orders),
- no operational and administrative concerns associated with the operation of the warehouse and employees,
- e-commerce business without investments in buildings, machines and software,
- saving on rent and operation of the warehouse and employees,
- speed of implementation (companies start storing with the partner very quickly).
Disadvantages for companies that use fulfillment
From the advantages mentioned, it may seem that using fulfillment is worthwhile for every small e-shop. However, delegating logistics to a third party also has disadvantages and potential problems that must be avoided. The e-shop must carefully calculate whether delegating logistics is worthwhile.
The main disadvantages include:
- higher shipping costs than if the e-shop handled it by itself,
- physical loss of control over the goods – the e-shop owner cannot check the goods or prevent errors at any time, and therefore the fulfillment partner must be as trustworthy as possible,
- systemic loss of control over the goods – current data on stock status can only be found through the fulfillment partner,
- potential errors in the connection of the systems – the entire cooperation is based on the exchange of data between the e-shop of one party and the warehouse system of the other.
Potential problems can be minimized by a thorough selection of a fulfillment partner who has proven experience with logistics and provides quality services in their own business as well. You can increase the chances that an e-shop will choose you as a fulfillment partner by:
- delivering goods to customers quickly and flawlessly,
- using a managed warehouse (WMS) and modern warehouse tools,
- offering more shipping methods
- and low price.
How managed warehouse (WMS) helps fulfillment partners
A managed warehouse or WMS is a system that facilitates the work of warehouses not only with providing fulfillment, but also with their own business. In short, it is a program that enables full or partial automation of warehouse processes – from ordering goods through receiving and storing them to picking orders. An example is our LOKiA WMS system.
LOKiA WMS helps fulfillment providers by:
- accelerating the storage of received goods – each piece is assigned a position in the warehouse according to the chosen storage strategy, so warehouse workers do not have to think about where to place the goods, and the inventory is clear,
- readers with WMS navigating warehouse workers to the desired goods and allow multiple orders to be picked at once,
- with the help of readers, assuring warehouse workers that they are reaching for the right goods – so they flawlessly pick a different assortment than the one they are used to,
- warehouse workers printing shipping labels from WMS, thus speeding up packaging,
- accelerating the processing of returns – just read the code on the box, the returned goods will be automatically stored and the ERP system will receive an instruction to cancel the document,
- adapting to the individual needs of the various e-shops for which you handle logistics – for example, it points out the wrong shape of box or attached leaflets.
LOKiA WMS can be connected to partner e-shops in two ways:
- The fulfillment provider has an ERP system connected to individual e-shops, from which orders are sent to ERP and at the same time to WMS – WMS thus functions as a central warehouse brain for all partner e-shops.
- If the fulfillment provider does not have and does not want an ERP system (for example, they only store goods for a few small e-shops), they create a separate account in WMS for each partner e-shop and connect it to it.
If you are considering the operation of fulfillment and are looking for a suitable warehouse solution for it, contact us. We will discuss your plans with you without obligation and together, we will find suitable tools.