The coronavirus pandemic has had many unexpected consequences in the ecommerce world, and one has been a shift for smaller sellers and third-party brands to look for FBA alternatives. Amazon’s abrupt change to how some goods were handled created disruptions and ground some businesses to a halt.
These changes and other risks inherent in Amazon’s marketplace, such as permanent seller bans, are causing many to consider alternatives to the company’s Fulfilled by Amazon (FBA) platform.
If you’ve had issues in the past or are looking to safeguard your ecommerce business by at least having a backup to FBA, then you’ll want to start vetting fulfillment companies now. The sooner you have a logistics plan in place, the quicker you can respond to any issue that arises. The need for protecting yourself has never been more apparent than now after we look at early pandemic impacts.
The best bet is to run small tests with different FBA alternatives, but figuring out who to run these tests with is a challenge in and of itself.
To help you get started on this journey, we’ve put together a few best practices and questions to ask about any potential FBA alternative. What you’ll discover quickly is that this is more than just a checklist, because putting your company in someone else’s hands should come with many questions, capabilities, and guarantees.
Build Your Must-Have List
The best fulfillment companies fit your business specifically. They should align with your specific requirements and also be tailored to your products and needs beforehand. It’s common for many fulfillment companies and third-party logistics providers (3PLs) to refer potential customers to each other to help that company get the best fit.
You can define the best fit by creating your list of must-have features and capabilities both in general and specific to your operations. Here is a high-level but brief list to get you started. And, we recommend creating documents to give to share with 3PLs so they can check off functionality as you expand specific requirements within each section:
- Size and space to store your goods safely.
- The equipment you need to move, store, ship, and protect products. This covers things like forklifts and heavy-duty racks to carton sealing machines and label printers.
- Location and access to shipping methods, from traditional carriers to ports, railways, airports, and whatever combination you need.
- Specialized equipment such as refrigeration units and sensors that send out alerts if the temperature changes.
- Finishing-touches support, such as the ability to use custom boxes, tape, labels, and more.
- Specialty service support. If you sell kits and subscription boxes, your partner will need to create and pack these in predefined, but still varying ways.
- Training and expertise that you may require. For example, the FDA has regulations specifically for pharmaceutical distribution warehouses.
- Space to expand as you grow.
- Support for the IT systems and ecommerce tools you use.
- Integration with carriers and marketplaces. Here’s where you’ll ask about their ability to fill Amazon orders.
Look for vendors and 3PLs willing to share their details and meet your list. Some may offer lists, or you can send over fulfillment company questionnaires to make it easier to judge multiple parties based on the same metrics.
Compare Capabilities and Requirements
Capability is a two-way street, and you want to evaluate how well a 3PL fits you and how well you meet their business needs. In some conversations, it might be easier for you to cut potential partners from your shortlist by focusing on their requirements.
One of the best questions to ask a 3PL is what minimums they require. Many will have a set number of packages that you must ship to be able to use their services, and volume plus how it is measured can make a significant difference for selection.
Look for a company that has expertise in handling your product type — small, large, fragile, food, refrigerated, etc. — and sets their requirements accordingly. If you sell bulky luxury goods, for example, you likely won’t ship a large volume but still require expert handling and storage. Partners who prioritize that expertise and charge more based on it and storage instead of volume could be a better fit.
Other capabilities to match to your business can include how quickly they process pallets or containers of products and get them ready for online sales. Ask how they monitor inventory and report or handle damage. And ask about customer-centric requirements such as when are their cutoff times for order processing.
Capabilities aren’t just about checking off your must-have list. They also cover how well your partner does those services within a workflow that supports your business. Start with simple options of automatically emailing tracking details to customers by integrating with order systems. Then consider the complex, i.e., if the workforce is incentivized by accuracy over speed — protecting both the safety of your products plus your overall reputation and ability to sell again to the same customers.
Guarantees are becoming an industry standard, and we’re all the better for it. There are a few distinct kinds you’ll want to discuss with potential 3PLs and fulfillment partners. Here is some overall guidance, but be sure to match it your specific need and customers.
Guarantees to discuss include:
- Inventory accuracy: Companies need to know the inventory they have to fill the orders they get. Guarantees of inventory accuracy cover the levels they have available to ship. It’s how you know to restock and avoid backorders, protecting your business. Part of inventory accuracy is also how they make you whole when something goes missing in the warehouse. A handful of 3PLs are now starting to repay wholesale costs of items that they damage or lose.
- Order processing: Shipping options have made customers demanding. Each individual has preferences for speed, savings, and more. So, your commitment to customers is to ship orders on-time and at the right price. Order processing guarantees ensure that goods move as they should (next business day, overnight, 3 pm cutoff, etc.) and that the prices displayed on your site are the final shipping prices for that order.
- Order accuracy: Every incorrect order generates wasted time, cost, and labor. If your shipper has a high number of incorrect orders, they’ll quickly eat your margins and harm your reputation. Get a guarantee of order accuracy and ask if they take any steps to make you whole when their error causes business harm.
- Speed and reach: How quickly can they get an order to your end-customer? This guarantee covers their fulfillment capabilities and should ensure that they have options to reach everyone in the U.S. within about three days. You want your two-day coverage map to be nearly as big, too.
- Specialty requirements: If you’re looking into FBA alternatives, then you’re likely already selling via Prime and want to continue this. So, you might want to ask about guarantees that the 3PL can meet (and will continue to meet) requirements for Seller Fulfilled Prime that they control. Other guarantees cover many elements (such as 99% on-time orders), but they must work with Amazon’s returns policy.
Something is going to go wrong at some point, that’s just a fact of business. What you want out of a 3PL is the ability to tackle challenges and have a plan for this process. Be demanding when it comes to support.
Ask about 24/7 technical and warehouse support or email ticket systems. Get an idea of when they’ll answer the phone and about how long it takes them to respond. Look for multiple ways to submit issues and communicate. If they handle integrations with your website or ecommerce platform, ask about the technical side of support, too. You should have a dedicated support person who can help you manage technical issues.
Support also covers the carriers they use. Discuss what happens if a package is lost in the mail. Who resolves the issue? Who reaches out to the carrier? How do they notify you? Can customers get automated notifications?
Go Over Security
There’s a lot of risk in running an ecommerce warehouse and fulfillment service. Lots of expensive, fun products can be tempting, and your warehouse partner needs to protect against that — whether the threat is internal or external.
To address this, you’ll want some assurances about how their operations run and what security you have available.
Start with the basics of fencing around a facility and controlled entrances. Ask about who might visit and why — every supplier should be able to check inventory, but they should also always have an escort on the warehouse floor.
Get specific about capabilities. Do they have 4-hour monitored security camera coverage of every square foot of the operation? What about parking locations? How long is this kept? What happens if the power goes out?
Security is also about operations. If their Wi-Fi goes out, can they quickly used wired systems to control data and access? Are both connections from separate providers to reduce risks? How do they backup data and other necessities?
You’ll want to start the conversation and let the vendor run with it. Your primary questions should lead them to cover discussions of service uptime, how they control access to your data, background checks on employees, and their processes for people coming in and out of the location.
Put Value and Service over Pure Price
Great partners match your values first and then align with your cost sensitivity. Matching on service requirements and how they run operations is a smart way to protect against price concerns, too.
Evaluate vendors on how they manage operations and how honest they are about capabilities — with guarantees or client introductions to back up claims. You want policies to protect you against shrinkage and damage-related losses as well as returns. Once you’re sure that the service can meet your needs, then start price negotiations.
Sometimes, the best fit will be a little more than you initially were thinking about paying. This could be hard to agree to but might ultimately be worth it for your long-term growth. Discuss options like risk-free trials or runs of small inventory. See if they offer flexible pricing or perhaps offer discounts if you move all of your FBA business to them over time.
If they’re willing to manage accounts and software for you, or integrate with your existing platforms, for free, you’ve got small cost-savings. Review all of their pricing and fees to ensure nothing is hidden and ask about how costs may change during holiday rushes or if there something you can do to save.
The best fulfillment partners make your business easier to run. That stress relief often comes as much from process and system improvements as it makes cost reductions. Give them a chance to make their case holistically and evaluate based on total impact. You might just find that the right solution controls costs while also making it easier to sell more to your most loyal customers.
Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.