For new companies making young products it’s usually not cost effective to do all their storage and shipping. That is were fulfillment services come into play. Many manufactures and companies outsource the last stages of their operations to fulfillment services. Companies who provide these services bridge the gap between customer and producer. Depending on the company, services can include storage and management of inventory, picking, packing, shipping and administration of customer inquires.
Companies who offer storage and warehousing will store a client’s products until an order comes in. Storage is usually available for temperature sensitive items that require refrigeration. The fulfillment service is responsible for maintaining and publishing inventory counts and products that are shipped. If picking and packing services are involved the fulfillment service will often have a designated “picker.” This person will rummage through the inventory in search of the product to be shipped then pack it in either a standard or customer provided package. As far as shipping is concerned, it is usually more cost effective to outsource shipping to larger courier/delivery companies such as UPS, DHL, FedEx and USPS.
There are several advantages in using fulfillment services. As I mentioned earlier, young companies may not have the storage capacity or funds to store their products. Fulfillment services normally charge fairly reasonable fees for storage, because extra costs such as utilities and what not are spread out through multiple clients. A typical company will either charge per item, pallet or space a client’s product takes up in the facility.
Shipping costs are also normally cheaper. Fulfillment services can get bulk shipping rates due to the massive amount of shipping for multiple clients they do. This makes it cheaper for companies to pay for fulfillment services than pay for their own shipping. Some companies can even pay for the fulfillment service with the money they save on shipping.