Dealing with minimum charges from fulfillment companies

If you are searching for warehouse 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.  Following are some thoughts on minimums.

What is a minimum?

minimum charge appliesIt’s a minimum volume requirement established by fulfillment companies that can relate to order volume, fees, or storage volume (number of pallets or square feet). A larger fulfillment company will often qualify prospective customers by asking for their current order volume per month. If it falls below the minimum (let’s say $500 per month), the company will pass on the opportunity.

Other companies may have a minimum square footage requirement that results in a storage charge, even if your volume falls below the minimum requirement.

Still other companies charge a minimum monthly fee regardless of the actual space costs and labor costs you incur.

Why do fulfillment firms have minimums?

Fulfillment companies have minimum charges to cover operational administration and other overhead charges. They seek to recoup these costs to ensure the profitability and viability of the business.  The types of things covered under a minimum charge include supervision, clerical staff, technology, insurance, taxes and other costs that cannot be assigned to specific customer projects.

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 $100 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.

The right answer may be to choose a fulfillment partner, like Kanban Logistics, that can scale operations to meet your business’s requirements – from your first step outside your garage right through to the growth and maturity stages of your business.

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