Operations and Management: A Fulfilling Outsourcing Deal

Aug 01, 2002 9:30 PM  By

Choosing a fulfillment company is a lot like choosing a partner in marriage. “Communication is the key,” says Wayne Teres, a Framingham, MA-based operations consultant. “Where most partnerships go south is in the lack of communication.”

And an unsuccessful partnership with a third-party fulfillment provider can hurt your overall business. After all, says Michael Sutton, president of Dayton, NJ-based school uniforms cataloger French Toast, “fulfillment is your last chance to affect your customer’s shopping experience.”

To improve your chances of making the relationship work, there are a few steps you can take:

  • Make sure your provider has experience with your particular product line. For example, if your company sells apparel, ask prospective fulfillment providers if they have steaming capabilities to refurbish your returns into salable condition. Make sure the company’s warehouse has dedicated space for hanging merchandise and can incorporate flat pack storage. Also find out if the provider can customize its services to meet your specifications.

  • Ask about peak season volume. One potential drawback to working with a provider that handles other catalogers selling similar merchandise is that all of its clients may have the same peak season. For that reason, ask about capacity, staffing, and service benchmarks and goals for all seasons. How much more staff does the fulfillment company hire during, say, the holiday season? Are these seasonal workers new, inexperienced hires or employees who worked for the company the previous holiday?

  • Look for a solid management team with experience in direct marketing. Retail fulfillment differs from catalog fulfillment, so be sure that the vendor you choose has worked with other catalogers. This is especially important if you’re a relatively new company. As Sutton says, “I had never recognized the complexity of order management and how many different paths an order could take,” such as multiple ship-to addresses and payment options.

    Boca Raton, FL-based natural fibers catalog Under the Canopy might have avoided some major problems had it followed this advice. Cofounder/owner Marci Zaroff had hired a now-defunct company to fulfill orders for her catalog. But the provider’s computer system “was untested,” she says, “and unable to perform basic fulfillment functions, such as ordering taking and stock status.” The problems arising from the company’s lack of experience with the computer system nearly drove Under the Canopy out of business, Zaroff says.

  • Ask for references — and be diligent in checking them. “References are extremely important,” Sutton says. “We wanted to be sure that our partner was going to maintain the integrity of our brand and keep the same service standards we have with our customers.”

  • Be honest and realistic about volume, goals, and expectations. This can be especially tricky for newer catalog companies, says Teres, because they have yet to acquire a history. “It’s very hard for a partner to understand your business, especially if you don’t completely understand your business yet,” he says. “But if you’ve entered into an agreement with an outsourcing partner and you lead them to believe that your orders are coming in at a rate of x, and they come in at y, someone is going to have to pay for it. Most likely, you.”

  • Consider doing it yourself. About 90% of catalogers — especially extremely small and very large companies — handle their own fulfillment, according to the most recent Catalog Age Benchmark Report on Operations (March 15, 2001 issue). But if you have a very seasonal business or primarily one-line orders, “outsourcing makes sense because it takes the capital expenditures off your balance sheet,” Teres says.

    And if you’re relatively new to the industry, Sutton notes, you may lack the expertise to do a top-notch job once your volume surpasses a certain level. “So why not have someone provide that service for you?”

Did you miss a previous “Operations & Management” article? You can find it online at www.CatalogAgemag.com.