So you are interested in starting up a fulfillment business but are unsure of where to start. Let's take a look at two of the available options, which are contracting with a third party fulfillment (3PF) vendor or doing it yourself. Although there are differences between the two, both require an extensive plan.
Contracting with a Third-Party Vendor
You want to ensure a good fit and grounds for a solid, long-term working relationship. How do you go about this? Some of the questions that need asking are: Are the services you need provided and covered in the quote? Is the company financially stable? Is there adequate growth potential? Is the fulfillment software used proven and robust? Is there a documented quality control program in effect? Are they your kind of people?
Taking care of your inventory and many other concerns will need to be covered. Let's dig deeper by taking an imaginary site visit to a 3PF vendor facility.
The Facility First impressions are always important. We would expect the facility to be reasonably attractive and in a good location. The grounds are neat and clean. The office is well-organized, free of clutter and looks to be efficient.
Customer Service We will want to meet with our CSR and ask if he/she will be dedicated to our firm. We need to understand the functions the CSR will manage for us. We also want to know who will handle the training of our staff in the use of the 3PF's fulfillment system and what reports will be provided. Will there be occasional face-to-face feedback meetings on performance, and is there a formal
complaint management system?
Software It is important to understand the 3PF's web-based solution (front end) by viewing a demonstration from another website of all the functions your website will require. An appreciation of additional features offered, to be taken advantage of in the future, will be helpful.
Is their fulfillment system homegrown or an off-the-shelf package? Does the 3PF have on-site programming support? Being informed as to how program changes are made, tested, tracked and communicated is important. Take a hard look at order management, inventory and support for kitting, determining how data security is provided and how the IT backup program operates are all worthwhile.
The Warehouse It must be clean and well-organized. The floors are looking good. The cartons on pallets are closed and neatly stacked, the pallets are neatly arranged on the racks and each pallet location has a barcoded address label. The racking aisles have identifying signage. We ask to see a product in the inventory system and then to locate it in the warehouse. We then ask to see a copy of their receiving and returns procedures and a demo of each.
The Fulfillment Operation Let's follow an order from order entry to the printing of the pick/pack slip. (If the system is paperless, then we want to see how the order is activated on the handheld device.)Then we want to see the items pulled from inventory, the order QC'd, packed and shipped. Are Focus Factories used? Is the shipping system automated, and are all small-package carriers used? How will they prepare the necessary documents and ship our international orders? Is the kitting operation supported by the fulfillment system?
Inventory Management We need to know how inventory is processed from receiving to its storage location. Is replenishment of forward picking locations done manually or is it system-driven? What is the frequency of cycle counting, and is the process documented? Does inventory reporting display reorder points and are they calculated based on usage and supplier lead time? Is frequently used material slotted for ease of picking? It is important to learn about inventory accuracy and at how it is arrived.
Additional Services What is provided? Some to look for are: mailing, poly-bagging, shrink-wrapping, demand printing, demand kitting and variable digital print. ·
Our Kind of People? Hopefully during our site visit we were able to meet face-to-face with management and others to determine if they really are "our kind of people." Are management and ownership available on a daily basis to run the business and seem competent and willing to solve our problems? Do supervisory and support personnel understand their jobs and show a willingness to help their customers? Does the workforce seem to be generally well-spoken and friendly as well as seeming to know their jobs and perform in a well-trained manner?
Doing It Yourself
If using a third party fulfillment vendor isn't for you, you can do it yourself, but it can be a daunting task. It will obviously include all of the elements discussed in contracting with a third party fulfillment vendor, plus others like how much space will be needed for offices, material storage, fulfillment activities and staging areas? A location? Electrical? Heat and air? How should the center be racked? Personnel, software, security and inventory management are all elements to be considered.
Space This is a primary concern. Is there enough in your existing facility, or is a new facility going to be required? The warehouse size will be largely dependent on pallet requirements and has to be based on your estimate of how the business will grow. A rule of thumb is to "think big," as fulfillment tends to grow in big chunks.
The Office Size may be 2,000 to 3,000 square feet to start as space will be needed for offices, workstations for administration and customer service, rooms for telephones and computers, a reception area, conference room, restrooms, supplies closet and a small kitchen/break room combo. Office equipment is the usual furniture plus copiers, fax, computers, printers, telephones and a security system that will go into either the phone or
computer rooms.
The Warehouse Size includes space for racks and their aisles for pallet storage, shelving for forward picking locations, plus secured storage if dealing with valuables. Shipping and receiving both require areas for staging and require docks, ideally two for each. Space is also needed for receiving, packing and shipping operations and equipment consisting of scales, computers, work tables and perhaps conveyors.
Kitting/assembly will also need some room to work. A ramp for inside loading and unloading is useful as is at least one controlled entry for employees and drivers. Restrooms, a battery room and/or a location for parking forklifts for recharging are also needed. Last but not least are aisles for people and equipment.
Electrical Electrical plays an important role. The breaker panels must be sized for growth. Lighting and equipment requirements dictate capacity. Many outlets are vital as are telephone placements and network drops for computers with growth built in. Be sure to plan for any RF devices to be used. Planning for lighting is a biggie and should not be done until the rack layout is finalized as those lights must be in the aisles. Other lighting must be bright enough to read orders at the floor picking level. A lighting consultant may be a good idea.
Floor The warehouse floor is the single most conspicuous area to be seen by potential clients. It takes a lot of abuse. Coat it before occupancy for ease of maintenance. DO NOT paint it. Clean it well and use a clear coating like you see at Sam's Club or Costco let the cement be the color. This makes it easy to care for and repair.
Racking A solid grasp of fire regulations and attendant sprinkler needs is required. A meeting with the local fire department inspector can be helpful, and a final inspection will be required before moving in. Make the racks go as high as is allowed to achieve maximum utilization. Use beams strong enough to hold the heaviest pallets.
Racks should be bolted to the floor (especially in
Equipment A forklift, pallet jack(s), hand carts and picking carts for moving materials are needed as is a battery charger and eye wash station. Workstations for computers/
printers, shipping, receiving, packing and returns processing are necessary as are counting scales (and perhaps a floor scale) and tape dispensers. A manual pallet stretch wrapper and hand strapper are useful. Fire extinguishers are a must.
In the kitting area, work tables (perhaps on casters) are required. Include extra ceiling drops for tape shooters and scales, dropped lighting (if ceiling lighting is insufficient for close work) and electrical outlets for automatic equipment. A belt conveyor and/or flex rollers will also be useful.
Supplies Void fill (paper/peanuts/air
pillows) and tape, cartons and jiffy bags are necessary. A few pallets, stretch wrap, strapping materials, cleaning supplies, mops, brooms and trash receptacles are all needed.
Networking and Phones Standard phone lines for the office, DSL for web-based needs and higher speed lines for downloads are needed. For the network, a layout diagram must be completed, and be sure to provide for more connections than are needed to allow for growth.
Personnel (Last but definitely not least) Salaries are the largest ongoing expense. "Think small" so you can run lean and mean. The warehouse requires staff for receiving, replenishment and movements plus staff for picking, packing and shipping. You will want to use temps as needed for kitting. Good people for IT and customer service are expensive and must be well-paid as turnover is disruptive.
Regardless of your choice, a well-thoughtout plan is essential.
Jim Rushing, President of R Fulfillment Solutions, can be contacted at fulfillmentsolutions@yahoo.com.
