Shipping your own orders gets old fast. But finding the right order fulfillment partner to take care of it is a tough decision and one you want to make properly.

Picking the right order fulfillment partner (3PL) can save you time, money, and energy. That way, you can focus on growing your business because you’re not the one putting every box in the mail.

But if you pick the wrong one, shipments might get lost and customers might get angry. You might end up paying bills and not entirely understanding why.

It’s complicated. So to help you pick the right order fulfillment partner – and tell when it’s the right time to be thinking about this in the first place – we’ve put together this guide.

Step 1: Make sure you need order fulfillment.

Before hunting for an order fulfillment partner, make sure your business genuinely needs one. Hiring help with fulfillment can streamline your operations by cutting down on the time spent shipping orders. But it’s also one of the most important business decisions you will make, and it’s not something you want to do lightly or at the wrong time.

Here are six surefire signs you need help. Even a single yes means it’s time to consider hiring an order fulfillment center.

#1: Your customer base is growing faster than you can keep up.

A rapidly growing customer base is a fantastic problem, but it’s still a problem! Having too many customers can overwhelm your ability to fulfill orders.

To scale your business effectively, you must manage increased demand without sacrificing quality. Third-party logistics (3PL) companies can help by taking over the fulfillment process. This will allow you to focus on other growth areas.

According to Chris Matthews from Zatu Fulfilment in the UK, “as your orders start to increase, you may find more and more of the time that should be spent on growing your business is taken up with shipping out orders. You may be finding that your inbox is swamped with shipping queries and return requests. These are signs it is time to speak with a 3PL.”

#2: Order fulfillment is becoming slow or inaccurate.

When order volumes spike unexpectedly, delays and mistakes often follow. Slow or inaccurate fulfillment frustrates customers and tarnishes your reputation.

Partnering with a 3PL can ensure orders go out on-time, intact, and to the right addresses. That helps cut down on customer complaints and boosts repeat business.

#3: Your employees are working too much.

Overworking employees to meet order fulfillment demands is unsustainable, increasing labor costs and leading to burnout, which negatively affects productivity and morale. Outsourcing to a 3PL can relieve this pressure, providing additional resources to handle peak times without overburdening your team.

#4: Your business is becoming really complex.

As your business grows, so does its complexity. Managing multiple sales channels, inventory locations, and shipping options can become overwhelming. A 3PL partner can streamline these operations, offering integrated solutions to keep everything running smoothly.

#5: Shipping is chipping away at your profits.

High shipping costs can eat into your profits and deter customers. A 3PL can leverage its network and negotiating power to secure better shipping rates, reducing costs and improving your bottom line.

#6: You have run out of space.

Running out of storage space can limit your growth potential. Partnering with a 3PL provides access to their warehousing facilities, allowing you to scale without investing in additional infrastructure.

That means you don’t have to spend money paying for a storage unit!

Step 2: Decide how many warehouses you need.

Deciding you need a 3PL in the first place is an important step. The next important step before even making calls is to decide how much help you need.

If your store barely exceeds 100 orders per month, one warehouse might suffice for a lean, straightforward operation. No need to overcomplicate things by building a much larger network.

Centralizing inventory in one location simplifies bulk shipping and reduces costs. When issues come up with order fulfillment, that also means you have a single point of contact.

However, if you’re handling a high volume of orders, you might need multiple warehouses. That could mean having several within a country or even warehouses spread across the globe. The key is to make sure you have enough order volume at each location to justify the cost.

Having too few warehouses can slow shipping and hike costs, especially for long-distance or international deliveries. But the opposite is true as well. Too many warehouses can lead to soaring freight, storage, and overhead expenses.

You need to do a meticulous cost-benefit analysis before you sign any papers. If multiple warehouses are necessary, you have two options: either find a fulfillment partner with multiple suitable locations or partner with several fulfillment centers. In the latter case, managing all warehouses and inventory efficiently requires robust inventory management software like NetSuite, ChannelApe, Skubana, or QuickBooks Commerce.

“Look at where your target audience is and cater to their needs,” says Chris Matthews with Zatu Fulfillment. “If you are finding you have a high cart abandonment rate for one region compared to another, chances are they are looking for region friendly shipping options. In an age of next day shipping, customers don’t want to have to wait for orders to be processed and sent across the Atlantic.”

Step 3: Review service offerings.

Before reaching out to warehouses, you need to figure out what services you need. Sure, there are plenty of fulfillment partners for small, lightweight, eCommerce items.

However, if your inventory includes hazardous materials, fragile goods, perishables, or items needing refrigeration, you’ll need to dig deeper. For stores with a high SKU-to-order ratio, such as apparel companies with diverse sizes and colors, a specialized partner can make a world of difference.

Look for fulfillment partners adept in handling your particular type of products.

Also, think about value-added services. Many fulfillment partners offer extras like kitting and assembly, customization and personalization, and even refurbishment services. If these are crucial to your business model, be sure your chosen partner can meet these needs.

Step 4: Carefully narrow down your choices.

Please Note: The information in this section comes directly from Will Schneider at Warehousing & Fulfillment. He runs a company that specializes in matching fulfillment centers, like ours, with sellers who need help shipping.

What you read in this section was previously part of a guest post, which we’ve bundled into this post for your convenience.

Make no mistake about it – your choice of order fulfillment provider is a make-or-break decision.

Unfortunately, most companies make a huge mistake when vetting fulfillment providers: they put the emphasis on product and service specialization, technology integrations, and location rather than some of the more important selection criteria.

This is an understandable first instinct, as it’s certainly important to make sure a fulfillment company will be able to perform the required tasks in a suitable location.

However, not only do most fulfillment companies in the current landscape perform a comprehensive set of services and integrate with numerous technology platforms, but there are also some more critical things that need to be investigated to make the right choice. Simply put, these more common selection criteria are not always reliable indicators of the order fulfillment provider that best fits your business needs.

Of course, investigating compatibility in terms of product and service specialization, technology capabilities, and location are not without value. But more pertinent factors foretell whether a fulfillment company is worth the cost. Here is a comprehensive list of things to look for in a 3PL provider.

Key Factor #1: The Right Quality of Service

A high-performing fulfillment provider is easy to identify if you know a few things to look for. The following key concepts will point you in the right direction and help you eliminate the wrong companies from your shortlist.

Guaranteed Performance with Accountability

A 3PL company must be able to operate at a high level, and when they do make mistakes, they must take accountability for errors. Unfortunately, many companies will tell you anything you want to hear – assuring you that they will perform high-quality work and rarely ever drop the ball.

But how do you know if their promises will be kept?

The easiest way to gauge whether a fulfillment provider is trustworthy is to go straight to their contract or agreement. Reliable companies have SLAs (service level agreements) and are willing to include performance guarantees in their contractual agreements with customers. Unreliable companies who don’t take ownership of mistakes will have agreements that “pass the buck” and avoid any penalties for lack of performance.

3PLs that provide performance guarantees will include the following in their contracts:

  • Specific performance guarantees that they will meet, including the timeframe to receive goods into their warehouse, inventory accuracy, order accuracy, and sometimes even shipping accuracy.
  • Remedies for lack of performance, such as reimbursement for mis-shipments and lost inventory over an acceptable level, will be noted as well.

Performance is the foundation of a healthy 3PL relationship, and the right 3PL will have a pathway to measuring and being accountable for performance. Any service you consider should guarantee performance rates through a contractual agreement.

Key Factor #2: Regular and Consistent KPI Measurement

The fulfillment provider should measure Key Performance Indicators (KPIs) – and this is non-negotiable. KPIs track progress against specific targets set by your contract. KPIs often concern quality, costs, speed, efficiency, resource utilization, or personnel compliance.

It’s one thing to list KPIs in the agreement, but it’s altogether different to have codified processes and technologies that enable the measurement of them. A reliable fulfillment company will have documented processes and procedures for every task performed in the warehouse, and online reports will be available to view results on a daily, weekly, monthly, and yearly basis.

Take inventory management, for example. Operating with a low percentage of inventory loss (lost or damaged product) requires:

  • Having a thorough receiving process to ensure products are counted correctly, entered in the system correctly, and placed in the proper area within the warehouse
  • Performing routine inventory counts, whether cycle counts or yearly counts, to ensure no mistakes are uncovered
  • Executing a near flawless order picking strategy, so that incorrect items or quantities aren’t picked
  • Providing a robust set of reports for staff, management, and customers to view in real-time

All these things combined will result in a low level of errors. It won’t guarantee perfection, as no fulfillment company is perfect, but it will ensure proper levels of performance.

So how do you know if a provider meets the mark in this area? Simple…ask for the processes and procedures manual and/or ask for a demo of their technology system and reporting. If a company doesn’t have these key components, you may want to drop them from your short list of options.

One other important note about KPIs – the best order fulfillment providers hold regular meetings with your business about KPIs. A reliable line of communication ensures that fulfillment companies are accountable for results and that they are being proactive instead of reactive. High-performing fulfillment providers will have monthly meetings or at least quarterly meetings to discuss performance.

Key Factor #3: Positive and Truthful Customer Reviews

The hallmark of quality service is positive feedback. Search for reviews and ratings of the fulfillment provider on the internet – this will give you a glimpse into their performance.

The overall quality of the reviews is more telling than the number. Pay attention to what clients say about the order fulfillment company. Then pretend you’re the client. Would you be satisfied with its performance? Do its practices encourage customers to shop for your product again? Or do its practices deter customers?

Key Factor #4: A Culture of Honesty and Integrity

A quality 3PL provider emphasizes its honest business practices. You can gain tremendous insights into an operation by the types of deals they strike and the transparency of their overall operations and relationships.

Be Wary of Back-Door Deals and Middlemen

The fulfillment provider should dissuade back-door deals that negatively impact your pricing – and they should champion your best interest. Without these measures, the relationship is built on a foundation of secrecy and lack of transparency, and you may pay more for your fulfillment services than needed.

Sometimes, providers strike deals with brokers or middlemen to increase their earnings. It’s not to say that every brokered deal is inherently bad, but they are extremely challenging and oftentimes harmful to you, the client. Unfortunately, by inserting another party, these providers most likely add an additional layer of costs to your business.

There are a few matchmaking services that are legit, matching you to the best fulfillment companies and only charging a small fee for the connection that does not in any way impact your pricing. But unfortunately, most lead generation companies, ‘top list’ websites, brokers, or fulfillment marketplaces take a cut of the deal anytime they refer your business to the fulfillment company. When commissions are involved, it’s far too easy to “play favorites” and pass deals to the companies that pay the highest dollar for referrals. This leads to extremely biased matches and should be avoided.

At the end of the day – be careful who you trust. Your fulfillment provider should be completely open with you about the structure of your deal. After all, if they can’t be honest with you about this important component, can you trust them fully with your inventory?

Key Factor #5: Best Match for Size of Operations

Another relevant factor is the size of the order fulfillment service. In many cases: small 3PL providers best match with smaller businesses, and larger 3PL providers best align with larger companies. A single provider usually cannot serve all business sizes equally.

The search engines make this type of analysis extremely difficult, because most of the top results are filled with larger 3PL providers. If you find yourself in the boat of startup operations and/or lower order volumes, keep searching past the first few pages of results and keep an open mind for single-location and smaller fulfillment providers, as they will likely offer the best overall pricing and terms.

Other Factors That are Important to You

Based on personal preferences, other factors may rank high to you. These factors are not the same for every business.

Perhaps it’s important to you that the fulfillment provider is close in physical proximity to your business. In that case, make it a priority to evaluate fulfillment companies on their locations. It might make economic sense to choose the fulfillment provider nearest to you.

In another example, you could prioritize the “personal fit” of the staff at the fulfillment facility. If you want to feel at ease around the personnel, choose the facility with that in mind.

Other businesses prefer a facility that matches their company style. Perhaps an eco-friendly business seeks facilities that reduce their carbon footprint or use recycled material.

Therefore, prioritize any important “other” factors that are most important to you before conducting your search.

Step 5: Request quotes.

Once you’ve shortlisted a few promising fulfillment partners, it’s time to request quotes. This part is simple.

But how these companies handle pricing? Not so much.

There are four main fee types:

  1. Pick-and-pack
  2. Postage
  3. Account and storage
  4. Value-added services

Pick-and-pack covers warehouse labor, while postage depends on package weight, destination, and speed. Both are applied on a per-order basis.

Then there’s account fees and storage fees. Account fees vary widely by company but are usually low. Storage fees depend on your inventory volume.

Value-added services like kitting, assembly, and refurbishment are typically priced on a per-project basis. This is because there is a lot of manual labor involved.

When reviewing quotes, forecast your sales volume and potential need for value-added services.

Use the quotes to estimate your total cost. The cheapest option isn’t always best, but the overall cost should be competitive.

Final Thoughts

Choosing an order fulfillment partner is a strategic move. If you pick the right one, you can more efficiently fill orders and keep customers happy. You’ll save a ton of time and possibly some money too.

It’s not an easy decision to make and it’s one you need to be careful about. You need to consider service quality, reviews, communication, transparency, and a number of other factors. But if you do your due diligence, you can find the right partner.

Having a good relationship with a 3PL makes it much easier to run an order-based business. That’s why so many companies call their 3PLs an “order fulfillment partner.” Because that’s what they are – key partners in keeping the business running!