3PL order fulfillment: dealing with minimum charges

If you are searching for 3PL order fulfillment companies in North Carolina, or anywhere, you may come up against “minimums.” These minimum requirements can be a non-starter for smaller companies just ramping up their volumes. Importantly, however, not all 3PLs treat minimums the same way. In this article, we’ll examine order fulfillment minimums and explain how to best navigate them.

What is an order volume minimum?

The term “minimum” in this case refers to a minimum level of activity required by fulfillment companies to consider working with you. It can relate to a minimum order volume, a minimum amount of fees to be charged, or a minimum storage volume (number of pallets or square feet). For eCommerce fulfillment, larger 3PLs will often qualify prospective customers by asking for their current order volume per month. If your volume falls below its minimum (let’s say 5,000 orders per month), the company will pass on the opportunity.

The 3PL’s reasoning is twofold: (a) warehouse space is valuable and (b) the company makes its money in eCommerce order fulfillment whenever your products are touched (e.g., picked, packed, shipped). So, if your products are taking up substantial space in the warehouse but your volumes are low, the 3PL may prefer to give that space to a company with more orders and more activity.

Do all fulfillment companies have minimums?

No. For instance, among fulfillment companies in North Carolina, Kanban Logistics has no minimum order charge and just a nominal storage minimum per month. While Kanban works with several Fortune 1000 companies, our focus is on serving small and mid-sized businesses and helping them grow.

The problem with high minimum charges is that they create a dilemma for growth-oriented companies, particularly online retailers that are just gaining traction. These companies may lack the volume required to work with some of the larger fulfillment centers, but they want to avoid having to change providers as they grow. Changing providers requires significant time, coordination and systems integration that can disrupt a business.

If you’re one of these companies, it may be in your best interest to find a 3PL that will scale with you – accepting your current order volumes as they are, while being ready to ramp up space and services as sales increase.

Tips for navigating 3PL order fulfillment minimums

Minimums can be negotiated. It's worth noting that some fulfillment companies are open to negotiation regarding their minimum requirements. Smaller businesses may find success in discussing their specific needs and growth projections with the fulfillment provider to arrive at a more flexible arrangement.

Solutions can be customized. Some fulfillment companies offer customized solutions based on the unique needs of a business. While they may have minimums in place, they might be willing to tailor their services to accommodate the specific requirements of smaller businesses, fostering a more collaborative and adaptable partnership.

Beware hidden costs. It is vital that you fully understand the terms and conditions associated with a 3PL’s minimum charges. In some cases, businesses may encounter hidden costs that go beyond the stated minimums, such as additional fees for special handling, expedited services, or other supplementary charges.

Analyze cost vs benefit. While minimums are certainly a piece of the puzzle when negotiating with a 3PL, they are far from the only piece. While a 3PL might have lower minimums, it's crucial to assess the overall value of the services provided, including factors like shipping accuracy, order processing speed, and customer service.

Don’t forget technology. Fulfillment companies that utilize top-tier warehouse management systems (WMS) and other technology can offer better visibility into inventory levels, order processing, and shipment tracking, contributing to a more efficient and transparent supply chain.

Turn to Kanban for minimum-free order fulfillment

At Kanban Logistics, we pride ourselves on being the “right 3PL” for small and mid-sized eCommerce companies across a variety of industries. We have no minimum volume requirements – we can start small and support your operation through every growth stage. As part of this support, we offer value-added services such as kitting, rework, packaging, returns processing, and cross docking. To learn more about how Kanban can support your company’s growth, contact us today.