Here at Spectra, we believe firmly that fulfillment can either be an enormous driver of growth or an enormous drag on a company’s bottom line. What makes the difference? There are many factors, but one that often escapes the notice of a growing business is the area of hidden costs.
Between the time an item is produced and the time it arrives at the purchaser’s address, there are any number of unexpected expenses that can be incurred. At the same time, there are many wasted opportunities for profit that can be passed up. A company that has little experience with fulfillment thus far is vulnerable to these “hidden costs,” and they definitely add up. In time, they could become so significant that they prevent the company from growing and reaching its true potential.
Overstocking
Whether because of high minimum production quantities or misjudgment of demand, it is a common situation for a business to end up with too much stock on the shelves. The initial investment for these materials may never be made up if sales do not pick up in time. Additionally, the space taken up by unneeded stock is wasted when it could be used for storing other items that are more profitable for the business.
Understocking
The hidden costs of understocking are a little more “hidden” than those associated with overstocking. That’s because one of the biggest consequences of understocking is delivery delay, as items need to be reordered and restocked before they can be shipped to the end user. These delays, in turn, erode confidence on the part of the end user and lead to fewer future orders. It’s critical to have enough stock on hand to meet demand, or to have a system in place to quickly produce materials on demand and get them to the end user with minimal delay.
Use of Space/Lost Product
A business that has decided to handle fulfillment in house quite often has not accurately estimated the space requirements needed for this activity. The average business, especially an e-commerce business that is just starting out, does not have sufficient storage space to keep enough stock ready to ship. Even more importantly, that space is likely not equipped with the climate control, theft prevention, and other security measures that a 3PL fulfillment provider like Spectra can offer.
While water and fire damage are the first major worst-case scenarios that may come to mind, more mundane issues can lead to the loss of inventory and wasted investment. Mold and mildew can damage stock and make it impossible to use. Even a mistake as simple as an inexperienced employee stocking materials in the wrong spot can lead to incorrect reorders, wasting capital on production of materials that are not needed.
Accessorial Charges
Accessorial charges are a category of hidden costs that includes quite a few specific fees. E-commerce businesses that are just getting off the ground, and even companies with a more established presence, are frequently surprised by additional fees that shipping providers charge due to various circumstances.
The project managers at Spectra have a thorough understanding of what factors could incur these accessorial charges and how to avoid them on behalf of our clients. In addition, by using a 3PL partner that integrates services like printing, inventory management, and shipping under the same roof, many of these accessorial charges are eliminated altogether.
Delivery/Pickup at Certain Locations
A shipping company may charge an extra fee for delivering to a military base, a school, or even a residential area rather than a commercial property. If a delivery takes place outside of normal business hours or outside of a timeframe set by the receiving party, additional charges could apply as well.
Delay Charges
If anything happens to delay the loading or unloading of a shipment, the expression “time is money” may become true in a literal sense! Shippers often charge extra if their truck and driver are required to spend time waiting for materials to be moved.
Oversize/Overweight Loads
If a shipping company has designated guidelines for maximum size or weight of loads, exceeding those guidelines can trigger sizable accessorial charges.
Avoiding Accessorial Charges
In most cases, by the time an e-commerce or B2B organization realizes that accessorial charges will be incurred, it is too late to do anything about them. The charges must simply be absorbed by the company, and if they are significant enough, they can cut deeply into profits. The only way to be sure to avoid these types of hidden costs is to anticipate them, understand fully the policies of the shipping company in question, and make sure that the contract falls within the specified parameters.
Spectra Helps Avoid Hidden Fees
Having Spectra function as your organization’s fulfillment department means that you have a team in place that is deeply knowledgeable about these and the many other hidden costs that can torpedo your profits. We not only bring over 20 years of practical fulfillment experience to the table, but we also have a network of valuable relationships with shipping companies around the country. We are positioned to match your fulfillment projects with the best service providers, and to make sure that you don’t have to deal with surprise accessorial charges that you didn’t plan for.
When you meet with a project manager from Spectra and present your fulfillment needs, we’ll give you a clear overview of what we can do to help. Our inventory management system is streamlined, metrics-driven, and calibrated to ensure that your stock levels are optimal. Our storage facilities are secure, clean, and climate controlled. And our shipping expertise is one of the most valuable assets that you can add to your organization as you look to get materials to your end users as efficiently and affordably as possible.
Spectra is headquartered in Columbia, South Carolina and serves both large and small clients throughout the United States with fulfillment needs of all types. Contact us directly to tell us about your fulfillment needs and to find out how our expert 3PL fulfillment services can help your business grow more quickly.
