Back End Foundation: How a Fulfillment Company Operates

Simply put, the fulfillment industry is comprised of companies that provide services such as receiving, warehousing, repackaging and sending requested product, premium or literature to a client's consumers or sales force. Most companies also offer other services like database management, mail processing or telemarketing.

How many companies are in the industry? No one knows for sure. In fact, Tom Quinn, director of fulfillment services for Mailing & Fulfillment Services Association (MFSA), says it's getting muddier by the day.

“In addition to the unknown number of strictly fulfillment companies, we can now add a high percentage of the 33,000 printers in the country who have at least one fulfillment-type service,” he says. “Add about 7,000 mailers who dabble in fulfillment, as well as some of the 3PLs (third-party logistics providers), and you're almost there. Even the catalog fulfillment providers are branching out.”

While it may be an industry that's difficult to define, identifying the challenges faced by its increasing membership isn't. Today's biggest concern is very likely the same as it was years ago: maintaining profit margins while meeting and exceeding client expectations.

“We have many challenges, but most are minor compared to the three we've always had from our clients: adhere to their budgets, deliver the level of service they expect and meet their deadlines,” says Chris Probst, vice president of sales for Aero Fulfillment Services. What's new is how we're meeting client demands while seeking efficient ways to ‘do more with less.’ Like others in our industry, we've invested millions in technology in the last five years. It hasn't been an easy transition — for us or our clients — but it has proven to be the right thing to do.”

Technology has changed the fulfillment industry in two ways. First, for organizations able to afford the investment (millions of dollars for a medium to large company is not unusual), technology has allowed them to deliver previously unheard of levels of service and accuracy to clients along with valuable data.

However, fulfillment companies have quickly discovered the systems require more than money. In the case of Aero, it was a difficult adjustment. “We needed to transition from a culture of providing high-cost, customized solutions to one of delivering solutions dictated by the system,” says John Gimpel, president of Aero.

“Some of our employees couldn't make the transition — they kept trying to circumvent the system. Some of our clients had difficulty adjusting as well,” he says. “They loved the system's benefits — online, real-time access to their program's inventory and shipments, for example — but they still wanted the flexibility to go around the system. We've learned it was unrealistic to adhere 100% to the system and still meet our clients' needs. We know now how to leverage the technology to get the efficiencies, information and accuracy and still provide flexibility to the clients.”

Secondly, technology has divided the fulfillment industry into two groups — the “haves” and the “have-nots.” Certainly there is no guarantee the “haves” will prosper just because they have technology, but there is no doubt the “have-nots” face limited growth.

Fortune 500 companies won't consider a fulfillment provider without the technology to back up their accuracy, service and quality claims. It's a minimum RFP requirement, like having sufficient warehouse capacity, as the fulfillment industry's challenge of doing more with less intensifies.