January 20, 2021
The Beginner’s Guide to Fulfillment as a Service
This blog post was originally published by Deliverr, which is now Flexport. The content has been adjusted to fit the Flexport brand voice and tone, but all other information remains unchanged. With the merging of Deliverr’s services (DTC fulfillment, B2B distribution, and Last Mile delivery) into Flexport’s existing international freight and technology services, we’re now able to provide merchants with true end-to-end logistics solutions spanning from the factory floor to the customer’s door.
You’ve probably heard of software as a service, but do you know what fulfillment as a service entails?
This new 3PL model is transforming the way ecommerce businesses fulfill orders, providing merchants with logistics technology, fast shipping speeds, and transparent pricing that’s boosting sales and fuelling business growth.
If you're new to outsourcing your ecommerce fulfillment and don’t know where to begin, follow this beginner’s guide to Fulfillment as a Service to learn everything you need to know.
What Is Fulfillment as a Service?
Fulfillment as a Service is a fulfillment model where online merchants use the resources of a fulfillment service on-demand. You may have seen it referred to as FaaS or Logistics as a Service (LaaS).
This model overcomes the constraints typically involved in in-house or third-party logistics by providing the services you want when you need them. This includes adaptive storage space, warehouse resources, and pricing models that meet your real-time needs.
The driving force behind fulfillment as a service is the technology that enables you to expand or reduce your requirements as needed, without impacting your delivery speeds or standards.
- Integration with your sales channels to download orders in real-time
- Intelligent distribution technology that distributes your inventory closest to historical demand
- Real-time shipping estimates that provide customers with personalized shipping options depending on their location
Fulfillment as a Service vs. 3PL
Fulfillment as a Service differs from a traditional 3PL model. 3PL involves a third party handling your ecommerce logistics for you, including receiving inbound shipments, warehousing stock, and picking, packing, and shipping orders.
While 3PL is similar to FaaS, it differs in three key areas; pricing, speed, and use of technology to streamline operations and make your fulfillment pipeline more efficient.
Traditional 3PLs tend to have complicated pricing structures with many hidden fees. They break down every single action in the fulfillment process and price those differently.
The fulfillment as a service model tends to come with clearer pricing. For example, Flexport utilizes a predictable, all-inclusive pricing model with no hidden fees. This includes receiving, inventory forwarding, picking, packing, and transportation per unit.
Fulfillment services are built around speed and efficiency to achieve the highest service level for you and your buyers and improve the customer experience.
For example, Flexport provides nationwide fast delivery on the biggest sales channels. Eligible customers automatically see reliable delivery days and a “Free NextDay Delivery” badge on social sales channels, at no extra cost to your business.
Technology fuels the most efficient fulfillment services. It should be present through every step of the process to eliminate human error and optimize for reliability and speed.
To give you an idea of how technology does this, Flexport uses machine learning to determine where to strategically place SKUs so that it’s distributed as close as possible to your historic customer demand. We also integrate with multiple sales channels and listing tools to ensure accurate order and inventory tracking.
The Benefits of Fulfillment as a Service
The Fulfillment as a Service model has six major benefits for ecommerce merchants:
1. High Return on Investment
Unlike with your own warehouse where you pay overheads no matter how busy you get, outsourcing fulfillment means you only pay for the storage space you’re using and the orders fulfilled. You don’t have to invest money in operational logistics like employees and security, making it easier to measure direct ROI on your fulfillment service.
2. Time Savings
Fulfillment services handle your entire fulfillment operation – from receiving inbound shipments to ensuring orders are delivered on time. With no fulfillment tasks on your to-do list, you can spend more time on business growth.
The on-demand, adaptive nature of Fulfillment as a Service means you can quickly scale your services to handle increased demand in peak seasons, or as you grow. For example, you can expand your storage requirements in the holiday season and scale them back in the new year.
4. Faster Shipping Speeds
Fulfillment service providers have the resources, experience, warehouses, and partnerships to deliver orders within 2-days or less. Plus, with many fulfillment services using a network of warehouses to distribute stock closer to end customers, you end up with both lightning-fast and affordable fulfillment.
Fulfillment as a Service uses technology to streamline your deliveries, reduce costs, and increase customer satisfaction. For example, by intelligently distributing stock closest to historical demand, you can dynamically offer customers shipping speeds relevant to their location, allowing them to receive orders as soon as possible.
6. Predictable Pricing
Look for fulfillment companies with clear, predictable pricing so you can gauge your expenses and profit without any surprise charges.
Flexport offers all-inclusive fulfillment pricing, making it easy to predict your fulfillment costs and charge customers accordingly. Plus, you don’t have to worry about paying for space you’re not using or orders you’re not shipping during quieter periods, thanks to our adaptive solutions.
What To Look For in a Fulfillment Service?
The key to succeeding with Fulfillment as a Service is partnering with the right company. The top things to look for in an outsourced fulfillment partner are integration into your sales channels, fast shipping speeds, multiple warehouse locations, transparent pricing, and the ability to grow with your business.
Integration With Your Sales Channels
Choose a fulfillment service that integrates with top marketplaces, such as Walmart and Wish, and ecommerce platforms, such as Shopify and BigCommerce. This ensures stock levels are synced across platforms, and orders are received in real-time to allow for fast shipping.
Fast Shipping Speeds
Fast shipping speeds of at least 2-day delivery are crucial, with shipping speed and cost being among the top reasons for cart abandonment. And, with customer expectations for delivery speed only getting faster, look for a service that offers 1-day delivery as well.
Multiple Warehouse Locations
Use a fulfillment service that uses a network of warehouse locations across the US to distribute your stock. Flexport’s network of warehouses helps us ensure nationwide 2-day delivery, as we keep your stock closest to demand.
Never enter a fulfillment agreement without fully understanding the costs involved. Look for a transparent pricing model that adjusts to your real-time needs.
A Growth Mindset
Finally, you want a fulfillment service that propels your business forward, so look for a partner that’s invested in your future growth. This includes:
- Integrations with sales channels with further additions on the roadmap, creating an omnichannel experience and enabling you to expand multi-channel
- Competitive shipping speeds that match or exceed customer expectations and qualify you for fast shipping programs across sales channels
- Marketing tools to promote your fast shipping speeds and increase conversions, such as fast shipping badges, website banners, and countdown timers for your listings
Fulfillment as a Service is here to change the face of ecommerce logistics and provide merchants with an affordable and effective way to increase online sales.
The contents of this blog are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. We do not guarantee, represent, or warrant the accuracy or reliability of any of the contents of this blog because they are based on Flexport’s current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This blog has been prepared to the best of Flexport’s knowledge and research; however, the information presented in this blog herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this blog.