What is Pick and Pack Fulfillment? Everything You Need to Know
Pick and pack fulfillment is a process that occurs after an order is placed in an online store. In this guide, we explain everything you need to know about pick and pack services.
Alarming but true, according to digital marketing agency Digital Third Coast, 80% of US Internet users made at least one online purchase in 2020—and that online shoppers said their main reason for shopping online was because it meant they could shop 24/7!
If you’re an e-commerce business owner, then you understand your customers’ need to shop 24/7 and get what they’ve ordered from you fast. For this reason, you might be considering investing in pick and pack fulfillment. If you’re considering this investment, you might be asking yourself questions such as:
“What is pick and pack fulfillment?”
“Do the benefits outweigh the costs?”
“What is the usual pick and pack fulfillment cost?”
If you aren’t able to find the answers to these questions, you might feel confused. You might also feel frustrated, given that you want to serve your customers while making the right investment decisions.
That’s why we’ve written this article. Once you know all you need to know about pick and pack fulfillment and how much it costs, you can decide if it’s right for you.
What Is Pick and Pack Fulfillment?
When you first start out running an e-commerce business, you might be able to store everything you sell in your home or the small business space you’ve rented out to run your business from. However, as your business grows, you might find that you’re running out of space.
Additionally, if you find you’re shipping your orders internationally, you might be spending a large amount of money on international shipping. You also might not be able to send out orders in a timely manner because of the other aspects of your business you’re managing.
This is where pick and pack fulfillment comes in. It solves all of these problems.
Basically, the way pick and pack fulfillment services work is that you keep your products in a fulfillment center. These products are stored in bins on shelves at the center until a customer orders them.
Once a customer order comes in, no matter how small or large, people working in the center will take out your products.
This is where the “pick” part of the definition comes from. Then, they will pack them into boxes or envelopes. This is where the “pack” part of the definition comes from.
After this, the order is shipped off directly to your customer. As you can see, this is the perfect solution to avoid being flooded with orders you can’t handle. It also simplifies and speeds up the shipping process, making your customers happy.
Types of Pick and Pack Services
Keep in mind that there are four different types of pick and pack fulfillment services.
- Piece picking
- Zone picking
- Batch picking
- Wave picking
Depending on your needs, one of these will work better than others for your business.
When choosing the right company for you, ask about which service they think will suit you best.
This answer, along with the information on the cost of pick and pack fulfillment throughout the rest of this article, will help you decide which company to go with.
The Cost of Pick and Pack Fulfillment
Now that you know how pick and pack fulfillment companies work and how they can help you run your e-commerce business, we’ll review some of the different aspects that can impact the cost of pick and pack fulfillment services.
That way, you can decide if this is the right investment for your business. The fees you might run into include setup fees, intake fees, pick and pack fees, storage fees, kitting fees, shipping fees, return fees, and account management fees.
Let’s review these in detail. That way, when you’re deciding which pick and pack fulfillment company to hire, you can ask them how much they charge for the fees. This will help you choose the right one for you.
The initial cost you’ll have to pay to a pick and pack fulfillment company is setup fees. This payment usually occurs before you hire the company. Usually, the price depends on how much volume you think you’ll need for your products and the type of e-commerce business you run.
Depending on the company you hire, you’ll either pay a flat fee or a fee that’s estimated by the company based on delivery costs, your product, and other factors.
Once you’ve paid the intake fees, you’ll pay for the inventory of your products itself. This is what is called “intake” in the shipping and storage industries. The fees you pay at this point will be those of the company receiving your products and then processing them for inventory.
Generally speaking, intake fees are either charged per amount or per time. So, you might pay a certain amount for one item or for several items, sometimes playing a flat fee for each box of items.
If you’re charged per time, then you’ll be charged for how long it takes them to receive and process everything.
Pick and Pack Fees
Pick and pack fees are related to the labor you’re paying for, where workers at the pick and pack fulfillment company pick your product from its bin and then packing it. Usually, the cost for this is between $3 to $5 for each item, though there may be additional kitting fees (which we cover later on in this section).
If you’re shipping a large number of items all at once through the pick and pack fulfillment company, you might be able to get a discount for picking and packing in bulk.
So, even if you aren’t using one of these companies to ship off all your products, you could use them to ship off the popular ones.
Even when your products aren’t being picked and packed, they’re taking up valuable space in these centers. For this reason, you will also have to pay a storage fee. These fees can vary significantly. They are calculated by the company based on many factors, including space needed for storage, the amount of time it sits on the shelf, and the type of product.
Generally speaking, these companies will charge you per the amount of space your products take up or a flat fee for a certain number of pallets.
Many e-commerce businesses pride themselves on not only selling high-quality products but also packaging them in ways that customers enjoy. The packaging is also a great opportunity for you to maintain your brand, which will keep your customers back for more.
Whether you have a specially designed branded box, cards, and other materials that represent your brand, or freebies you include with each order, these will impact the price of pick and pack fulfillment services.
In the industry, this is called “kitting.” If you need these services, you’ll end up paying kitting fees.
Once your products are all picked and packed, it’s time to ship them off. You’ll be paying for this additional service via shipping fees. Usually, the company has its own prices. However, they might work with an external shipping company.
If one of your customers is unhappy with the product they’ve received, or it’s defective, then it will be returned to the pick and pack fulfillment center. When this happens, the center has to process the item once again.
Additionally, they might have to reassemble some of the packaging. Because of this, you’ll have to pay fees for returns.
Account Management Fees
Finally, there are account management fees to take into consideration. This is usually charged monthly and covers any additional costs outside of the storage, packing, and shipping of your items covered above.
For example, they might have to take calls on your behalf or do other administrative tasks. You pay for this labor with the account management fees.
Different Pricing Models for Pick and Pack Order Fulfillment
Now that we’ve covered the different fees you might pay for when hiring a pick and pack fulfillment company, we’ll review the two different pricing models that are most common in this industry. Depending on your needs, one will work better for you than the other.
When a pick and pack fulfillment company uses the unit-based model to charge customers, they’re charging by the hour, by the unit, or by the pallet. If you’re selling a large amount of one item or many items in bulk, then this is likely the best way to pay for you.
Individual Item-Based Models
When a pick and pack fulfillment company uses the individual item-based model to charge customers, they’re charging for the item itself and how it’s handled in specific ways. These are different costs that are then added up together. They include:
- The storage cost by the cubic foot
- The amount of times the item is ordered (this covers pick and pack labor costs)
- The cost of the shipment itself
- Any kitting costs per item
- A customer support cost fee that’s charged at a flat rate
If you have a specific item that you’re selling often, but you don’t need to sell it in bulk, then we recommend you use the individual item-based payment model with the pick and pack fulfillment company you choose. This way, you’re paying for exactly what you’re getting.
How to Calculate the Cost of Pick and Pack Services
Even though costs can vary significantly from one pick and pack fulfillment company, you can do a few calculations to estimate the cost now that you know about the different pricing models and costs related to pick and pack fulfillment services.
When coming up with this estimate, remember to add 10% to your final figure. This is in case any unexpected costs come up.
To start calculating, you first need to know what the fulfillment provider’s usual rates are, and whether they use a unit-based or individual item-based model. Then, you need to come up with an estimate on your end of how many units, orders, and pallets you expect to need stored and shipped off for every order and every month.
This might be an estimate since you can’t fully know how much you’ll need to be shipped off. Based on customer orders in the past, though, you should get pretty close to the real amount.
Then, you can calculate the cost by multiplying the number you came up with on your end and the amount the pick and pack fulfillment company charges per unit or item. Here are some examples of what this might look like:
- (Storage fee for pallets) X (10 pallets of your product)
- (The individual item fee) X (20 monthly orders of your individual product)
Depending on your company, you might have some fees that you calculate using unit-based models, while you might have some fees you calculate using individual item-based models. Go through your list of every product you plan on storing and having shipped off from the pick and pack fulfillment company.
Then, once you’ve completed all these calculations, add them up. This will give you an idea of how much you might expect to spend. If necessary, add any of the additional fees covered in “The Cost of Pick and Pack Fulfillment” above, multiplying each amount with each service as covered in this section.
Do You Need More Information?
Now that you know what pick and pack fulfillment is and how to calculate how much it costs, you might need more information. Maybe you want to find the right pick and pack fulfillment company for you. Or, maybe you want to find out what services matter will impact your business most positively when choosing one.
Whatever information you need, we’re here to help. At Fulfilltopia, we’re experts when it comes to pick and pack fulfillment. We also offer these services. To learn more about how we can help you, contact us here.