Fulfillment costs for online shops
Like almost everything in life, fulfillment unfortunately also involves costs. What do these costs in logistics for e-commerce companies consist of?
That strongly depends on whether online shop owners take over the fulfillment themselves or outsource it to another company. In the next section of this article, you can read an overview of what the costs are made up of.
Costs for e-commerce fulfillment without a 3PL service provider
In the beginning, most e-commerce entrepreneurs begin to ship the goods themselves. If the quantities are small, the costs for storage and the absolute costs for shipping in Germany, Austria, Great Britain, and beyond are still manageable. But as soon as the quantities increase, an important decision has to be made to keep costs for logistics and fulfillment as low as possible:
In-house processing or outsourcing of the fulfillment?
If you’re brave enough to build your own fulfillment process in-house, you should prepare yourself now for these tasks. In order to avoid surprises by unexpected costs, we listed the expenses that are incurred with the independent method below:
- Shipping service provider
The most obvious costs here are the rental costs of the warehouse. It is important to select a warehouse that is as affordable as possible, but still has a good location. A good location is, besides other things, characterised by the distance to the end customer, as this is a decisive factor for shipping costs and delivery time. In addition, the logistic infrastructure is an important factor that should not be underestimated, especially with regard to pick-ups by shipping service providers. In addition to the rent, one should also not forget other costs such as electricity and water.
Costs for hard- & software
Costs for software need to be included, as well as the costs for the corresponding hardware. Expenses in this field are normally directly related to the efficiency of the warehouse. Once again, you face an important decision here: do you want to spend as little money as possible and therefore rely on Excel files and similar or are you willing to invest a larger sum in software that is tailor-made for the fulfillment process and has the latest technical standard. The same question also applies to the hardware. For example, buying tablets optimizes daily work at the warehouse when processing and managing orders, but this is obviously linked to further costs. Your shipping volume will ultimately determine which option is best for you.
Costs for insurance
In addition to what was written so far, reliable insurance is necessary to avoid getting into serious trouble in case of accidents and other damages in the warehouse.
Costs for shipping service providers
Other unavoidable expenses are incurred as a result of cooperation with shipping service providers. Apart from this, be prepared for the additional work involved. Contracts with the service providers must be negotiated and mutually agreed upon by both parties involved in this process. As the volume of shipments increases, you will find great potential for reducing costs, because the services of shipping partners are highly dependent on the quantity shipped.
Costs for packaging material
Speaking of volume discounts – you can save a lot of money in this area by bulk buying packaging material. But beware – too much packaging material consumes storage space that is needed for your goods. As always, good planning and finding balance is crucial here.
Costs for employees
Equally important is a well thought-through concept for the warehouse personnel. Do you send a small amount of products in the summer but the amount dramatically rises during the Christmas period? Then, of course, you need a flexible solution that allows you to increase the number of employees if necessary without high additional costs.