I’m hot of the heels of a trip to China to visit my factory and suppliers and sourcing agents. This is the second time I’ve gone, and this year was as good as the first (see recap of first visit here).
After 2.5 years, Po Campo is getting ready to move into a new home! And we’re taking our warehouse with us. There are many places that will warehouse and ship your products for you, so why are we doing it ourselves? You need more space, you have to stock a lot of shipping supplies, and it takes a lot of effort.
Short answer: Because we always have. And I kind of like it. And it’s cheaper.
When we started Po Campo, we were making just 200 or so bags at a time. My co-founder and I didn’t have space in our apartments to store them, but my parents lived in a nearby suburb and, as empty-nesters, that had plenty of space and liked the thought of helping me with my business any way they could. We trained my parents on how to ship orders and they would dutifully take care of that for us. We did this for the first 3 years of Po Campo’s existence.
Once we started importing the bags in 2012, we were getting 8,000 bags at once, rather than at most 500. Clearly that was too much to keep in my parents’ basement, so I started looking for a warehouse space. My friend Annie of Mohop shoes was setting up shop in a raw commercial space and had extra room so we moved in there.
Looking back, this would’ve been a good time to outsource the warehousing but honestly it didn’t cross my mind. I don’t know if it is because I didn’t know fulfillment centers existed or because I wasn’t ready to let go of it yet. Our operation still seemed pretty small scale.
As it turned out, our first production run from China had a lot of issues. We had to hand inspect every bag before shipping it out, which we wouldn’t have been possible if we had had outsourced it.
As the business grew, shipping and fulfillment became more complex. We established processes for shipping items from our online store, how to handle drop-ship accounts, how to export, how to work with different stores’ vendor routing guides (basically very specific instructions on how you ship products to them). We negotiated better UPS rates and got discounts for shipping supplies. We installed software to better manage our inventory and sync with our online store and Quickbooks. I always thought it took my parents so long to ship bags because they were older and slower to learn new things, but it turns out that shipping actually takes time and effort!
However, our office/warehouse space had some downsides. It didn’t have a loading dock and we were in the basement, which made moving pallets in and out with the freight elevator a pain in the neck. Also, it was horribly cold in winter and just kind of crappy overall, with flickering fluorescent lights, cracked cement floor and lots of spiderwebs. We were ready for an upgrade.
I was picturing moving into a cool lofted studio space that we could use for an office and maybe a showroom and then outsourcing the warehousing and fulfillment. I shopped around and found some suitable fulfillment companies, but after getting estimates on the cost, it turned out to cost about a third more than we were paying to do it ourselves. (See how most fulfillment companies charge below). Was it worth it?
I decided it was wiser to just move the warehouse into a better space. After looking at other warehouse spaces, I realized our warehouse was actually pretty small, and could be even smaller if we found a place with taller ceilings. I’m happy to say that I found the kind of lofted studio space I was originally dreaming of, and it’s large enough for a small office and warehouse. I think this space will hold us just fine through the next period of growth, and which time we will reassess.
Things to think about when deciding if you want to self-fulfill:
– You can make sure it is done right (mis-ships from fulfillment centers are not uncommon)
– You can access your inventory easily, should you need to do pop-ups, retail events, or sales calls
– You can customize your shipping process on the fly, e.g. if you want to add gift tags for the holidays
– It’s nice to have your product around you because it’s tangible proof that you’re making things
– It’s often cheaper, assuming you’re not paying for a high rent space. Rawer, commercial flex-space is about half the cost of office space.
– If there are any problems with your product, you can catch it before sending it out to your customer.
– It’s very time-consuming and you’ll probably want to hire someone to do it. A college student will suffice.
– It’s more complicated than you’d think. You’ll have to learn about how shippers work, how to get the best rates and how to do the appropriate documentation.
– Depending on your product, it can take up a lot of space. Plus, you’ll need to stock shipping supplies. This isn’t feasible if you live in a high-rent area. Fortunately, Chicago has many affordable spaces in good locations.
– You have to be there to do it. I always dreamed of a virtual office, but storing physical inventory means that someone has to be there everyday to ship it out.
Example of Fulfillment Center Fees
– Rent, for how space you take up in their warehouse
– Picking fee, for every time someone has to pick an item off the shelf or out of a box
– Receiving fee, for every time you send new inventory to them
– Packaging and shipping materials, like boxes, tape, etc.
– Pallet loading fees, if you are shipping out product by the pallet
– Order processing fees, if they have to log-on to any accounts to download orders
– Labeling fees, if your customers require specific labels or bar codes
– Paperwork fees, if your shipment requires special paperwork, such as for exports
– Returns fee, if your customers send back unwanted product directly to the warehouse
– Shipping account usage fee, if you ship using their UPS/FedEx account
This is more specific than how I account for fulfillment costs in our system. I just have two line items in our books for fulfillment: Shipping costs (i.e. UPS) and fulfillment costs (i.e. shipping supplies and the hourly wage of the person who’s doing the shipping). When I was comparing the cost of doing fulfillment ourselves versus outsourcing it, I went through the painstaking process of determining how much we would’ve spent had we priced everything like an outside fulfillment center does, which is how I found out it would’ve cost roughly $500/month more to have someone else do it.