The True Cost of Self Fulfillment
Want to scale your home based fulfillment? For any founder getting traction and finding a market for their item is incredibly rewarding. That is until they find them themselves using their home as a makeshift fulfillment center and using all of their favors with friends and family to come and help them pack and ship their items. This process of undervaluing ones personal time as well as undervaluing the free labor they are receiving adds tremendous value to the company early on. However it also has the possibility to inform decisions that can stunt a companies growth. Business leaders that excel understand that the bootstrapping that is done early on is intended to provide higher margins that can be used to fuel the business. The savings that come by ownership providing free labor help to provide needed cash for purchasing inventory and marketing. The potential down side is when business owners assume that scaling their in-house fulfillment will help to keep their margins at the bootstrap level. Below is a deep dive of what goes into fulfillment and what the pros and cons are to developing an in-house fulfillment center.
Know Your Cost Center
The first step is clearly identifying what the cost to scale in house fulfillment is. Get a specific look at warehouse space, look into racking and equipment, get quotes on insurance, speak with a staffing company about the costs associated with finding and training labor.
Space:
Warehouse space is important. Commit to too much space and be forced to carry the monthly rent bill for space that is not used. Don’t commit to enough and find yourself short on space during your peak season. Additionally what does your business need? Is ceiling height important? Are bay doors vs dock doors important? If you found a space but it was on a 2nd story and requires a freight elevator, what would this mean to your receiving process?
Equipment
What type of equipment does your business require? Do you need forklifts to get items into pallet racking? Do you need conveyor systems to streamline order fulfillment? What type of racking? Pallet? Rivet Racking? Are these items scalable with your business? Does the racking you can afford today work when the business grows 10x? If a leased building has 16′ ceilings and you purchase 12′ racking what happens when you need a larger building and can locate a building with 25′ or 30′ ceilings. The 12′ racking can be used in the new building but at what cost? The empty space above the 12′ racking is critical to optimizing the businesses sales per SQFT. The key with any equipment purchase is to purchase items that can be used today as well as down the road. As the saying goes “penny wise dollar foolish.”
Insurance
Most at home fulfillment operations don’t pay much mind to things like insurance. Most owners assume the home has insurance and I am the only one working on the business so no need. This unfortunately does not carry over once you lease a building. Landlords will require warehouse insurance, content insurance, workers compensation insurance etc. These insurances can cost $20,000, $30,000, $50,0000 per year and are usually tied to the companies sales, so as your sales go up so does your insurance.
Software
What software will be used to run the warehouse? Is this software scalable? What happens if the software goes down, what is the backup to still process and ship timely orders? Do you need an onsite or remote tech support company to manage the internal infrastructure of the company? Internet, routers, switches, cameras all made by different companies all receiving frequent updates can be a technological nightmare. When investing in software for a small business it is crucial to have fundamental in house understanding how how the software works and how to fix small day to day issues.
Labor
Labor is often times the cost center that is most overlooked. Labor can account for 20%-40% of total costs. Owners may have experience fulfilling their own orders and may have identified it takes “x” minutes to get the item, pack it up and create the shipping label. However these time are almost never met once the fulfillment process is handed off to a non owner worker. Owners have the understanding that things need to get done quickly and they need to get done correctly. Unfortunately these traits may not be found in staff that is hired. To run an efficient labor force there needs to be 3 things.
– A process that is in place. This process will make sure that warehouse staff knows what to do the moment items arrive or the moment an order comes in.
– Oversight: someone that understands the way the warehouse needs to work and is constantly monitoring to make sure the processes in place are being followed.
Warehouses are simply liabilities that are needed for an end goal, if you can reach that goal without the liability do it.
Denis Robinson
If your business is growing and you think it’s time to expand your fulfillment operations check out Innovative Warehouse Solutions. We may be able to get you back to selling and marketing and out of shipping orders you already acquire.
Written by:
Jason Steinman:
Jason is a content contributor at IWS with over 15 years in the logistics space. Jasons goal is to help small to mid sized brands by providing content that helps them plan for growth rather than react to it
Dimensional Weight and How it Impacts Your Shipping
What is Dimensional Weight, why does it exist and how can you try and avoid over paying for your shipping.
The What and the Why?
Dimensional weight is a calculation that all carriers use in determining the actual shipping weight of a package. There was a time when carriers would take packages simply based on their weight. As time went on this process proved to be advantageous for the shipper but not for the shipping company.
Imagine the carrier picks up 2 packages – 1 from customer A and 1 from customer B. Customer A is shipping toaster ovens. The box is 16″ x 10″ x 10″ and when placed on a scale comes in at 20 lbs. Customer B is shipping plastic chairs. The box the chair comes in is 26″ x 18 x 18 and when placed on a scale it weighs 20 lbs. Based on a per weight only method both of these packages will be billed the same rate. However the cost to transport these items is not the same. A standard delivery truck would be able to fit 2.5x more toaster oven than chairs. If the items need to be transported on a plane again fewer items will fit based on the size.
This discrepancy in the actual cost to transport an item is what led all carriers to adopt a dimensional weight system. This allows the carriers to make sure each square inch of their trucks and planes are producing similar returns.
How is Dimensional weight calculated:
Dimensional weight is calculated using a simple formula. The length of a product times the width times the height divided by a DIM factor
Take the 2 examples above:
Company A
Item: Toaster Oven
Box weight: 20 Lbs
Box size: 16 x 10 x 10
Dimensional weight: ((16 x 10 x 10)/166) 9.63 Lbs
Since the actual weight is more than the dimensional weight this package would ship at 20 Lbs
Company B
Item: Plastic Chairs
Box weight: 20 Lbs
Box size: 26 x 18 x 18
Dimensional weight: ((26 x 18 x 18)/166) 51 Lbs
Since the dimensional weight is more than the actual weight this package would ship at 51 Lbs
How IWS can work to decrease the impact dimensional weight
Dimensional weight can be mitigated a few ways:
- Most products don’t present a dimensional problem alone. They face a dimensional problem when multiple units are being shipped at the same time. For this reason having access to a multitude of packaging materials can be the solution. Since customer orders can and will vary there is most likely not one or two shipping options to keep costs inline. Many other 3PL providers try and standardize all their customers orders into 10 or 15 total packaging options. While this may help to reduce the 3PL’s cost it is may not be the best thing for their customers. IWS stocks over 40 different shipping boxes and bags allowing IWS to most closely match box sizes to the items shipping. As an additional benefit items that are shipped in boxes with limited empty space tend to have fewer damages while in transit
- Shipping rates. Utilizing IWS’s highly discounted rates can help to decrease the impacts of dimensional weight.
Written by:
Jason Steinman:
Jason is a content contributor for IWS with over 15 years in the logistics space. Jasons goal is to help small to mid sized brands by providing content that helps them plan for growth rather than react to growth.
Simple Ways To Optimize Your Website For SEO
Want to know the one thing that every successful digital marketer does first to ensure they get the biggest return on their marketing budget? It’s simple: goal-setting. This is an absolutely essential practice for any digital marketer who knows how to execute their campaigns in a productive, cost-effective way. With a few. With a few simple tips, you can be doing the same in no time! In this blog, we’ll walk you through the first steps every savvy digital marketer takes to ensure that they’re on target to hit all their marketing objectives. Get ready for revenue!
Remember: even if the channel you’re considering is all the rage right now, it might not fit your brand. Always make informed decisions that directly relate to your company. Otherwise, your message won’t be delivered to its intended audience and you’ll have wasted time, effort and money.
Know Your Digital Goals
The first step is clearly identifying which goals you want to achieve. Get specific. Do you want to increase brand awareness? Are you all about locking in leads? Do you want to establish a strong network of influencers that can help you be discovered? How about pushing engagement on social media?
Get Specific
A useful tool for narrowing down your goals to ensure they’re viable is the SMART mnemonic. It’s important to get specific to understand exactly what you’re working towards, and help you break down the process of hitting your targets. This is exactly what this mnemonic helps you to achieve.
- Does the channel reach my intended audience?
- Is the channel sustainable and affordable within my company’s marketing budget?
- Will I be able to measure the success of the channel?
- Does the channel allow me to express my brand’s intended message?
- Do the channels I’m considering work together to convey my message?
Always Remember Your Goals!
Establishing a solid vision for your business is the first step to planning your digital marketing budget. Always keep your final goals in sight when organising anything for your company. When deciding which steps to take next in your business, ask yourself how they will help you achieve the goals you outlined in Step #1. This will ensure that you stay on track and prevent you from spending your budget on anything that won’t help you achieve.
Cum et essent similique. Inani propriae menandri sed in. Pericula expetendis has no,
quo populo forensibus contentiones et, nibh error in per.Denis Robinson
As your budget progresses and evolves, continue referring to your SMART objectives. Stay focused and remember your goals – they will always inform what your next step will be!