Full House: Inventory Management for Runaway Growth
If there’s one thing that will make you quickly lose a customer, it’s failing to deliver what you promise or when you promise. On the flip side, good inventory management will help you build trust with your customers and increase your level of business.
Building up this kind of professional supply chain can be a complex and time consuming task. That’s why many business owners turn to a fulfillment house to handle inventory for them.
But what exactly does a fulfillment house do and how do you find the good ones? After several inquiries from SAGE subscribers, we decided to find out! We reached out to Chris Manfredini, President of Mavich Branding Group (MBG), to get his insights as first a customer and then an operator of a fulfillment house.
Chris shares with us the basics of what a fulfillment house does, how to know when you need one, and tips to choose the right one for you!
Please tell us a little about your background and experience in the industry.
I bleed purple! I received both my undergraduate and master’s degrees from Texas Christian University studying Supply Chain Management. Fresh out of college, I coupled my passion for athletics and business with a fitness software startup where I served as the Chief Marketing Officer. This experience sparked my first interest in branding and marketing, and ultimately led to me starting Mavich Branding Group. My interest evolved into passion, and has only grown with the company over the past 5 years as I’ve learned the intricacies of the business.
Getting to see brand transformations for our clients every day is the best part of this business! I see a bright future for the promotional product industry where people – especially millennials – have an outlet to utilize their creative and technological skills to change the way promotional products are used in business.
What is a fulfillment house?
A fulfillment house serves as a centralized location for inventoried product. Promotional product distributors partner with the fulfillment house to receive, process, and deliver orders to end buyers. Additionally, a fulfillment house can provide value-added services such as custom kitting, packaging, logistics management and real-time reports.
As a distributor, when and why does it makes sense to use a fulfillment house instead of shipping orders myself?
Consider a fulfillment house when you near your capacity for growth with your current resources.
We spent time in the early days of MBG in trial and error, figuring out if a fulfillment house was right for us as a business. We maxed out our 1,500 square foot building quickly, and if we had hopes of growing any further, we needed space!
Using a fulfillment house gave us the ability to concentrate on what we do best, which is selling products and programs. Our fulfillment house not only saved us time but money when it came to shipping costs. We were finally able to stretch our legs and really see what we were capable of, which paid for all of our fulfillment house cost and then some.
How do I send orders to a fulfillment house? Can I integrate through e-commerce?
Many fulfillment houses use cloud-based technology to make the flow of information extremely easy and accessible. The most well-run fulfillment houses will have software and an internal IT department who sync with most of the popular online ordering systems. This is crucial to creating an efficient and seamless connection between you and the fulfillment house.
Do fulfillment houses usually require a minimum level of business?
A fulfillment house will ask you for the EAU (estimated annual usage) for products being inventoried and the potential for account growth. Based on these facts, they will plan best practices and pricing for your program.
If you are thinking of using a fulfillment house, you should collect this information from your current business data and analyze your volume. If the volume exceeds your own capabilities, has the potential for growth, and can counterbalance the costs of implementing the program (including both time and hard costs), then this should be an easy business decision.
What fees should I expect? Will using a fulfillment house still allow me to be competitive on my prices?
When getting involved with a fulfillment house, expect a setup charge, inventory receiving fee (product inbound) and then a pick, pack, and ship fee (product outbound). If you are bringing a sizable account with a high inventory turnover rate, you could negotiate the fulfillment house to waive the setup fee. As for the inventory receiving fees and pick, pack and ship fees, you should plan for 5-10 cents per piece. Any additional requests, such as polybag, hang tags, etc. will also result in additional fees.
If you have ever participated in order fulfillment, you will quickly understand the hassle and costs of setting up software, managing inventory, and physically picking and packing orders. Even though a fulfillment house might cut into your profits, the benefits are far-reaching. With lower shipping rates, space to chase larger accounts, and your overall valuable time being saved, you will be able to sell more, break into new markets, and ultimately increase revenues.
What are the most common errors when starting to work with a fulfillment house? What best practices should I follow to avoid problems or miscommunications?
The most common obstacle we see from our clients and partnering distributors is the lack of understanding, not of the fulfillment house process but of their own customer’s program. Do not rush into using a third-party fulfillment center without analyzing the scope of requirements, the demands, and, most importantly, expected volumes. After you collect all critical information, you can confidently determine whether your program will be successful and profitable.
How do I find a good fulfillment house?
Even though a fulfillment center will claim they have been in business for years or currently manage large accounts, this does not mean they are a perfect fit for you! Take the time to interview them, asking key questions pertaining to your program.
Some of the basic questions to discuss with your fulfillment center include their ability to connect with your e-commerce system, whether they can meet your expected demands of growth, typical order turnaround rate, after-ship tracking information, return policy, and what additional fulfillment services they offer that separates them from the other fulfillment houses.
Remember, this partnership will be representation to your customer of how you operate as a company, so it’s crucial to find a fulfillment house that you can trust to meet your needs.
About Mavich Branding Group
Mavich Branding Group is your one-stop source for all promotional, marketing and design services. We work with you to design a unique logo and create a campaign with promotional products and personalized apparel. With a state of the art facility, we offer in-house printing along with inventory management and warehousing, Learn more about MBG at mavichbranding.com.