How Do 3PF Costs Compare to Your Internal Fulfillment Costs?

May 28, 2013 4:18 PM  By

The proposed costs for third-party fulfillment (3PF) will depend on your company’s volume of orders and transactions, the service level metrics you set as standards, and your company profile data mentioned above.

With that said, here are three examples of our clients that use outsourcing to handle their backend fulfillment. These are fully loaded costs, not including shipping costs.

1. A small apparel company with 125,000 orders and 24,000 active SKUs: Backend fulfillment bids were between $2.99 and $4.50 per order.

2. A health-and-beauty company with 300 products and 200,000 orders: Fulfillment without shipping costs varied for three bidders between $3.50 and $4.30 per order. The client expects to save $125,000 in shipping costs.

3. A large apparel B2B wholesaler that has 5,000 products with 200,000 orders (800,000 cartons) annually: Bids from 3PF vendors for backend fulfillment were between $3.04 and $5.14 per B2B order.

Our proprietary database shows that internal fulfillment costs can vary widely, depending on order volume and fulfillment efficiency. These are fully loaded costs including indirect and direct labor, occupancy costs and packing materials.

Efficient companies with annual sales of more than $25 million have fully loaded costs per order from $4.50 to $6 for a 2.0 to 2.5 line order, excluding shipping and IT costs. Extremely efficient automated fulfillment centers may be as low as $2.50 for a 2.0 to 2.5 line order.

For smaller companies that don’t have the year-round sales volume to absorb costs, the figure can be much higher—$7 or more per order.

For more on 3PLs, download Multichannel Merchant’s 3PL and Fulfillment Service Guide.

Curt Barry (cbarry@fcbco.com) is president of F. Curtis Barry & Co., a multichannel operations and fulfillment consulting firm.