Shipping Your Products & Order Fulfillment Services

A Fulfillment company is the keystone to automating any product based business. What is a Fulfillment house? And how do they work to automate your shipping customer service operations?
This week Matt and Brandon answer all of these questions and more in the AutomateMySmallBusiness.com podcast. From getting the best value for your dollar to shipping packages worldwide without licking a stamp. This episode is one of the most beneficial to date, so prepare yourself to delve into the core of the automated business model.

Podcast: Play in new window | Download

Links from the show:

• UPS
• Volusion
• FedEx
• Amazon
• Shipwire
• Vistaprint
• Uline

Transcript:

Welcome to Automate My Small Business where we show you how to set up and run your own automated business on the cheap. So get ready to take back your life and add a little spice. It’s time to build something automated.

BRANDON: Hi there. This is Brandon.

MATT: And this is Matt.

BRANDON: And this is Automate My Small Business Episode 4. Today we’re going to be talking to you a little bit about fulfillment and shipping. Once you have your shopping cart and you got your business up and running online, you’ve marketed it, you gotten traffic to it, people are now ordering, you got to somehow get the product to the customer. And this is where a lot of the automation of the backend comes into play and the operations of it in getting shipping automated and processed and maybe even if returns, if that’s necessary. So we got a lot for you on this episode and I think you’ll like it.

MATT: Yeah, I know shipping for me was one of the big things that took a lot of my time. When I first started out, I was doing it on my own. So this is a huge time saver once you start to automate this and move out towards fulfillment centers.

BRANDON: Yeah, not only is it critical for automation in terms of making or breaking the time that you spend or can save but it’s also huge cost saver if you do it correctly especially shipping and utilizing the shipping rates properly, you know. And if you do it incorrectly it could really cost you a lot. So this is a really important topic.

MATT: Okay. So how about we start out and talk about, maybe go over some of the shipping companies that are out there and how you might do it when you’re first starting out before you move to fulfillment.
BRANDON: Well you know I am always an advocate of the saying, you should try it yourself, do it yourself, or at least for a few weeks maybe even a month or two on your own just to get the sense of what time restraints there are, how is the product packaged, what kind of box do you need, how much time does it take to pack it and label it and get it out to customer and then of course dealing with the customer on that issue. So you know when you’re getting started, go ahead and do it on your own. First thing you ought to do right up front, get a UPS daily pick up rate. That basically cuts your rates in half and all it is a simple email or website sign up. Sometimes you can get a personal…

MATT: Account manager.

BRANDON: Yeah, account manager to get you going if you have a little bit of volume, and it peaks their interest but even if you don’t, no big deal. You can go and get yourself an account. I suggest UPS. They’re all pretty comparable in price here and there and you can save money if you do your homework but for most part they’re pretty much comparable in price. So, yeah, shipping—start yourself, you’ll notice that most of your shopping carts out there have some sort of integration with the shipping carriers. I remember starting off with Yahoo shopping cart. They made it real easy by letting me click basically a single button that said, print label, and UPS, you can just for these you know labels. You stick them right to the side of the box. You stick them into your laser printer and you hit that print label button and zap, there it comes out. You peel it, stick it to the box and wait for the truck to come by every day.

MATT: Yeah, I think the company you choose will really be driven by the kind of what’s going to be easiest for you. I know when I was shipping on my own using Volusion, the only thing I could print labels for was FedEx so I used a lot more FedEx than I did UPS.

BRANDON: Right. So you know it’s different with each carrier and it’s different with each shopping cart. Some were either easier than others but if you can get that process down to a real quick 5 minutes or less, you’re going to save yourself a lot of time. In the end, you’re going to hire a fulfillment company that’s going to do this for you. And it’s nice to have that experience to translate to them. Maybe you can do a little training even though they’re professionals in what they do of course but the can always use some of the experience that you might have with the product and maybe it’s an awkward size or shape. In my experience, the product I had was a large product and just barely got underneath that threshold of what they call you know an overage fee which basically caused double by going an inch over the size that the formula says it should be. So by having that knowledge and working out those dimensions, I spent quite a lot of time getting those package dimensions under what it needs to be and you know the fulfillment house is just going to ship whatever you tell them to ship so they’re not keen on you know making sure that dimensions is going to be underneath the threshold. So that’s important to watch out for.

MATT: That’s a very important point, I mean, I think anyone who’s starting out with maybe a big product might want to consider looking into those dimensions because that could definitely affect your profitability if you need to design your product to be smaller than those things.

BRANDON: Yeah, the term there is dimensional weight versus actual weight so look up dimensional weight on whatever carrier you use, if it’s FedEx or UPS. They have a formula that you got to use. And I’ll give you an example; my wife had a palm goods product that was like this tree that you hang jewelry from. And the tree literally weighed under a pound. It’s like a little branch, like a branch, wood branch, that you hang jewelry from. It was a nice little home item and you put it in this box and the box had to be huge because the tree had to fit in without it breaking and all that. It turns out, what normally would have cost 5 bucks to send to almost anywhere in the country was about 80 bucks just because of the size of the box. So you can really screw your profit real quick by not watching out for that kind of stuff.

MATT: So we talked a little bit about UPS and FedEx. You know you also have a 3rd option of using the postal service. Have you shipped anything with the postal service for any products?

BRANDON: You know I haven’t. I know it’s got a great flat rate promotion going on right now. I wish I could utilize that but the packages that I use are not standard size. But there are a number of things that you can use USPS for such as parts that you’re getting out to your customers or things that might be small here and there and it’s definitely going to be cheaper to use USPS for because it’s not critical time, it’s not a critical cost. Those are the kind of things I use it for.

MATT: I think it works pretty well. One of the things that you do give up is a very detailed tracking. So with both UPS and FedEx, you get great tracking on where your product is, how long it’s going to take to get there, you know, all those steps it’s gone through. I mean, that’s really nice as a merchant so that you know kind of where things got lost or that they’re going to make it there on time. Postal service doesn’t have that. They do have something called delivery confirmation which will tell you that it got there eventually but it doesn’t give you much knowledge during the process of shipping it. But it is cheap, very cheap. And I use it especially for international packages. Now, that’s where you can save a lot of money over UPS or FedEx.

BRANDON: And this is no secret, everyone out there probably knows that most companies that are shipping product probably charge a little bit more. Sometimes they call it handling charges. But you’re going to end up making a small profit off of every item you ship to customers—you’re going to do it just to make sure that you’re covering your cost but also it could turn out to be a profit center for you too.

MATT: And some companies will do that so that they can better compete on price. So you see a lot of the really cheap items, if you go on Amazon you’ll see, you know, a USB cable for a penny. Oh, how can they do that, they do that because they sell the USB cable for a penny and then they ship it to you for $10 which really cost them $2. So think about those business models that might let you compete better with your competitors. I mean people don’t generally look at how much the shipping is going to cost until they’ve already decided that they’re going to buy something.

BRANDON: And here’s a few tips on trying to get your rates down. Go ahead, call up the account representative in your area and negotiate rates. You can tell him, look, I’m starting to really pick up my volume here. What can you do on price? You know they’re usually open to doing that. I don’t know exactly how the hierarchy works with UPS but it gives me the feel that everybody is out there trying to just get their sales up and however they can do that by adjusting prices for any particular customer that seems to be growing and they want to keep your business. So they’re out there to really make good pricing for you so that they’ll keep you as a customer.

MATT: And I’ve seen that you can save significant amounts of money by doing that, I mean, over 30% easily.

BRANDON: Yeah and the other tip I could give you guys to try to save on shipping cost is ask your fulfillment company. Once you get going in the fulfillment, they may be willing to share their discount, their deep discounts by them being a fulfillment house and having huge volumes that they’re doing to pass those savings on to you as their customer. In fact the fulfillment house that I use passes that cost directly to me so they make zero profit on it and it’s a real nice cost savings for me.

MATT: I think that’s definitely something you want to talk about during the negotiations when you’re considering fulfillment companies.

BRANDON: Yeah, and you know, one fulfillment company, Amazon fulfillment—Matt, you’ve looked into this real deeply, you know, because Amazon is who they are– god, how many millions of packages do they ship out a day, I mean that’ll be millions. But it’s quite a lot and they’re getting pretty much free shipping.

MATT: Yeah, it’s really cheap. And they do pass that on to you so …

BRANDON: And they do pass it on. I don’t know if it’s one to one. I’m pretty sure it’s not but it’s pretty cheap. So keep that in mind. So, yeah, when you’re looking for fulfillment companies and you’re out there shopping around, you could either go local or out of state. And there’s some benefits that. I ended up going local because I needed to make few deliveries myself with parts that I can’t get anywhere else or I would have to pay more for because I have to ship them directly to the fulfillment house or there’s a little bit of customization I needed so I just needed to have a little hands on with them. So that kind of thing, you may choose to go local and get a fulfillment house near you. Since I leave in California, the lease rates are high, the warehouse space is expensive, therefore their prices to me are going to be a little bit more expensive than say somewhere in Kentucky or Tennessee or you know out in the Midwest where spaces are plentiful.

MATT: Or the dessert in Nevada.

BRANDON: Or Nevada. Someplace where the warehouse can be anywhere and they’re paying pennies per square foot, you know. So you’re going to have cheaper fulfillment costs by going out into rural areas but you lose a little bit of control.

MATT: That also impact something else with shipping is that the closer you get your fulfillment center is to your customer, the cheaper your shipping is going to be. So some of the bigger fulfillment companies like Amazon and Shipwire and some others have multiple fulfillment warehouses throughout the United States. And you can use their systems to maybe have a fulfillment center in Chicago and on the West coast in Reno, then you’re getting, you know, ground rates with a day or two delivery time to Midwest through your Chicago distribution center. And you know the same thing to San Francisco and the California.

BRANDON: Yeah, there’s definitely a lot of benefit of having multiple warehouses across not only the country but across the world. In fact, I’m looking to go overseas to Europe right now and I’m looking for a fulfillment house in England or even North ?? of Canada and in Asia. And when you have an internet business, the world is your market. So you know don’t limit yourself in thinking that you know, oh I’m just going to be selling in the US, oh I’m just going to be selling in my area like in my state. That’s just small thinking and not the way it works on the internet. The whole world is your market so keep that in mind as you grow. You’re going to eventually want to have that exposure all over the world and having warehouses all over the world would drop costs, not only for shipping but then you get to pass that savings on to your customer and you’re going to drive sales higher because of it so…

MATT: So international shipping is another concern. So can you talk a little bit about your experience with shipping things internationally?

BRANDON: Yeah, I mean, I get a lot of orders from Europe and believe it or not, some people are okay with paying $200 or more for shipping. It just blows my mind but imagine how many customers I could be getting if the prices were down to $13 which is what it would be if I had a warehouse there. Eventually you get to the strategic point of saying you know this is well worth the time and investigating to get warehouse locations worldwide or at least to markets that are going to be closer to a population that your customers are in. And yeah, that’s definitely worth considering once you get to that level.

MATT: Yeah, one of the other things with international shipping is dealing with customs and the time that the packages will take to go through customs. So that can sometimes impact, you know, your scheduled delivery times. I’ve noticed that UPS and FedEx are a little bit better about getting through customs than say the postal service. So that might be a consideration if you’re going to do a lot of international stuff.

BRANDON: Yeah, if you’re going to do the shipping yourself, my suggestion is don’t do international shipping on your own. It’s just a waste of time. It takes 20 minutes to fill up the custom forms and if you’re not good at it, you’re going to want to not do any international shipments for customs. So that’s what you need to be looking at.

MATT: Okay. So what are some of the other things that you look for when you’re trying to evaluate what fulfillment house to go with?

BRANDON. You know, there are a few requirements that I look for in a fulfillment house. One is they must directly work with the shopping cart you have. I shop around a lot for fulfillment houses at the beginning and I was surprised to see how antiquated a lot of them were. In fact, some of them even ask that I fax in the orders on a daily basis as they come in to the shopping cart. And I’m thinking to myself, what? We live in an internet world and a digital world and you’re asking me to fax in the orders on a daily basis. I mean, that’s just not automated. That goes against everything we’re talking about here. So you know ask them what shopping carts they’re familiar with. Ask them what shopping carts they use currently with other customers they might have and make sure that they do know how to use it. Yes, you can train them. Yes, they can learn it. If it’s not one that they particularly use all the time, it’s probably not a big deal for them to learn it but it’s always better that they already know so you know orders go out smoothly and they know how to credit the customer if something went wrong or a return comes in, how to process return using your shopping carts. That’s a big one for me is that they really work with the shopping cart that you have.

MATT: Yeah, I agree with that. And I took a one step further and wanted a shopping cart that automatically integrated with whatever fulfillment company I use. So I wanted my orders from my shopping cart to get directly sent in to their computer systems, and them not even have to log in to my shopping cart so that’s I went with Shipwire.

BRANDON: Yeah, you know, the second requirement I would say is you know make sure that they use your preferred carrier. Most of them offer shipments through all carriers. Some have one that they prefer because they get great rates through, you know, let’s say FedEx for them but it’s UPS for you, you know, you might have a little bit of an issue. But they’re usually fairly flexible in that. Some of them even can calculate which one is cheaper for each order in real time. So if a customer comes in saying that they’re in Pittsburg and you know they want it overnight or for whatever reason, some fulfillment companies have the ability to calculate which one is cheaper and use that particular carrier. So that’s nice.

MATT: And that’s exactly what I wanted in mind. Again Shipwire is another one that supports that.

BRANDON: Yeah. The third item I’d say is inventory tracking. It is good to know how much inventory you have in their warehouse at any particular time. Some fulfillment companies that are smaller might just email you on a weekly basis saying, okay, this is the count we have. Or as they get more sophisticated, they have inventory tracking software that is web-based and you can simply log in at any time, find out what inventory levels you have on any particular parts or kits you have or anything you have on your shopping cart. So that’s important because it really sucks to have customers backordered a couple of weeks because of your lack of knowing whether the inventory is up to speed or not, you know. It might take a week to get certain parts. So that’s something to look for.

MATT: Yes, I think there’s two parts to that: so one again is with the shopping cart integration. If they’re truly automated, they should be able to update the inventory that your shopping cart knows about so your shopping cart can track that as well and let customers know that their things are backordered; and the second part of that is looking for fulfillment company that can reorder the parts on their own and not have to involve you. It can save you a lot of time. I know you do that a little bit.

BRANDON: Yeah. It’s important just to have that information flow. Speaking of information flow, if you have a point contact with somebody in there that you work with, that always helps. If they’re too big of a fulfillment company sometimes you just get the runaround and you’re not getting the kind of help you need, you know. If you have a customer that’s screaming, where’s my order, and you just want to call in and say, hey, what’s the deal? Why is there you know 5 days of orders that are backed up, you know, you’re going to want some answers and you need to have somebody to be able to talk to. So to be able to have their phone number on speed dial and all you got to do is call up and say, hey, Tracy, what’s going on? Why the order’s backed up? And you know she’s got an answer for your right away or whatever. So I like to deal with medium sized fulfillment companies because of that. I like that personal touch but what do you think about that, Matt?

MATT: Yeah, I agree with that. That’s one of the few problems I had with Shipwire. It’s hard to get a hold of someone right away. Usually it just gets into voicemail and you know couple of hours later they get back to me. So that’s one place where I really envied the smaller fulfillment companies.

BRANDON: Yeah, they give you that little extra personal touch probably more so than the big guys.

MATT: Yeah. But of course you pay for that too so…

BRANDON: Yeah, it does end up costing more. The ability for them to take calls in terms of customer calls for particular types of questions such as where’s my order, or when is this going out, or is it sitting on a dock, is it five days away?

MATT: They don’t just do shipping, right? They offer a lot of other services in addition to the shipping part of it which can really help you out in taking customer calls and doing customer care is one of those.

BRANDON: Yeah, I mean, everything you think of for product delivery to a customer is pretty much handled by a fulfillment company. This is really the meat of your business and its operations, right? It’s all of the labor behind the business that you’re building.

MATT: Especially for product companies.

BRANDON: Yeah, especially for product companies. So for them to be full service or part time service in terms of customer service or having your phone line directly linked into their phone system so that they answer the call you know with your business name, you know, that’s going to be powerful. I like to do it where I get a virtual phone number. I get this on the internet. The phone number has a dial tree, press 1, press 2, press 3 for sales or customer support or business operations or things like that. And you know you can direct those customers to your fulfillment house for certain questions like, where’s my order, or how far away is it, or what’s the tracking number, you know, things like that. You’re not going to want to answer those questions because you may not be in front of the computer all the time or you don’t want to be the one answering the calls anyways so what you’re going to want is that communication flow from your customers directly to the person that knows the answers and that is your fulfillment company. So they need to be able to take calls and most of them charge a little extra for that. Sometimes they know which might be you know 15 bucks a month or something like that. So going into pricing, Matt, what kind of pricing have you found out there for fulfillment houses?

MATT: You can get started for very little. Things like fulfillment by Amazon and Shipwire. Both let you send kind of a minimum number, maybe three or four products up there to try them out. It’s hard to say on a per package basis for Shipwire because they have kind of a weird pricing model where they have ranges of number of items you ship and also the amount of space you take in the warehouse, all kinds of different things that go into the final price but it’s generally you know less than $5 usually down on $2 or $3 per shipment plus the shipment itself.

BRANDON: Right.

MATT: With things like the Amazon you know you save a lot on the cost of shipping by using Amazon’s rates. Their system for sending out packages is just insane. There’s some videos that are online that show this giant conveyor belt that goes throughout the entire Amazon fulfillment center and you know people just walk around and they throw things on the conveyor belt and it’ll all suddenly end up in a box somewhere and they get shipped out. It’s just incredible automation. So they’re able to do things at a much greater scale on a lot lower cost than kind of the middle range fulfillment companies.

BRANDON: Yeah, we kind of touched on this on episode 1 about the particular product you have and kind of matching that with the fulfillment house. If you have DVDs or CDs or books, Amazon fulfillment is your guy. Nobody can beat them. They have robots on tractors in their warehouse where all it does 27/7 a day is pick CDs and DVDs off of shelves and put them in boxes and bubble wrap them and tape them without a single person touching it. And they drive their cost down to nothing in that case. If you require a little bit of assembly or some packaging, you’re going to need some extra care so that’s going to require some labor.

MATT: Definitely for assembly but I mean if it’s just pick and pack, pick and pack meaning that someone orders a couple of different products and they all go in the same shipping box, that’s something that they can definitely handle but if your product requires assembly before it’s even put in the box then that’s something that you’re probably going to get someone else for.

BRANDON: Yeah. So you know, shipping products are one thing. You don’t have to be shipping products per se. Even if you’re getting post cards out there. You don’t need a fulfillment house for that but you know one quick tip about automation of post card sending that. If you got a vista print and you print out your post cards– I just did this a couple of weeks ago for a trade show I was going to. I got a snail mail list of everybody that’s going to the trade show and printed them on vistaprint.com. I uploaded the excel file of everybody that they’re going out to and I mean I’m talking dirt cheap postage here because I do it in bulk for I think 300 bucks, I got a thousand post cards printed and mailed out. It took me about 10 minutes to do this. So that’s a great time saver and if you’re not shipping boxes but sending out post cards.

MATT: And if you are sending kind of materials like loose leaf printed books, there are fulfillment companies that specialize in that. They can print that on demand.

BRANDON: Yeah. There’s a lot of mail manager print houses out there that can do pretty high volume stuff to get mail to thousands of people you know if you got some sort of a special promotion you want to run, it’s great way to do it.

MATT: And if your product is a digital product, all this gets even easier because you’re shopping cart will manage, allowing your customers to download stuff. So what else do we have to talk about?

BRANDON: Well I think that kind of wraps it up. I think that’s a good overview of fulfillment shipping. There are a lot of options out there. Do a search on Google for fulfillment, you’ll get a lot of results. You got to just kind of do your homework on this one. It’s not something that’s going to be really easy. You’re probably going to meet with a few of them. Take a look at their warehouse. See if they got the goods to make it all work for them you know forklifts and …

MATT: and lots of bubble wrap.

BRANDON: Lots of bubble wrap. Some of them will have their own boxes that they will even offer you because they got their own box company that works form them or works with them so there’s a lot of savings that you can look for in certain fulfillment houses.

MATT: And boxes you can get for cheap because you know UPS and FedEx will give out some free materials. I mean companies like Uline you can order boxes in bulk from for very, very cheap.

BRANDON: Yeah, Uline is a great source for boxes. They’re pretty cheap where you can get bundles of 20 to 50 boxes depending on what sizes they are for pretty much wholesale price. When you get a box maker working with you or a company that does boxes, you’ll get a little bit better price because you’re ordering it direct from them. But overall Uline is a great way to get started, uline.com.

MATT: And one thing I got to encourage you to do is just get to using a fulfillment center as fast as you possible you can. I remember when I was starting and you know I felt like I was going to the UPS store everyday and it just took so much time and I was always stressed out that I wasn’t going to make it by the you know delivery time.

BRANDON: Yeah.

MATT: You know I got to get there by 4 o clock because that’s when the truck comes by or else it won’t go out today. Just all the stress and customer orders today, oh my god, I got to get out—got to get out. When I finally went and started using fulfillment company, I just completely forgot about those stuff and it really was probably the most automating the business.

BRANDON: Yeah. It really just takes the whole business and takes it off your shoulders and onto somebody else to have to worry about it because it can really get overbearing. Sometimes if it’s all on you to get this packages out on time which just becomes no fun at all when you’re having to tape up boxes all day, it’s just no fun.

MATT: And I really don’t think it cost me anymore money to do it with the fulfillment company. I mean I get all that savings of my time and my stress and I probably pay about the same as I did when I was just doing it myself.

BRANDON: Yeah you know I started off saying this but I do think it’s worth doing on your own for a few weeks at least do it two weeks. You start to appreciate what they do for you so it’s a good experience.

MATT: You have no other reason than appreciation. That’s a good recommendation.

BRANDON: So that pretty much wraps it up. If you guys have any questions you want to send us emails or Twitter us on #amsb and send us emails. Go to automatemysmallbusiness.com if you want to check more podcast coming up.

MATT: And the email address is podcast@automatemysmallbusiness.com

BRANDON: That will do it for episode 4. We’ll see you next time. Thanks guys.

You’ve been listening to Automate My Small Business. We hope you enjoyed this episode. To get a list of the links we’ve just talked about or download more episodes and How To videos, go to automatemysmallbusiness.com. Thanks for being with us and catch us next time on Automate My Small Business Podcast.

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