So you are interested in starting up a fulfillment business but are unsure of where to start. Lets take a look at two of the available options, which are contracting with a third party fulfillment vendor or doing it yourself. Although there are differences between the two, both require an extensive plan.
CONTRACTING WITH A 3PF
You want to ensure a good fit and grounds for a solid long-term working relationship. How do you go about this? Some of the questions that need to be asked include: Are the services you need provided and covered in the quote? Is the company financially stable? Is there adequate growth potential? Is the fulfillment software used proven and robust? Is there a documented quality control program in effect? Are they your kind of people? Taking care of your inventory and many other concerns will also need to be covered. Lets dig deeper by taking an imaginary site visit to a 3PF vendor facility.
First impressions are always important. We would expect the facility to be reasonably attractive and in a good location. The grounds are neat and clean. The office is well organized, free of clutter and looks to be efficient.
We will want to meet with our CSR and ask if he/she will be dedicated to our firm. We need to understand the functions the CSR will manage for us. We also want to know who will handle the training of our staff in the use of the 3PFs Fulfillment System and what reports will be provided. Will there be occasional face to face feedback meetings on performance, and is there a formal Complaint Management System?
It is important to understand the 3PFs web-based solution (front end) by viewing a demonstration from another website of all the functions our website will require. An appreciation of additional features offered, to be taken advantage of in the future, will be helpful.
Is the companys fulfillment system home grown or an off the shelf package? Does the 3PF have on site programming support? Being informed on how program changes are made, tested, tracked and communicated is important. Take a hard look at order management, inventory and support for kitting. Determining how data security is provided and how the IT back up program operates are both worthwhile.
It must be clean and well-organized. In our imaginary site visit, the floors are looking good. The cartons on pallets are closed and neatly stacked, the pallets are neatly arranged on the racks and each pallet location has a barcoded address label. The racking aisles have identifying signage. We ask to see a product in the inventory system and then to locate it in the warehouse. We then ask to see a copy of the receiving and returns procedures and a demo of each.
The Fulfillment Operation
Lets follow an order from order entry to the printing of the pick/pack slip. (If the system is paperless, then we want to see how the order is activated on the handheld device.) Then, we want to see the items pulled from inventory, the order QCd, packed and shipped. Are Focus Factories used? Is the shipping system automated, and are all small package carriers used? How will they prepare the necessary documents and ship our international orders? Is the kitting operation supported by the fulfillment system?
We need to know how inventory is processed from receiving to its storage location. Is replenishment of forward picking locations done manually, or is it system driven? What is the frequency of cycle counting, and is the process documented? Does inventory reporting display reorder points, and are they calculated based on usage and supplier lead time? Is frequently used material slotted for ease of picking? It is important to learn about inventory accuracy and how it is arrived at.
What is provided? Some services to look for are: mailing, poly-bagging, shrink-wrapping, demand printing, demand kitting and variable digital print.
Our Kind of People?
Hopefully during our site visit we were able to meet face to face with management and others to determine if they really are our kind of people. We want to make sure that management and ownership are available on a daily basis to run the business and seem competent and willing to solve our problems. Supervisory and support personnel must understand their jobs and show a willingness to help their customers. The workforce personnel seem to be generally well-spoken and friendly, and they seem to know their jobs and perform in a well-trained manner.
OR SHOULD YOU DO IT YOURSELF?
DIY can be a daunting task. It will obviously include all of the elements discussed above in contracting with a 3PF, plus others like, how much space will be needed for offices, material storage, fulfillment activities and staging areas?; what type of location?; electrical?; heat and air?; how should the center be racked?; and personnel, software, security and inventory management are all elements to be considered.
This is a primary concern. Is there enough space in your existing facility, or is a new facility going to be required? The warehouse size will be largely dependent on pallet requirements and has to be based on your estimate of how the business will grow. A rule of thumb is to think big as fulfillment tends to grow in big chunks.
Size may be 2,000 to 3,000 square feet for starters as space will be needed for offices, workstations for Administration and Customer Service, rooms for telephones and computers, a reception area, conference room, rest rooms, supplies closet and a small kitchen/break-room combo. Office equipment is the usual furniture plus copiers, fax, computers, printers, telephones and a security system, which will go into the phone or computer rooms.
Size includes space for racks and their aisles for pallet storage, shelving for forward picking locations, plus secured storage if dealing with valuables. Shipping and receiving both require areas for staging and docks, ideally two for each. Space is also needed for the receiving, packing and shipping operations and equipment consisting of scales, computers, work tables and perhaps conveyors.
Kitting/assembly will also need some room to work. A ramp for inside loading and unloading is useful, as is at least one controlled entry for employees and drivers. Rest rooms, a battery room and/or a location for parking forklifts for recharging are also needed. Last but not least are aisles for people and equipment to move in.
Electrical plays an important role. The breaker panels must be sized for growth, and lighting and equipment requirements dictate capacity. Many outlets are vital, as are telephone placements and network drops for computers with growth built in. Be sure to plan for any RF devices to be used. Planning for lighting is a biggie and should not be done until the rack layout is finalized, as those lights must be in the aisles. Other lighting must be bright enough to read orders at the floor picking level. A lighting consultant may be a good idea.
The warehouse floor is the single most conspicuous area to be seen by potential clients. It takes a lot of abuse. So coat it before occupancy for ease of maintenance. DO NOT paint it. Clean it well, and use a clear coating like you see at Sams Club or Costco, and let the cement be the color. This makes it easy to care for and repair.
A solid grasp of fire regulations and attendant sprinkler needs is required. A meeting with the local fire department inspector can be helpful, and a final inspection will be required before moving in. Make the racks go as high as is allowed to achieve maximum utilization. Use beams strong enough to hold the heaviest pallets.
Racks should be bolted to the floor (especially in CA) with spacers bolted between double rows for added strength. Protect the uprights at the end of the aisles with fenders so the forklift drivers cant damage them. The use of wire decking on the beams is good for ensuring a pallet doesnt fall off, and it is also good for storing cartons that are not on pallets. Aisle widths will be dependent on the type of forklift(s) used. Label all pallet positions.
A forklift, pallet jack(s), hand carts and picking carts for moving materials are needed, as is a battery charger and eye wash station. Workstations for computers/printers, shipping, receiving, packing and returns processing are necessary, as are counting scales (and perhaps a floor scale) and tape dispensers. A manual pallet stretch wrapper and hand strapper are useful. Fire extinguishers are a must.
In the kitting area, work tables (perhaps on casters) are required. Extra ceiling drops for tape shooters and scales, dropped lighting (if ceiling lighting is insufficient for close work) and electrical outlets for automatic equipment. A belt conveyor and/or flex rollers will be also useful.
Packaging fill (paper/peanuts/air pillows) and tape, cartons and jiffy bags are necessary. A few pallets, stretch wrap, strapping materials, cleaning supplies, mops, brooms and trash receptacles are all needed.
Networking and phones
Standard phone lines for the office, DSL for web-based needs and higher speed lines for downloads are all required. For the network, a layout diagram must be completed, and be sure to provide for more connections than are needed to allow for growth.
Last but certainly not least is your personnel. Salaries are the largest on-going expense, so you should think small so you can run lean and mean. The warehouse requires staff for receiving, replenishment and movements plus staff for picking, packing and shipping. You will want to use temps as needed for kitting. Good people for IT and Customer Service are expensive and must be well-paid as turnover is disruptive.
To sum up, a plan is essential to succeed. Whether you choose a third party fulfillment vendor or select the do it yourself route, be sure to have a plan in place before beginning.
Jim Rushing can be contacted at email@example.com