Online Exclusive

The Price of Fulfillment

Whether they know it or not, every printer is already involved in executing some type of fulfillment services. They may not call it fulfillment, may not promote the service, may not charge for it, but every piece of printed material has to be packed and shipped somewhere.

Fulfillment services are often disguised, not readily recognized. When variable printing is thrown into the mix, when you personalize and customize print to each person the piece is delivered to, that’s also a fulfillment service, says Tom Quinn, president, Q Fulfillment Solutions. “All variable printing machines, even color machines, are fulfillment devices,” he explains. “They are not printing machines. For a long time, the problem printers were having is that they didn’t know how to sell it; they were selling variable print as a short-run option. It’s a fulfillment service.”

One of the biggest issues within the fulfillment arena is setting pricing parameters, notes Quinn, a renowned consultant who also holds Mailing & Fulfillment Service Association (MFSA) seminars. In fact, his most popular seminar—recently held at Graph Expo—covers just that that subject.

“We use time motion studies to establish how to bill out those rates,” says Quinn. “How long does it take to build this activity? I like to use numbers divisible by 60; we round everything up to minutes. Then use time motion after that. You have to price out those labor rates, measure how much time it takes to do a specific activity and then bill accordingly.”

The challenge—a fulfillment company could have as many as 60 different pricing parameters, with each application is a little bit different from the others.

“We want you to store and ship sales collateral to our sales force; that’s one application,” notes Quinn. “Now the company is getting leads; they want you to send those lead packages out, and also capture where they are and send a notification to the sale rep that they were sent out. That’s another application. We are going to Graph Expo, we want you to send this big shipment over there; with everything clearly marked; when we are done; after GE, and we just throw stuff haphazardly back in boxes and put a UPS tag on it to ship back to fulfillment we want you to open and inspect every box and put back the unused material back in inventory—that’s a third application.”

It just continues to build.

That’s not even considering a whole other part of fulfillment—packing and shipping premium products printed with companies’ logos, such as golf balls, baseball caps, and t-shirts.

The Price is Right?

One company that took Quinn’s lessons to heart is CCG Marketing Solutions.

“Quinn helped me understand that you have to cover your overhead—your fixed costs, persons processing orders, web hosting, inventory control, and reporting, and have the fees for variables in place as well,” explains Jeff Pinkin, EVP Sales and Business Development, CCG Marketing Solutions. “These are all costs that have to be covered. “

Ten years ago, the industry operated on a fixed price model, says Pinkin. “It didn’t matter what was in the carton, it would cost $7 dollars a carton. That would include everything-gate entry, storage, inventory control, data entry, packing, sending and shipping.”

But downward pressure within the industry forced fulfillment companies to move to an a la carte model. “There is no going market rate; we could be bidding a job $4 per order going out, and our competitor could be bidding $7 or $1,” says Pinkin. “Prices are all over the place; there could be a variance of 35 to 40 percent.”

Adds Pinkin, “It became impossible to win bids based on that simple, fixed pricing model.”

Everything is charged separately—from how an order is entered to line time to special instructions. There are charges for IT and for reverse logistics—when returns are made.

It’s made pricing much more complex, but “it’s what the market demanded,” acknowledges Pinkin. “This started out with the larger companies started pricing things these way and trickled down. It gives clients more control.”

One of the problems, says Pinkin, is that not all fulfillment companies are considering their fixed costs when they are pricing. “They are hurting themselves and hurting other companies also,” he says.

To counteract the wildly diverging prices, CCG, which is based in West Caldwell, NJ, looks to establish relationships that go beyond mere fulfillment. The 45-year-old company provides integrated marketing services, specializing in technology driven fulfillment, as well as supporting brand building tactics such as literature and sample fulfillment, direct mail, sampling, couponing, social media engagement. and rebates.

The Beauty of the Business

When a company is coming into the business, pricing is a big challenge, acknowledges Jim Rushing, president of R Fulfillment Solutions. “An order can have a lot of elements; it can come in one shot or individually as separate items. It is so varied—that’s part of the beauty of the business.”

Rushing, an auditor for MFSA, travels the country helping companies improve their fulfillment operations to ultimately receive accreditation. He looks at operational and technical requirements in receiving; hand assembly and kitting, shipping, inventory management, system reporting, returns, the quality of the software used to drive the business, client services, and even security—all are audited to make sure the company “is top notch.”

One of the newer trends is on-demand fulfillment, reports Rushing. Orders can be built on demand, or built in bulk and placed in inventory. Instead of 100 or 1,000 kits, a fulfillment order might require building three kits on demand.

If your company builds the kits in bulk and puts them into inventory; then there is a cost element of storage. If the kits are built to order, let’s say 10 demand kits instead of 1,000; each kit becomes more expensive to build.

Not an Easy Process

Of course, there are printers who have brought fulfillment in-house as a value-add service to their printing business.

The move is not a simple feat.

First off, “printing and fulfillment employ very different business models,” notes Quinn. “Printing and mailing use what I would call production or manufacturing models, producing revenue by running machines and selling the output. In fulfillment it is very much a service model; it’s not about the machines. We have software, people, and a building.”

Often printers move into fulfillment because a client asks them to do it. They go out and buy the software—necessary to be successful; they partially install it and then run fulfillment like it is part of the printing business. “You can’t run it that way,” says Quinn.

Fulfillment is the last touch before the consumer gets it, explains Complemar, chairperson, president and CEO, Christine B. Whitman. Headquartered in Rochester, NY, Complemar provides direct mail, short-run digital printing, fulfillment and distribution services to Fortune 1000 companies.

“It requires a very carefully orchestrated production schedule to accommodate clients who have their projects come late,” says Whitman.

Our business requires a complex infrastructure, adds Ann Wood, VP of operations. “For printers, it’s not part of their core competency; it takes only one bad order to ruin a relationship with a client,” says Wood. “A lot of printers underestimate how difficult it is.”

Of course, companies like Complemar would prefer that printers stick to their competency and not encroach on theirs’. Wood does bring up a good point, though. If you are a printer, for every 10 dollars of printed material, you would earn less than $1 dollar for fulfillment.

“The risk of not effectively delivering the job for $1 is not a great idea, without thinking through the type of infrastructure and IT organization and capabilities that rare required to provided fulfillment in an effective manner,” says Wood.

The steps involved can be overwhelming, performed like a tightly choreographed dance number. One misstep, and everything falls. Complemar, which is ISO 9000 certified and MFSA accredited company, uses a Six Sigma approach to insure that the “process is done correctly; there are many places within that process that it could break down,” notes Whitman.

While fulfillment involves a series of parts necessary to get the project out the door—hand assembly, pick/pack and ship, warehousing, customer service, and information technology—there’s one metric that’s absolute essential to control: Inventory accuracy.” “If you tell a client you have 55,000 pieces you better have 55,000,” notes Quinn. “The primary reason companies change fulfillment vendors is because of inventory accuracy.”

Adds Quinn, “Inventory control starts at the back door; in a printing co. the lowest paid employee is the guy doing receiving and shipping. That’s not the guy you would hire to do receiving for a fulfillment service. The customer service expectations are entirely different.”

Perhaps the biggest difference is in the company mindset. “The fulfillment business is about being a support for another marketing organization,” says Quinn. “You become part of their business; you have their inventory, you communicate with their salespeople, maybe even their clients.”

Adds Quinn, “if you are printer, you are a vendor; if you’re in fulfillment, you’re a partner.”