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What is a fulfillment service and why should I use one?

A fulfillment service is a contract method of delivery of your products.You should use this model if it best fits your business.There are several advantages of using a fulfillment house, but there are several disadvantages too.You should analyze your options and pick the fulfillment service only when it is the best choice for your company.

You have three basic models to run your business' product logistics.This article will give the basics on all three models and then explain when the fulfillment service is the best choice.

Drop-Shipping Model
This method is when you work to sell the product for a manufacturer.All products are shipped directly from the manufacturer to the buyer and you never touch the product.The advantage to this method is that you have no inventory costs and you may be able to get the manufacturer to become completely transparent.Sometimes you are able to send your labels and invoices to the manufacturer and it makes it appear to the customer that they only dealt with you.

The disadvantage of this model is that you will have lower margins to make a profit on because you will not be able to pay shipping in bulk.This means that you will have to be selling a product that has a large enough margin in order to use this model.The other disadvantage is that customer service is extremely limited.If the customer does not get their package as planned, you may not be able to navigate the manufacturer's customer service to get a straight answer.They may promise you one thing and you pass that information to the customer to find out the information is incorrect.You now look bad instead of the manufacturer.

Inventory Model
This is the traditional system where you order your entire inventory and store it, sell it, and ship it.The advantage to this method is that you can ship immediately when product is ordered because you have it on hand.You are responsible to reorder when stocks get low.You also have good customer service because you know exactly what is happening because you are in charge of it all.

The disadvantage of this model is that inventory can tie up a lot of capital.Additionally, you may have to sell things at a discount if you have too much product when the season is over or the product becomes dated for some reason.Last, you have to provide your own fulfillment process to get the product to the customer.Many traditional stores have trouble with this part because they are used to the customer coming in to the store to get the product.

Fulfillment house model
This model is common to internet companies and is actually a subset of the inventory model.A fulfillment house will handle some or all of t he aspects of getting the product to your customer.The will maintain inventory, order new product, assemble, pick, pull, pack, and ship, all according to your specifications and with your labels.The fulfillment house often can handle the order taking and provide an ordering and customer service call center if one is needed.

The advantage of this method is that all of the logistics are done by the fulfillment house.All you have to focus on is marketing the product.The fulfillment house will take care of the rest.The disadvantage of this is that the fulfillment house charges for their services.

In conclusion, you should use a fulfillment house only when the profit margin is large enough to pay the fulfillment house.And the other requirement is use the fulfillment house when you can make more money focusing on selling the product instead of managing the logistics.

In summary, you have several different methods to handle the logistics of your business.The fulfillment house model should only be used when it is the best fit for your business.Usually this is when you have a high enough margin to pay the fulfillment house and you make more money selling the product instead of managing the logistics.

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