Mailing & Fulfillment Special Report — Getting Started In Fulfillment

By Tom Quinn

MOST OF the printers I have visited over the past several years are already in the fulfillment business with one or more applications. In fact, several applications reviewed were very sophisticated, consisting of both static and dynamic content and requiring considerable data manipulation plus mastery of several shipping methods.

Printing companies are very entrepreneurial in finding ways to satisfy customers’ needs with their existing resources. In addition, printers have taken the leadership in the Web-to-print industry, which has provided them experience in establishing shopping carts for their clients.

So, getting started in fulfillment may not be an entirely correct title for this article, but it definitely is a guideline to growing the business—correctly. Even so, I’ve heard many printers say that they are in fulfillment, but don’t know if they are doing it right. The following steps are presented in what is considered the optimal order. However, the incorporation of fulfillment within printing operations is seldom orderly and optimal, so using the data as a guideline or checklist is suggested.

Step 1: Type of Fulfillment. It is my recommendation that a printer should focus its fulfillment activities on specific applications. There are many types of fulfillment, but the last two fulfillment surveys completed in conjunction with the annual MFSA/NAPL Fulfillment Conference substantiated that fulfillment projects (handwork) and literature fulfillment are the top applications completed by printing companies.

These applications are a natural extension of printing applications and represent the basic fulfillment applications. It is important to understand that a literature fulfillment program, which requires the printer to store and ship material for an infinite time period and maintain outstanding inventory accuracy, will also bring other applications.

These additional applications include: database management, returns processing, trade show and special events support, premiums management, print-on-demand applications, lead inquiry fulfillment and others. These applications are all a natural extension of “capturing the sales collateral material” for a company.

There is a tendency for printers new in the fulfillment business to find fringe applications, which require either special software or additional capabilities. These applications include product fulfillment, e-commerce and other applications not associated with the material printed for the customer. The primary reason for a printer to enter the fulfillment business should be to keep the presses running and the development of the customer as a partner.

The survey previously referenced also revealed that customers on fulfillment programs show a growth in print volume—and at higher margins. This is a good reason to keep your sales personnel focused on the literature fulfillment projects and programs.

Step 2: Selecting the Right Software. It is extremely important that printing establishments select the correct software for their applications and company strategy.

The fulfillment industry is fortunate to have five very competent and experienced vendors providing fulfillment software. Each of these vendors meets the criteria of understanding the back end of the business. A true test of fulfillment software lies in its ability to guide in the management of inventory and to provide the correct tools to provide world-class inventory accuracy.

Following are the names of the five fulfillment software vendors that are also Mailing & Fulfillment Service Association (MFSA) members. More information can be found on each vendor by browsing the MFSA Website at www.mfsanet.org.

Each of these software packages has specific strengths, and I suggest you plan to visit their booths at the upcoming Graph Expo & Converting Expo exhibition in October for more detailed product demonstrations.

Step 3: Fulfillment Facility. Ideally, the fulfillment facility should be located separately from the printing and, possibly, the mailing facility. The primary reason is that these facilities are very successful in buildings with eight-foot ceilings and two dock doors. A fulfillment facility should have at least 20-foot-clear ceiling heights to allow installation of racking, which will hold up to four pallets high.

Think high and don’t be afraid to think about large footprints for the building in the beginning. Once you get started in the fulfillment business, you will find it is quite easy to quickly get up to 1,000 pallets. A good migration strategy is to find a local developer of office/warehouse space with excess inventory of space.

This developer will be more than glad to provide additional and temporary space for you in the future. See the accompanying diagram of an excellent startup 17,500-square-foot facility that had the potential to provide up to $2 million in revenues. Note on the diagram the number of dock doors (four), the material flow, the lighting in the aisles, the space for handwork, and the accessibility of telephones, computers and electrical outlets.

These factors are all important to the successful operation of the fulfillment center. Remember to “think high” when researching fulfillment facilities.

Step 4: Equipment. The machinery requirements for a fulfillment operation are as follows: pallet racking and shelving, forklift, electric pallet jack, pallet jacks, hand trucks, picking carts, counting scales, floor scale, pallet wrapper, computer workstations, shipping workstation, receiving workstation, hand pallet strapper, work tables, and several sections of adjustable and expandable conveyors.

Based on individual needs, you may also need a dock plate for receiving. Your individual applications, such as large point-of-purchase materials, may require specific equipment. Most of this equipment can be purchased second hand, with out fear of premature failure.

It is important to start simple and master the basics of warehousing and inventory control with the basic tools of the trade before proceeding into something more sophisticated, such as pick to light or RF. A startup approach that keeps things simple and efficient has always worked in the past.

Step 5: Supplies. These are as follows: packaging materials and tape, boxes, pallets, cleaning supplies, strapping materials and specialized shipping containers for special applications.

These materials are available in the shipping department of the bindery. The only difference will be the large variety of packaging materials that may be required, such as padded envelopes, Tyvek envelopes and special corrugated boxes for kits.

Step 6: Networks and Phones. It is expected that the print company network will be installed in the fulfillment facility. The amount and type of computer hardware required will be dependent on the software vendor selected.

Several vendors require fully hosted applications, which require the procurement of servers and the installation and maintenance of software in your facility. Other software providers are Application Service Providers (ASPs), which are accessible through a Web browser and store the operational program and software in a central location.

In either case, make sure you follow the manufacturer’s suggested configurations for optimal operation. It is not the right place to skimp. Sharing servers and telephone lines will slow down the operation of your program and adversely affect customer operations. This is a high-tech business, so you need to respond in a high-tech fashion. Do not try to cut corners in providing the right access to Websites and operational equipment.

Step 7: Personnel. Most fulfillment centers can be started with two or three people. These would include a fulfillment manager, warehouse manager and a warehouse/fulfillment specialist.

The fulfillment manager should be a fulfillment industry expert and have a very thorough operational understanding of the fulfillment software package being utilized. This individual should also have the ability to make sales calls, guide clients through the fulfillment setup process and serve as the initial customer service person.

The warehouse manager should be hired initially, because he/she will be responsible for installing the most important part of the fulfillment system—the warehouse management system. That person will also be charged with writing all back-end procedures and training new personnel as the center grows.

The warehouse/fulfillment specialist need not be a full-time employee, but can be a bindery person who can be trained and utilized as necessary.

Fulfillment projects can be completed by temporaries with the warehouse manager or specialist providing needed supervision. Note that there are no direct IT personnel assigned to the center. If you have in-house IT staff, they should only be utilized as necessary and not assigned directly to the operation.

All IT time spent with the fulfillment center should be billable to the customer. The operation just isn’t profitable enough to sustain a full-time IT employee. The most common mistake made by startup operations that affects bottom line performance is over-staffing.

Step 8: Sales and Marketing. Most printing companies are dragged into the fulfillment business by their customers. In fact, 88 percent of the companies responding to the last survey stated that as the primary reason.

Actually, getting into the business is not as hard as growing it and making it a profitable entity. So, it is imperative that company ownership and management make a concerted effort to market and sell the fulfillment capability to additional customers and to use the fulfillment offering to attract new clients.

The first step is to decide how to sell the service. The most successful method has been to utilize the print sales personnel to open the doors, and then rely on either management or the fulfillment manager to assist and drive the sale from that point forward. More sophisticated and larger printing operations may need a specialist in the business to provide establishment selling skills to the organization.

Ownership must also provide a basic marketing campaign to take the new service and new company message forward to clients and prospects. Don’t depend solely on your existing print sales reps to develop their accounts, as there has been a general reluctance on the part of print salespeople to accept new services.

Step 9: Pricing. Establish a pricing matrix for the fulfillment operation that includes all services completed. Some of these parameters, such as storage and customer service, have never been charged by printers in the past. As a result, justification with the customer and sales personnel will have to be developed and presented.

Following are a few of the basic pricing parameters that should be specified:
Storage - $/pallet/month
New Product Setup - $/setup
Warehousing - $/hour
Receiving - $/receipt
Cycle Counts - $/hour
Order Receipt - $/order
Fulfillment Cost - $/order
Shipping Materials - Cost + percent
Reports - $/report
System Usage Charge - $/month
Customer Service - $/hour
Initial Setup Charge - Total $

Step 10: Commitment. The most common problem I’ve observed is the lack of ownership and management commitment to learning and growing the business. The decision to add fulfillment to your current operation is not to be taken lightly.

This is a service business as compared to your current production business—printing. Pricing is based on services, employees and systems—not machines—and furthermore is a partnership arrangement with your customer. When you open a literature fulfillment application for a client, you become an extension of their operation and enter into a whole new business relationship.

A printer can easily enter into the fulfillment business with a $200,000 investment. This is much less than the cost for most pieces of equipment utilized in the printing business, including most bindery gear.

However, the investment required is in your time and dedication to understanding, driving and growing the fulfillment operations. If successful, you will increase print runs, improve print margins and decrease turnover (by up to 300 percent) by incorporating fulfillment into your service mix. So do it right—the first time. |||

About the Author
Tom Quinn is director of fulfillment services at the Mailing & Fulfillment Service Association (www.mfsanet.org). He can be reached at tquinn@mfsanet.org.

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