3 Ways Your Fulfillment Partner Is Losing You Money

Published : November 20, 2015

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Your choice in fulfillment partner shouldn't be based solely on the prices of your components or finished goods; your vendor's inner workings and performance—and what they mean to you financially—must also be considered. Even if you're getting a "great price" on the basic services you need, if you're wasting resources on filling in performance gaps back at your fulfillment center, those perceived savings will evaporate in short order.

Below are three scenarios where your fulfillment partner may be dropping the ball and costing you money.

1. You aren’t being supplied with the data you need to make strategic decisions; you’re always having to react to problems in your supply chain.

Much is being made in trade publications about supply chain-wide transparency right now, and rightfully so. With innovation and excellence balanced precariously on the ever-narrowing tip of reliable data flow, it's vital that you get up-to-date analytics from every source possible. As John Fruehe explains in Forbes, data must be both actionable and accurate in order to be used for business decisions, which means you must be able to rely on the source providing the data. If you're only getting radio silence from your vendor, you're making reactionary decisions, as opposed to planned ones, out of necessity. Those reactionary decisions have the potential to be very costly as you over or under-compensate for changes.

Is that risk worth a short-sighted cost savings? More often than not, the answer is no.

2. You have to spend so much time managing your fulfillment center that you don’t have time to focus on strategy or business development.

Ideally, a manager should be in place to keep an already-flowing state of orders moving along, not frantically reinventing the wheel to make their fulfillment center work. If your vendor is notorious for patchwork shipments with poor fill rate, late orders or incorrect paperwork, you could be doing more repair work than you might realize.

Flexibility is a required trait in the supply chain, and sometimes that manifests as keeping a robust "Plan B" list of backup vendors. If a vendor knows that they aren't the sole source of a given product or service, they're more likely to step up their game and tighten up delivery practices. Additionally, if you aren't keeping vendor scorecards, you're inviting trouble: if and when you need to bring up an official performance complaint, documented performance failures will only help your case.

3. You’re getting a lot of customer complaints about incorrect, late, or damaged orders.

You are the link between your warehouse and your customers, and if your vendors are holding fast, accurate orders hostage through bad practices, your customers are eventually paying the price. If you've had a lot of complaints about your orders arriving broken, incorrect or late and can't find issues among your own team, consider the impact of your vendor's performance. Are their goods correct and undamaged within a given case pack? Are they getting you what you need on time, or does your team typically need to scramble or make do with what's on hand? You can weather a lot of obstacles in the supply chain and still perform well, but it only takes one bad order to lose a customer!

If you've gotten to this point, it's time for drastic action—be it taking your vendor to task with ongoing assessments or replacing them entirely. If you lose your customer base, it won't matter if you replace your vendor, it will be too little, too late and you'll both end up losing profits.

Be Firm.

You should also avoid the temptation to "woo" your vendor into better performance. While it might work, it also has the potential to send the wrong message: "If you drop the ball you should have been holding, I will reward you if you pick it up again." It's better to reaffirm your expectations within your fulfillment center, and explain that poor performance will result in a termination of the partnership. That way, a vendor is in the right headspace—keeping your business, rather than vice-versa.

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Topics: Vendor Management

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