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ORDER FULFILLMENT COSTS AND PRICING: Things you need to know

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ORDER FULFILLMENT COSTS AND PRICING: Things you need to know

Do you really know how much order fulfillment services cost? Fast and accurate delivery to your customers is essential for your brand, but the issue of cost directly affects how much profit you make. When looking for order fulfillment centers, you need to do a lot of research and consideration to choose the one that fits your budget. However, the first question that businesses directly ask is: “How much will order fulfillment cost?”

Not all order fulfillment warehouses are created equal, and some pay more for premium services that aren't really needed. You can find a lot of 3PL warehouses out there that are very affordable.


(order fulfillment cost and pricing)


In many cases, you should have a partner who is an outsourced fulfillment company because they are experts in this area, which helps them reduce overall costs. In fact, there are several reasons that outsourcing will save your company money:

  1. Large volumes of orders when shipped jointly by outsourced companies will cost more than shipping yourself.
  2. Reduce fixed costs to operate, such as rental costs as you will have to pay for the space you use – this can be extremely helpful for cyclical business models.
  3. Reduce the cost of supplies, such as boxes, packaging, etc.
  4. Reduce time and staff management costs
  5. Instead of spending time shipping orders, you can spend time thinking about ideas to develop its business.

Remember that a fixed formula does not measure costs. Expenses can appear in many different fulfillment categories. And most commonly, fulfillment services companies will charge you based on the services they performed for you during the month. In this post, we'll give you all the information you need to know to determine the price and cost of fulfillment services.

VOLUME AND CONTRACT DISCOUNTS

Before signing a contract, fulfillment companies always ask you questions about order volume (how many orders you deliver per month, how big the warehouse space is, and which carrier you use). Not only are they trying to figure out how much of their inventory you can use, but they can also use this information to determine if you qualify for a volume discount.

Volume discounts are lower prices in exchange for higher volume levels. Both parties benefit because you get a lower rate per order, pallet, or shipment, and the fulfillment companies are shipping in higher volume. In our most recent survey of warehouses, a full 70% of fulfillment companies offer discounts for order fulfillment depending on volume, 62% offer discounts for storage services, and over 70% of fulfillment providers use some form of a discount on shipping services (either cost plus or discount off of published rates). 

Another way to get better rates is is a long-term contract. Execution companies offer month, year, and even multi-year term options. Especially in multi-year agreements, fulfillment companies often provide incentives to customers (including price discounts and no interest rate increases). Some companies will raise prices every year (average 3%-7%). Make sure you look at all the options available to you to find the best price.

Below, we'll detail all the potential fees you'll have to pay when using the services of fulfillment companies:

  • Set up fees: Account Set up and System Integration - These are the costs you pay for the installation. Set the initial system.
  • Inbound Shipping: Freight or Container Shipping - This is the cost to send your product from the supplier/manufacturer to the fulfillment center.
  • Receiving: This is the cost of storing your product at the warehouse, including checking, counting, and placing the product in the warehouse.
  • Storage & Warehousing: This is the cost of placing your product in the warehouse per pallets, square foot, or bins.
  • Pick and Pack & Order fulfillment: This is the cost of picking, packing, and preparing the order for delivery.
  • Box fees: Standard or Custom Packaging - This is the cost when you need additional packaging or boxes to package and prepare your order.
  • Order insert fees & Custom Labeling: This is the cost when you need to add any promotional or marketing content to the package or label the package in any unique way.
  • Outbound shipping: This is the cost to ship your order from the warehouse to the customer's hand.
  • Returns fees: This is the cost to receive and return the product, inspect the product, and return inventory or handling.
  • Kitting fees: This is the cost of special kitting or assembly projects to prepare your product for shipment. (Example: Each of your products takes 30 seconds to kit, and the warehouse will charge a base fee of $40 per hour of kitting. So each of your products when kited will incur an additional $0.3333)
  • Account management fees: This is the cost for monthly reporting or overall management (including monthly costs for system integration and online reporting) that fulfillment companies provide for your account.

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Kingify provides printing on demand service, with fulfillment centers located all over the world. It connects with your ecommerce stores and fulfill orders on your behalf.
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