| Case Studies Keeping Corporate Costs in Check: A Cost/Benefit Case Study in Fulfillment Helping Startups Grow: A Cost/Benefit Case Study in Fulfillment Mentor Publishing Inc. is a rapidly growing publisher of educational materials and is headquartered in the northeastern US and in constant need of additional space. It has already outgrown its expansive new headquarters and corporate offices occupy buildings in the immediate area. Mentor plans new product lines for the near future and is making a major investment in a new marketing campaign that will dramatically increase sales. Currently, order processing, warehousing, and related support services are occupying potentially valuable office space that, as the company grows, is desperately needed. Mentor conducts its product and literature fulfillment through in-house departments. Individuals within these departments have performed the same job function since initial employment with the company. Wages, vacations, benefits, and bonuses are well above market levels. Production and material handling equipment has aged or has been upgraded and is presently under-utilized. Additionally, Mentor’s in-house fulfillment and shipping activities are cyclical. Requirements are large during special promotions/introductions in the fall, but relatively light for the remainder of the year. Mentor asks AMERICAN FULFILLMENT to assist them in evaluating its needs. The Account Development Team meets with Mentor to outline services and capabilities and better define the parameters of Mentor’s needs. AMERICAN FULFILLMENT delivers to Mentor a quote on the project, along with a draft of a services agreement that outlines the requirements and understandings of both parties. Based upon demonstrated, substantial cost savings, Mentor elects to have AMERICAN FULFILLMENT handle its needs. Valuable space becomes available. Mentor pays only for what it uses, reduces labor and equipment problems, and realizes yearly expenses that are a fraction of former departmental costs. Marketing and purchasing managers are able to budget more accurately and assume greater control and accountability for these services. Mentor gains valuable knowledge on its expenses and usage through the monthly reports that are generated by AMERICAN FULFILLMENT for its use. Mentor Publishing Inc’s In-house Departmental Expenses Resemble the following:
NOTE: These values assume no departmental profits or extraordinary expense items. Based upon figures provided by Mentor to AMERICAN FULFILLMENT, the following are the charges associated with fulfillment services for Mentor for one year.
Back to Top Virtual Entertainment Inc. is a startup that markets compact discs through multiple channels. Currently, the company consists of two partners and an administrative assistant. These three individuals perform all essential duties of the company—administration, marketing, sales, finance, and order fulfillment. Inventory is currently housed in short-term storage. Over the past six months, the company’s growth has been restricted because the time required to fill orders has substantially cut into time spent on sales and marketing. Virtual Entertainment explored the idea of hiring a production assistant to fill orders and leasing warehouse space to store its inventory. However, the costs incurred implementing these items were a large impediment to growth. Also, during slow periods Virtual Entertainment would still be required to pay the expenses associated with this expansion. Virtual Entertainment contacts AMERICAN FULFILLMENT to inquire about its scope of services and up front costs. AMERICAN FULFILLMENT explains that with little or no up front costs, it can provide warehousing, inventory management, order processing, pick and pack services, and shipping. AMERICAN FULFILLMENT and Virtual Entertainment enter into a service agreement where AMERICAN FULFILLMENT provides the full scope of fulfillment services and invoices Virtual Entertainment by the piece shipped and warehouse space utilized. A dedicated customer service representative is assigned to personally oversee account activity and serve as a liaison with Virtual Entertainment. Virtual Entertainment realizes significant cost savings, and now devotes 100% of its time to the promotion and growth of the company. For the first year of operation, Virtual Entertainment applied the following cost estimates to in-house order fulfillment:
Based upon figures provided by Virtual Entertainment to the following charges are associated with fulfillment for one year:
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