How to Evaluate a Fulfillment Company

• Transportation

The ecommerce boom has led to more warehouses and fulfillment companies than almost ever before, making it hard for any company to attract and keep the right talent while having enough physical space to get everything done.

Costs are going up and up, which can make outsourcing fulfillment a tantalizing choice. However, there’s a lot of risk in handing over one of the most important aspects of your business to any third party. Evaluating that risk and the company you choose to mitigate it is no easy task. However, it is something you can do when you know the right questions to ask.

To provide some assistance, let’s look at a few of the core areas of differentiation and capabilities in the space. These differences typically offer growing companies their best metrics and considerations to evaluate fulfillment companies and select the right partner.

Define Your Goals

The value of your fulfillment partner depends significantly on how well you understand your business. Walk into the conversation with any provider with the knowledge of what specifically you want to achieve, whether it’s getting rid of a problem, meeting customer demands, or dealing with an issue like growth.

Goals touch on both your business and your specific products. A fulfillment partner needs to “get” what makes your business unique and understand the special considerations for shipping your products. Focus on anything out of the usual, such as batteries or perishables, hazardous materials or refrigeration needs.

Your companies should align on higher principles as well, from current debt and contract requirements to how you would run your warehouse. See a more in-depth Fulfillment Company Assessment Questionnaire here.

Review Your Warehouse Needs Together

Your fulfillment company should also be able to handle the daily, weekly, and monthly needs your business has. These range from standard elements to specific requirements for your warehouse or product.

Start with high-level conversations about your average monthly orders. Does this meet the 3PL’s minimum requirements? If you scale beyond your current level, how do costs and fees change?

Considerations here should look at customer-related needs too. If you want to promise two-day shipping to anyone in the continental U.S., can your fulfillment partner meet that demand? If they say “yes,” flesh out the details. They may have specific cut-off times for shipments or order processing that you’ll need to understand and list out on your website.

A great fulfillment partner should be proactive in helping you provide quality service. A good evaluation tool comes in the discussion around how to tell your customers. The fulfillment company should discuss the technology they use and how it all integrates with your ecommerce software or other tools to ensure customers are seeing the most accurate information.

Quality partners will help you with displaying a wide range of information, starting with inventory availability and shipping estimates.

Ask for Guarantees in Writing

Rampant mistakes can kill a business. It’s important to know that a fulfillment company has policies in place to manage and mitigate risks, from human errors during picking an order to the times when a customer buys too much and needs to cancel quickly.

Your fulfillment partner must have policies to handle these issues and guarantees around order accuracy, inventory loss, and data protection. Not only that, but they should be willing to demonstrate the capabilities and put their promises in writing.

If someone says that they can get your goods to 99% of customers in the U.S. within two days or promise a 99.9% order accuracy, how do you measure this? How do you hold them accountable?

When you put these elements in your contract, ensure you have agreed-upon metrics and tracking or reporting to verify the claims.

The best fulfillment companies offer policies and promises regardless of your products or location. Look for someone that makes a blanket promise on excellence and is then willing to discuss the specifics of how you will achieve those together.

Clarify Support and Training

Two core elements for evaluating any partner in the modern age are training and ongoing support they provide for how you use their services and interact with their teams.

When there’s an issue in the warehouse, it can grind an entire business to a halt. Bad inventory levels, accidents, hazards, and broken software can also cause you to hit “pause” so you’re not taking orders for products you don’t have or promising delivery dates that you can’t meet.

Your warehouse partner needs to have some form of 24/7 support. There’s no reason not to anymore. This can come in the form of phone, online chat, or support ticket systems. Not only do you need ongoing access, but you should be told how long it’ll take them to respond.

Beyond emergencies, standard support questions need clear lines of communication. This helps your business do better and understand trends that happen in the warehouse. Ask how your partner tracks and reviews data and what they can share as well, so that communication is ongoing and a two-way process.

Support evaluations and questions should also cover when to do when there’s an issue. For example, what happens if a carrier loses your end-customer’s package after it leaves the warehouse? You should get a solid answer and plan with how to address common occurrences such as this.
While you’re not going to be running much new software (hopefully) when you pick up a fulfillment partner, there is going to be a change in your workflow and the tools you use. The vendor should be able to walk you through these new processes and discuss what it’ll look like for your team. They should provide hands-on training for your staff to learn the reports, tools, and integrations needed to use their service.

Not only do you want to negotiate initial onboarding, but you’ll want access to ongoing support. This might be a helpdesk, knowledge base, wiki, or manuals. Your team is going to forget how to do something  it happens to all of us and the process of getting assistance and retraining should be direct, straightforward, and your partner should welcome it.

Frequently Asked Questions (FAQs) for Evaluating Fulfillment Companies

What should I know about my own business before speaking with a fulfillment provider?

Before engaging with a fulfillment partner, you should clearly understand your specific goals, such as overcoming a current problem, managing business growth, or meeting customer demands. You must also know the unique requirements of your products, especially if you handle items that require special considerations like refrigeration, hazardous materials, batteries, or perishables. Furthermore, you should ensure alignment on higher business principles, such as contract requirements, current debt, and your preferred warehouse management style.

What specific warehouse and customer needs should I review with a potential partner?

• Order Volume: Discuss your average monthly orders to confirm they meet the 3PL’s minimum requirements and clarify how fees will change as you scale.
• Shipping Promises: If you want to offer services like two-day shipping across the continental U.S., verify their capability to meet this demand and establish the specific order processing cut-off times required.
• Technology Integration: Review how their technology integrates with your ecommerce tools to provide customers with accurate information regarding shipping estimates and inventory availability.

Why is it important to get guarantees in writing?

Mistakes in fulfillment can destroy a business, so a partner must have documented policies to mitigate risks like human picking errors or quick customer cancellations. You should require written guarantees concerning order accuracy, data protection, and inventory loss. To hold the company accountable to these promises, ensure your contract includes agreed-upon metrics and reporting or tracking methods to verify their claims.

What level of support and training should a fulfillment company provide?

• 24/7 Support: Because warehouse issues can bring a business to a halt, the provider should offer 24/7 emergency support via phone, chat, or tickets, along with clear expectations on response times.
• Issue Resolution & Data Sharing: There should be clear lines of communication for standard questions, reviewing trends, and concrete plans for common issues, such as a carrier losing a package.
• Staff Training: The vendor should provide hands-on training so your team can learn the new tools, integrations, and reports.
• Ongoing Resources: Your staff will need ongoing access to retraining resources like manuals, a knowledge base, a helpdesk, or a wiki.

What are the red flags and positive signs when discussing pricing?

Surprise costs are the biggest red flag in the fulfillment industry. While final pricing depends on multiple factors, a high-quality vendor will provide specific guidelines so you can calculate your expected costs and understand how pricing adjusts if your business shrinks or grows. Positive signs include trial periods and flexible pricing tailored to your business. You should also demand clear policies on how they handle damaged inventory or shrinkage, and ask if they charge additional fees for system integrations, account management, or SKU tracking.

Get a Specific Price

“How much will this cost me?” is one of the more frequent questions used to evaluate a fulfillment partner. Like every lawyer you’ve ever talked to, the answer invariable is: “It depends.”

That’s okay. There’s going to be a lot that plays a role in final pricing. However, you should always be able to calculate it. A high-quality vendor will be able to tell you what their services cost and what fees you can expect. Nothing should come as a surprise.

Surprises in cost are about the biggest red flag you’ll see in fulfillment.

Ask for specific pricing guidelines and discuss what happens when you grow or shrink. Look for positive signs like trial periods or flexible pricing that can be tailored to your business. You’ll also want crystal-clear policies on what they do in the event of inventory shrinkage or damage. Some may charge fees to manage your account, track SKUs, perform system integrations, or take other actions.

Demand specifics. If your partner is happy to provide them, it’s a great sign. There’s a lot of nuance in the pricing elements for a warehouse and fulfillment partner. Do your homework and pick up guides and questionnaires for a little extra help in knowing what questions to ask.
 Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about

business and sharing his own experience with others.