May 2008 - Getting the Most Out of Your Fulfillment Company

Do you just throw your DR products over the fence to the shipping outfit? No, no, no! Here are six ways to take advantage of the things a quality fulfillment center can really do for you.

By Jack Gordon

Fulfillment may represent the backend of a direct response marketing campaign, but it is a grave mistake to think of it in those termsas an afterthought. Shipping, charging, inventory control, processing returns, customer servicethose are operations that can make or break a campaign. They all happen at the fulfillment house.

Whether they happen efficiently and effectively depends not only on the fulfillment house you choose, but on how well you work with, plan with, and sweat the details with the fulfillment people. They can save you money. They can make you money. And they can feed you information that will help with everything from initial budgeting to tweaking the creative or the offer in your advertisements.

How can marketers get the most value from their relationship with a fulfillment house? Here are six tips from the experts.

1. Pull them into planning Fulfillment executives are unanimous on one point: In way too many direct response (DR) campaigns, they are the last players invited into the planning process. The client will go through marketing, media buying and production. Then, at the last minute, theyll think: Oh, we have to involve the fulfillment company now, says George Fanolis, vice president of business development for Fosdick Fulfillment of Wallingford, Conn.

Thats a big mistake, Fanolis and others say, because a couple of early meetings with a good fulfillment house can create efficiencies that pay big dividends.

Weve been preaching the same thing for 25 years, says Brett Healey, director of business development for Full Perspective Services Inc. of Indianapolis: Start at the end and work your way back to the front. Involve the fulfillment house from the start.

A fulfillment house brought into the campaign at an early stage can provide invaluable cost-effective guidance about matters such as how to configure packaging, whether to preassemble some parts in a kit (as opposed to picking and packing each part at the time an order is received), whether to ship in one large box or two small ones and where to put the bar code on a box, among other things. But we lose that influence, Healey says, if you just show up [later] and say: Heres what Ive got. How do I get it to the consumer?

Talking to the fulfillment house early in the campaigns development process is the single most important step a marketer can take, executives agree.

2. Get real with budgeting One huge benefit of an early meeting with the fulfillment house is likely to be a more realistic budget for the campaign. When calculating their breakeven cost per order (CPO), marketers tend to think hard about media, their biggest cost. But they often use simplistic pro formas in which they just plug in a figure for fulfillmentperhaps around seven percent of the cost of an order, says Tony Sziklai, president of Moulton Logistics Management of Van Nuys, Calif.

Trouble is, Sziklai says, the real costs of fulfillment can vary widely, depending on other factors in the campaign. Certain soft offers, for instance, will lead to an unusually high rate of returns from customers.

What are the top areas in which budgeters are likely to underestimate the true costs of fulfillment? Andy Arvidson, owner of Imagine Fulfillment Services of Torrance, Calif., names returns, reshipments, customer service, credit card chargebacks and refunds.

3. Ship from where? As fuel prices rise, so do shipping rates. Last fall, it cost less than $3,000 to ship a standard, 40-foot container of goods from Los Angeles to the East Coast, says Hal Altman, owner and president of Motivational Fulfillment & Logistics Services of Chino, Calif. As of mid-March, the cost was nearly $4,000. And it will get worse before it gets better, he says.

Where you do fulfillment thus becomes a more crucial question. If youre bringing goods from China to a port in California, Altman says, it behooves you to use a fulfillment company with a facility in the western United States. If youre landing goods on the East Coast, the reverse is true. Thats one reason some fulfillment houses maintain operations both east and west of the Mississippi.

Bicoastal operations also cut the time and price of shipping to the final customer, says Doug Engebrethson, senior vice president of sales for CPU2, a fulfillment house headquartered in Arden, N.C. This can allow a marketer to build more margin into the shipping cost charged to the customer. Suppose the customer pays $29.95 for shipping and handling. If youre shipping from both coasts, maybe it only costs you $20, Engebrethson says. And if your money-back guarantee says minus shipping charges, then you save again on returns.

A fulfillment partner can help with shipping costs in other ways. You want to get the best rate possible and one way to do that is to leverage a fulfillment company with high volume and a national footprint, says Kristofer Johnson, vice president, business development of direct response at GSI Commerce, headquartered in suburban Philadelphia. They can negotiate the best rates possible from their partners and vendors and pass those savings along to you. In this regard, size matters.
Regardless of where you ship from, be sure to consult the fulfillment house about the most economical way to transport your particular goods. Their ideas might surprise you.

4. What about retail? Delivering pallets of goods to national retail chains is a very different proposition than sending individual packages to households. If you expect that your DR campaign might turn into a retail operation, choose a fulfillment house that is up to speed in both worlds.

The Wal-Marts, Macys and Targets of the world each have their own specific requirements for how goods must be packaged and delivered, fulfillment executives point out. Naming just some examples, Healey says that individual guidelines can apply to how a skid is packaged, how many cartons can be on a skid, how heavy the cartons can be, whether a label has to be on every box, whether and how the quantity of boxes in a shipment has to be listed, and where the bar codes should appear. The fulfillment house needs up-to-date EDI (electronic data interchange) systems to keep things running smoothly.

When bringing a product to market, marketers dont know where their retail sales are ultimately going to come from, says Doug Wille, president of direct response at GSI. They can come from Neiman Marcus to Kmart and everything in between. We think a fulfillment house with a robust EDI system is absolutely critical for the marketer looking for retail sales.
The major advantage to a DR marketer of a fulfillment house that also handles retail shipping is the opportunity to work from a common inventory, says Altman: If you have a big DR weekend and get 8,000 new orders, you can move products from the retail inventory into the DR stack in 20 minutes instead of shifting them to a different warehouse.

5. Use the backend to improve the front-end Fulfillment houses dont just store and ship your goods, they also deal with your customers, especially after the sale. And they have sophisticated tracking software and systems that can provide a wealth of information about many aspects of a campaign.

Arvidson rattles off an eye-opening list of topics that a fulfillment house can address by mining the data: financial information; buying patterns and demographics; product prices and descriptions as viewed by your customers; shipping prices and configurations; payment options; continuity plans; coupon codes and promotions.

Sziklai says that mining your backend data helps you understand your true costs, and therefore, budget more wisely. But thats only the beginning. Data mining also points to ways to save money and make better decisions at every point in the campaign, including creative and media buying. Thus, feedback from the fulfillment house can guide you in determining which offers work best, which call centers to use, and even which media to buy.

Indeed, a fulfillment house with state-of-the-art technology can track so many things that the marketers real challenge often boils down to deciding which metrics are truly useful. Engebrethson says that a good account rep at a fulfillment house will not just point at the ocean of data potentially available, but help you figure out what kinds of reports you really will act on. Dont collect data just for datas sake, he cautions. Too much costs you money, and you wont use it. Too little prevents you from learning valuable things about the campaign.

6. A thousand questions Fulfillment houses cant prevent shipping costs from rising, and they dont have much wiggle room on labor costs. With the notable exception of refurbishing products returned to the warehouse in usable condition, as opposed to sending them back to China, Altman says, there arent a lot of places where a fulfillment house can save a client big amounts of money. (He notes that with proper planning, a good fulfillment operation often can refurbish, for resale, six or seven out of every 10 returns.)

No fulfillment company can, by itself, make your campaign take off or turn it into a home run, says GSIs Johnson. But any company, if the programs not managed properly, can kill a campaign. So picking your fulfillment company may be the most critical choice that you make in terms of your outsourcing partnerships.

It comes down to building a genuinely productive relationship with the fulfillment center. That relationship cant start at the last minute.

Instead, Engebrethson says, it should begin when the client account manager on our end says to the marketer, I want to ask you a thousand questions. Questions like: What is the offer? What happens if a customer asks X? How do you want to handle situation Y? How easy should it be for the customer to do business with you?

If you hear questions like those, by all means take the time to answer them. On the other hand, if an account managers only question is, How do you want it shipped? maybe you ought to keep shopping for a fulfillment house.

Jack Gordon is Electronic Retailer magazines editor at large.

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