The Pros & Cons of Different Order Fulfillment Company Models
by Staci Americas on Oct 17, 2023 10:00:00 AM
In the world of order fulfillment, where poor execution can erode customer confidence and profits, choosing the right partner is critical. But with literally thousands of companies to choose from, that choice can be confusing. But providers tend to fall under a handful of order fulfillment company models. If you understand which model works best for your business, you can narrow the choices and zero in on the perfect partner.
Whether you're a fulfillment director, logistics director, or involved in supply chain management, this article is your compass through the fulfillment maze. We'll explore the unique strengths and weaknesses of large, global logistics giants, national players, mid-sized national firms, local or regional providers, and the ever-popular Fulfillment By Amazon. By the end, you'll be equipped to make an informed decision about which fulfillment path to follow.
The Pros & Cons of Different Order Fulfillment Company Models
Let’s look closer at the five primary categories of order fulfillment companies:
Large Global Logistics Companies,
Large National Logistics Companies,
Mid-sized National Fulfillment Companies,
Small Local or Regional Logistics Companies,
Fulfillment By Amazon (FBA)
Each option offers distinct advantages and drawbacks, and choosing the right one for your business is crucial.
1. Large Global Logistics Companies
These industry giants offer a wide-reaching global network, ideal for international fulfillment, but may lack personalized service and e-commerce specialization.
The advantages of leveraging order fulfillment companies with an extensive global logistics footprint include:
- Extensive Network – They can service you across many different countries and locations. If your market is global, this might be attractive to you.
- One-stop Solution – These companies usually provide a comprehensive range of services, from warehousing to shipping and even customs clearance.
- Technology Integration – Large global logistics firms typically invest in advanced technology systems, ensuring top-notch tracking, reporting, and inventory management.
The challenges of working huge, global order fulfillment companies include:
- Impersonal Service – While they excel in scale, they might not offer a high level of personalized service.
- Lack of Customization – Large companies tend to like very defined, repeatable processes that they execute the same way for all customers to drive efficiency. If you want to customize a process, that could be difficult.
- E-commerce Might Not Be a Specialty – Many mega 3PLs have their roots in freight forwarding or large-scale warehousing for retail distribution. While they may offer e-commerce fulfillment services, it might not be their forte.
- Complex Fee Structures – They might have complex pricing and fee structures that could be difficult to comprehend, making budgeting challenging.
2. Large National Logistics Companies
With many nationwide locations, these order fulfillment companies allow for scalability and quick domestic shipping, though you might receive less personal attention and face potential cost challenges.
The advantages of leveraging larger fulfillment providers with a national logistics footprint include:
- Multiple Locations – National logistics companies boast a network of facilities across the country, enabling easy scalability and swift domestic shipping.
- Technology – They often have robust technology systems in place, enhancing tracking and management.
The challenges of leveraging order fulfillment companies with a large national logistics footprint include:
- No Fulfillment Focus. Like the global mega-3PLs, many of the larger national providers only recently expanded to provider order fulfillment services. Their primary focus, historically, may have been trucking or pallet-in/pallet-out warehousing – very different disciplines than high-volume pick and pack fulfillment.
- Less Personal Attention – The level of personal attention you receive depends on your size in relation to theirs. If you prefer being a big fish in a small pond, a very large provider may not provide the level of customization and attention you may want.
3. National Providers with a Fulfillment Specialty
These providers offer a balanced combination of scale and personalized service with customized solutions, but may lack the global capabilities and resources of the largest 3PLs. This category of provider is more of a direct-to-consumer fulfillment specialist,
The advantages of leveraging national B2C order fulfillment companies include:
- Focused expertise on pick and pack services. Warehouse design, systems, automation and labor planning are completely different for direct-to-consumer brands compared to warehouse services for retail distribution. If you are a D2C or multi-channel brand, you want an order fulfillment company that knows pick and pack fulfillment.
- Balanced Service – Most companies in this category are mid-sized firms that strike a nice balance between an ability to scale and personalized service.
- Customized Solutions – You're more likely to find tailored solutions to meet your specific B2C fulfillment requirement, like custom packaging.
The challenges of leveraging order fulfillment companies with a mid-sized national logistics footprint include:
- Limited Global Scale – Mid-sized companies may lack the international infrastructure and partnerships that larger logistics giants possess. If your business requires global reach, this could be a limitation. There are exceptions. For example, Staci Americas Fulfillment in the U.S. is now part of Staci’s global fulfillment network of 80 distribution centers across the U.S., Europe and Asia.
- Variable Technology Capabilities – Their technology systems might not be as advanced or integrated as their largest competitors, potentially affecting efficiency.
4. Small, Local, or Regional Logistics Companies
Local and regional logistics fulfillment players excel at personalized service and cost-effectiveness but may struggle to keep up as your fulfillment requirements grow in size and complexity.
The advantages of leveraging order fulfillment companies with a small, local, or regional logistics footprint include:
- Highly Personalized Service – Local and regional providers excel in customer service, offering personalized attention that larger companies might not match.
- Cost-Effectiveness – They frequently offer competitive pricing for local or regional fulfillment using manual picking methods, making them attractive for smaller businesses or start-ups.
The challenges of working with order fulfillment companies with a small, local, or regional logistics footprint include:
- Limited Ability to Scale – These companies may lack the know-how and infrastructure to support high order volumes, creating barriers to growth.
- Limited Automation – Local providers might not have invested in the automation systems required for highly efficient operations, which can result in higher costs.
- Limited Geographic Reach and Higher Parcel Costs – Their networks may not extend beyond regional boundaries, so they can’t serve you in multiple U.S. markets. That results in many high-cost, high-zone parcel moves – unless you partner with other providers in other regions.
5. Fulfillment By Amazon (FBA)
FBA ensures fast last-mile delivery and ease of use, making it an attractive option for Amazon sellers, but it comes with high fees, brand visibility limitations, and restrictions on control.
The advantages of leveraging Fulfillment by Amazon include:
- Fast Delivery – FBA offers fast and reliable delivery, which is a significant advantage, especially for Amazon Prime members.
- Ease of Use – It's a ready-made solution tailored for sellers on the Amazon platform, streamlining the process.
The challenges of leveraging Fulfillment by Amazon include:
- High Fees – Amazon's fees can be substantial and may eat into your profit margins.
- Limited Brand Visibility – Custom packaging is not an option with FBA. Your product will likely ship in Amazon-branded boxes or bags and you won’t be able to customize how the products are packed or add materials other than the product into the box (e.g., promotional flyers)
- Restrictions and Control – Amazon has strict guidelines and retains significant control over how you manage your inventory and interact with customers, potentially limiting your flexibility.
Choosing the Right Order Fulfillment Company Model for Your Needs
In navigating the complex world of order fulfillment, your choice of fulfillment provider should align with your unique business needs. From large global giants to local champions and Amazon's convenience, each option offers distinct advantages and limitations. Careful evaluation is key.
Explore Staci Americas' tailored fulfillment solutions to find a solution ideally suited to your requirements. Contact us today to learn more about our model. Make the right choice and optimize your supply chain management today.
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