How to Evaluate a Fulfillment Partner for Your Hardware Startup

Written by Jake Rheude

You’ve made waves in the hardware startup revolution—creating a product that sets itself apart, fills a niche, and solves problems. But you know well that the hard work isn’t behind you now. In fact, your business is at a critical turning point.

Are you going to continue packing and shipping out of a stuffed garage where you’re losing time and money, and really—you have no idea what you’re doing? Or, are you going to reward yourself for your hard-earned success and hand the work off to the professionals? 

Finally giving into the idea that you can’t, and shouldn’t, handle it all was tough enough, but choosing the right third-party fulfillment partner is just as big of a decision. When evaluating a fulfillment partner, there should be an emphasis on partner: you need a company that not only understands your business’s needs, but can be trusted as an extension of your brand. To figure this out, here’s what you need to evaluate.

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Evaluating a fulfillment partner should be a thorough process. After all, this company will be responsible for the final transfer of value between your business and your customers. Red Stag Fulfillment, has created an extensive list of interview questions to ask your potential fulfillment companies. You can access the PDF at the bottom of their Resources Page here, or use their guide for interviewing third party fulfillment companies below:

The Do’s of Evaluating A Fulfillment Partner

1) Define exact and measurable KPI’s

Since this is your first time partnering with a 3PL, (logistics lingo for “Third Party Logistics”) you don’t have anything to compare it to. So when you finally start shopping around for, or trying out, a third party fulfillment company, you need to set some measurable KPI’s (Key Performance Indicators) to guide the fulfilment company and give you something to evaluate.  

You can set up Key Performance Indicators in a variety of ways: through logs, time stamps, and also barcode scanning. Talk to the fulfillment company and see what options it has available—and take note of that too so you can determine what tracking methods and kinds of transparency your business needs.

Finally, you should always request to track deliveries and measure their timeliness. Don’t rely on their reports—see if they have an autonomous system in place that you can use to track your packages and see how well they’re performing.

  Whether or not a third party fulfillment company has this type of tracking is important to note, too. If they refuse to give you this information, for whatever reason, that’s not a good sign. These KPI’s are an important measurement of how efficiently they’re delivering your products to your customers. You’ve done all the work to get them to purchase it, and now you need to make sure that they’re just as happy upon your products’ delivery. 

2) Meet your fulfillment partners and visit their facility

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A lunch meeting isn’t going to cut it. You need to get inside their warehouse and see what kinds of technology and systems they’re working with so that you can fully understand how your packages are going to be handled. It’s like when you went to the manufacturer to check out your first completed project—you needed to see the big picture. When evaluating a fulfillment company, we suggest making a surprise drop-by visit too. 

The reason behind this is that seeing how they react to seeing you without any prior warning will indicate a lot. How organized do they look? How does management seem to be working? When touring the facilities, speak to management about how the employees are compensated and incentivized. For example, are the warehouse workers motivated to not only pick orders correctly, but also get them out the door on time? Or is it just about getting orders on the trucks? By observing what is around you and asking these questions, you’ll get real insight into how your products and business are going to be handled.

In the end, this visit should make you feel excited about this partnership. You should leave there feeling as though you trust them, they’re sincere and honest, and they are passionate about their work and your business.


3) Ask if they are prepared for the worst-case scenario 

You’ve worked out the kinks to make sure that you have a plan for your business in the worst-case scenario—and so should your 3PL. We hate to think it could happen, but one of the biggest issues in the industry is malfunctioning hardware. So, what if a bunch of customers need to send your product back? Can they intake these packages quickly and efficiently? Can they offer your customers free returns and free shipping labels?  

Keeping customers happy is one of the biggest concerns in the hardware industry, and well, every other industry too. So your fulfillment center needs to be able to keep not only you happy, but your customers too.  

Besides dealing with the scenario above, you should ask your potential 3PL the following questions: 

  • Do you have a backup generator if the power goes out? 
  • If the power goes out, does our order flow halt?  
  • Are there backup internet service providers? How many levels?
  • Is there an internal IT department?  
  • Or is there an external IT department (that can cause delays)? 

4) Ask about their ability to scale up

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You should always be one step ahead; looking into the future, your business is already working on growing. So, will your new fulfillment center be able to handle it? Not only that—imagine if you get a major order you weren’t expecting. Will your 3PL handle the massive order with the same efficiency as before?

Just like you would with a manufacturer, you need to ensure that your fulfillment provider can handle what is thrown at them, and problem-solve when the unexpected comes.

Questions to ask include: 

  •  If our SKUs expand, what happens?
  •  Do you have a predetermined, scalable workforce to handle extra packaging?
  •  What does this include? Off-hour shifts? Weekend shifts?

The Dont’s of Evaluating A Fulfillment Partner

1) Don’t choose a fulfillment center just because it is close to you

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You might be located in New York or San Francisco, but that doesn’t mean your customers are located there too. The problem is that shipping out of major cities on the coasts might seem like a great idea, but if your customers are all over the country, shipping from the coasts is going to cost your 3PL (and you) a whole lot more. If this is your situation, choose a centrally located city, like St. Louis.

On the other hand, if your products are mostly sold overseas, packing and shipping your products on the East or West coast might actually be a whole lot easier.  The point is that the best option for your business might not be located a quick drive away. Don’t be afraid to explore options that are further if they check all of your boxes.

2) Don’t lock yourself into a long-term contract, ever!

That’s right. You should never lock yourself into a long-term contract, even after you’ve worked with your fulfillment partner for a good period of time. When starting off, it’s especially important that your fulfillment partner meets your API (Application Program Interface) needs. This is the back-end software connection that communicates orders from your eCommerce store to your ecommerce fulfillment center.

This gives you security if, down the road, they can’t handle an increase in shipments, or you’re unhappy with another aspect of their service. A third party fulfillment company becomes an extension of your business, and you should never be forced to accept service that is below your standards.

3) Don’t put cost over value

If the price is too good to be true, well, it probably is. Now, we’re not saying that you can’t get great service for a great price, but if a fulfillment center is offering seriously low prices, they should be able to back up why. Then it’s your job to weigh and pros and cons of that price. Does that low price affect accuracy? What about customer service? You wouldn’t build your hardware with cheaper parts if it meant that the final product was going to suffer, so you should evaluate your fulfillment center in the same way. Keeping your customers happy and coming back is a huge aspect of your business, one that directly correlates with how quickly and accurately your product is delivered, so always keep value in mind over a low price. While you might save on shipping, you might also lose out on a return customer.

4) Don’t be afraid to ask for a trial period

Yep, you can totally do this. Don’t feel like you need to sign a big contract, or even a short-term one. Ask your fulfillment company if they would be open to a trial period. We guarantee that a fulfillment company with an excellent track record will be totally on board and willing to show you they can earn your business. If you have the opportunity to do multiple trial periods, use this time to compare the two companies’ transparency, like full access to measurable KPIs you can use to make a final decision.


Conclusion

Evaluating an ecommerce fulfillment partner is one of the most important steps when growing your online business. This company that you’re trusting for the final transfer of value between your business and your customers. At Red Stag Fulfillment we understand what this process is like, because we were born from an eCommerce business who had multiple unsatisfactory experience with other fulfillment providers. That’s why we’ve created this extensive list of interview questions, free of charge, for you to ask your potential fulfillment companies.

About The Author

Jake Rheude

Jake Rheude

Director of Business Development

Jake Rheude is the Director of Business Development for Red Stag Fulfillment, an ecommerce fulfillment provider that was born out of a successful ecommerce business that couldn’t find a high-quality fulfillment provider. He has years of experience in ecommerce and business development with startups and small businesses. In his free time, Jake enjoys reading and sharing in adventures with his black lab Reagan.

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