Outsourcing order fulfilment and customer care is becoming the de facto business model for fast-growing online retailers. A variable cost-base, infinite scalability and access to the latest fulfilment technologies are just some of the ingredients in a winning formula./h3>
However, it is critical that your look before you leap. Disaster stories have recently emerged about providers folding, banks foreclosing and uncompromising, indebted landlords withholding 3rd party stock. This is the nightmare scenario and much can be done avoid such circumstance.
When searching the market, make sure that your selection criteria is clear and measurable. Once you have identified a preferred supplier who seemingly ticks all the boxes, it’s time to dig deeper. Trust me, the effort is well worth the long-term peace of mind.
‘Due diligence’ is a well-established process of investigation into a business, performed prior to agreeing a contract. Basic checks are fine, but thoroughness is recommended to ensure a potential supplier of critical services is both legitimate and financially robust.
It is perhaps unfortunate that the old maxim of ‘get what you pay for’ applies to the fulfilment industry. There are always suppliers willing to provide the service cheaper, but at what cost? The rule is not universal, but those who are proud of their price and not so willing to negotiate down to the bottom are generally profitable and better bets for a long-term partnership.
So, what should you be doing before committing to a new fulfilment partner? Here are a few pointers:
WIf they are members of a trade association or supplier network or have standards accreditation such as ISO9001, it’s likely that a number of checks have already been carried out on the supplier by third parties. Check these out and verify that they are still valid.
Information in the Public Domain
Is independently-sourced data consistent with what you have been told? If the supplier is UK-based and a limited company you can search for details such as incorporation dates, registered addresses and accounts on the Companies House website. If this doesn’t hang together or perhaps the supplier is part of a byzantine web of companies, it’s time to start asking questions.
Youth vs Experience
Long-standing suppliers with long histories will normally make a virtue of this fact; it should not be disregarded and should afford a degree of confidence. This doesn’t prejudice newer entrants into the market, but you should ensure that they are adequately capitalised and supported by the reputable directors.
Very much part of the mix, but not a quick fix. It is likely that customers, supplier and employees (past and present) have reviewed the supplier or left comment in forums. Negative reviews are rarely motive-less and it is not uncommon for parties to fall out, so take heed and ensure you take an even-handed view.
Run the Accounts
Some form of financial data exists in the public domain for all limited companies. Basic credit worthiness checks are freely available and you may choose to pay a supplement for the suppliers ‘full accounts’. If you are not confident, ask an accountant to give you their opinion. Acid ratios, working capital, short-term liabilities and year-on-year trends will immediately indicate the financial robustness of a company.
A good supplier will always be able to provide references from existing clients. Obviously, these will be biased in their favour, but you are unlikely to put you in contact with a difficult or unhappy customer. Always ask for at least two references before making your decision and ensure you make contact with them, ideally by telephone. You may also choose to independently contact testimonial clients (often listed on websites) and, whilst it is a more difficult path, the results can be enlightening.
Why not test the service for yourself and place some orders. This will enable you to judge the speed of delivery, packaging integrity and communication. Perhaps return an item for refund and see how this works out.
Meet and Greet
The location of a fulfilment warehouse is largely immaterial, but whether local or distant, you should make the effort to visit a prospective supplier and see their facilities. Get in front of them and ask prepared questions about their history, financial model, strengths and weaknesses, quality standards, payment terms, risk management and contracts. In other words, don’t be afraid of insulting them. A good supplier should be able to look you in the eye and clearly answer your questions without hesitation or deviation. The best business is always done face-to-face and your ‘gut feel’ may ultimately guide a decision either way.
Once your decision is made, it is merely the beginning. Take interest in the affairs of your supplier and stay close to them. As part of your own risk management plan, you should be running checks at least once per year to satisfy yourself that the business is on a sound footing.
Finally, remember to buy right or buy twice. Unfortunately, if you make the wrong choice in fulfilment, you may not get a second chance.
by Gemma Tomlinson on 03/01/2018