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Question about fulfillment center pricing and cost/benefit (6)

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Hello folks,

Currently, I am in a position where I own my own warehouse and import/ship all of my products myself (or pay employees to do it rather). To be perfectly honest, it's not exactly something I enjoy doing. It's just a lot of crap to oversee. You have the logistics of inbound shipments, outbound shipments, all the waste being generated (mountains of cardboard), shipping companies, deliveries, returns, pallets, employees, workers comp, liability insurance, shipping supplies, etc.....

So I am considering using a fulfillment service to handle all of these things. It'll allow me to downsize my operation and just manage everything from a nice office.

My question is: do any of you guys have experience making this transition? Is it really as nice as it seems? Or is it just a case of the grass seeming greener on the other side? I am not done fully analyzing the cost of how much something like this would take off my bottom line, but so far it's looking like it's a bit more expensive than I had expected.

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That's the thing - it gets quite expensive.

We run our own warehouse as well, even though we rent, but I have been looking at outsourcing it to a fulfilment center.

But then:
- they didn't use the carriers we use, so export was no longer an option
- small items all have to be picked individually, so all of a sudden, we can no longer sell accessories that are a must-have (to the main product), as they only cost 2 euro, but cost 0.90 to pick.
- Inbound shipments are expensive as well, as not all of our suppliers use barcodes, which are a must-have. So items have to get labelled. Another cost for the label + the labelling.

It's a pain to handle all the logistics of your logistics (I am currently paying a full time employee 70% of his wages, while he is home with a back problem, which has been on going since 9 months. No way to get him fired and he gets a total of 2 years of pay, before termination of his contract is an option)

Yet, I have not found a way to solve the issue where it makes sense economically.

Now if your margins are high enough and you are just sick of it, it might still be worth paying the price.

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Not to go too offtopic and all the best of health to that guy but I do have a related question to this - Is it you who has to pay his wages? Wouldn't his social insurance kick in right around this time? Just a curiosity since I've yet to encounter the situation and it doesn't look business friendly at all to have such laws in place, especially if you are small entrepreneur who can't easily replace employees overnight.

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@manu Yes, I have to pay. From an employer's perspective, it's a nightmare.

Differs vastly from country to country, so what I have to deal with here in The Netherlands will be completely different somewhere else.

Hope you never have to deal with it!

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Would it be the case to consider outsourcing a logistics company abroad that has lower operational costs in combination with the right incoterms?

So they can handle all freight forward operations, labeling, and stuff with your preferred carriers. It may result in almost the same costs but if it lowers your risks, it may be worth considering.

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This is something we're stuggling with as well. We operate our own fulfillment, but are starting to move what we can and will sell quickly to Amazon and other items we're looking for 3PL options, but running into the same problems as pekadis mentioned above. We have however found that more of our suppliers are willing to drop ship straight to consumer, so that may be an option. The struggle we face with this is the varying ways each supplier wants to receive PO's.

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