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Warehousing & Fulfillment

Why SLAs – and True Partnerships – Matter When It Comes to Outsourcing Fulfillment

Warehousing & Fulfillment
July 21, 2020
7 min read
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By Chris Domby, Vice President of Supply Chain at Ware2Go

Companies that outsource fulfillment can considerably reduce their capital expenditure, mitigate risks, and increase their operational speed-to-adapt. Even more, outsourcing logistics allows brands to focus on revenue drivers such as product innovation and growing sales channels. As described, the business case sounds compelling. Why wouldn’t you want to reduce risk and increase top line growth?

Finding a quality outsourced warehouse provider that can accommodate your product needs, service all of your sales channels, and reach all of your customers is difficult, especially if you’re not attuned to what “great” looks like in the warehousing and fulfillment space. And once you find a quality provider, it’s often hard to get their attention unless you are a large merchant with substantial shipping volume.

SMBs Often Struggle to Get the Best SLAs

SMBs may outsource warehousing to third-party logistics (3PL) companies. But the service level agreements (SLAs) they get are often less aggressive than those provided to firms with greater scale.

Traditional 3PL warehouses might consider a business that ships less than 100 orders a day as a C-list customer. In that case, the 3PL warehouse might only guarantee 90% on-time fulfillment performance during negotiations, if they guarantee performance at all.

Yet the industry standard for on-time fulfillment – one of the most important SLAs, often required by eCommerce marketplaces – is 95%.

Such SLAs lay out agreed-upon fulfillment timelines. For example, if you get this order in by X time, we’ll have it out by Y time. We’re strict on this; our on-time fulfillment SLA specifies that if a customer places an order by 3:00 p.m., we can make it available for UPS pickup that same day.

We’re consistently at or above 99% on-time fulfillment, and SMBs are our sweet spot. We can offer 99% for SMBs because we’re consolidating volumes across multiple SMBs into our warehouse partners for better SLAs and pricing.

 

Other top SLAs SMBs should focus on include:

  • Fulfillment accuracy, which measures the extent to which customers actually receive the products they order – and in the right quantities;
  • Dock-to-stock time, which is the time between the product’s arrival in the warehouse and the time it is stored to fulfill outbound orders; and
  • Cycle count accuracy, which is the extent to which the warehouse management system reflects the products that are physically there.

    Top-Tier Performance Requires Serious Partner Vetting

    Strong partnerships enable SMBs to get the best performance and experience from their warehouse partners. And finding great partners starts with SMBs doing their research – a lot of it. We often hear from merchants that they didn’t realize how much detail goes into choosing the right warehouse and fulfillment provider for both short- and long-term needs. Learning to “talk the talk,” understand the pricing model, and planning for the day-to-day management can be an overwhelming task, especially when your main focus is on growing your sales channels and not warehousing operations.

    It’s also important to understand and ask potential warehouse partners about their key performance indicators (KPIs) and adherence to SLAs. Understanding their on-time fulfillment performance, pick and cycle count accuracy, and dock-to-stock times helps SMBs understand a warehouse partner’s ability to execute.

    A visit to the warehouses SMB goods will be stored in is also an absolute must. We handle this step for our clients. During our warehouse visits, we go through a 100-item checklist to ensure they are a good fit. We objectively address topics such as the following:

  • Does the warehouse have thorough security processes and contingency plans?
  • Do they show indicators of being well managed and detailed in their work?
  • Do they have strong safety measures in place?

Considering culture is also extremely helpful in vetting potential partners. When we walk around a warehouse, we note whether associates are smiling or if they seem miserable. We’ve visited so many warehouses that we know what to look for and sometimes it’s as simple as asking yourself if they say hello when you walk by or look down at the ground.

Staff tenure also speaks volumes. High turnover signals that there are issues with management and employee morale. When you’ve got people who just don’t care handling your product, customers get the wrong items, and inventory walks away. Conversely, high employee morale leads to people taking pride in their work.

The financial stability of warehouse operators is also key. An SMB needs to know that its partners are going to be viable for the future. Knowing how to gauge if they have solid financials is so important – especially in the current economy.

Partner Onboarding and Ongoing Communications Are Vital

For us, once we get a warehouse certified, we assign an operations excellence (OPEX) manager on our team to oversee that partnership relationship. These managers typically have eight to 12 years of experience managing warehouses in fast-paced fulfillment.

They spend ample time and attention onboarding warehouse partners, making sure they get up and running smoothly. After onboarding, they provide daily oversight of the warehouses, addressing merchant and warehouse issues as well as providing strategic guidance. It’s a consultative approach, and it includes the operations excellence managers sharing best practices with warehouse partners.

Finally, OPEX managers perform monthly reviews and site visit audits with our warehouse providers. That includes reviewing KPIs and SLAs, discussing performance and areas of improvement, and getting partner input.

Everybody Benefits When Logistics Partners Collaborate

Strong warehouse partnerships allow for greater responsiveness to customer needs. That can add up to new opportunities for warehouse providers and SMBs.

Here’s one example of how that has played out:
A large nutraceuticals company approached us last spring with specific storage and distribution requirements. The company’s protein powders, supplements and other products require a climate-controlled environment. But warehouse facilities with temperature and humidity control can be hard to find in the United States.

We and one of our warehouse partners saw this as an opportunity. We helped run the economics of this request, and our warehouse partner agreed to invest significant dollars to retrofit its facilities to accommodate it.

Just two weeks later, another nutraceuticals opportunity came to us – and it was four times larger than the first. This company had just six weeks to get out of its existing 3PLs facility.

We asked our warehouse partner to consider broadening the footprint of its environmentally controlled warehouse operation. So, this effort expanded to well over a half-million-dollar investment. Within the six-week timeline, Ware2Go and our warehouse partner worked together to stand up rack space, get staff in place, and install temperature and humidity control systems. It was quite the feat, but we ended up going live a week earlier than anticipated. This is a testament to the fact that strong partnerships enable businesses to get things done.

We hold our warehouse partners to high standards and build relationships that work to make each other better. We approach new growth opportunities together, and this creates great benefits for our mutual clients. The business model provides merchants with economies of scale, more flexibility and better SLAs.

That’s why it’s so important for SMBs to select the right warehouse partners. If SMBs can’t get their products to their customers quickly, they lose business. But when SMBs outsource distribution, they can focus on core competencies and rest assured that their warehouse partner will meet their warehouse needs. To learn more about how Ware2Go is creating true partnerships with businesses of all sizes, watch our On Demand Video Series. To learn what a partnership with Ware2Go might mean for your SMB, reach out to one of our logistics experts.

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