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Fulfillment Services -- Benefits, Challenges Of Fulfillment

June 2005
When the National Association for Printing Leadership (NAPL) asked participants in an economic survey which service areas they expected to grow fastest over the next two years, fulfillment topped the list, cited by 59.6 percent of respondents. Not surprising: The association's research shows that, perhaps more than any other area of service diversification, fulfillment is customer-driven.

As more and more print customers seek to limit the number of suppliers they deal with, they're calling on one or two key providers to supply a wide array of fulfillment services.

According to NAPL's working definition, fulfillment entails the storage, management and timely distribution of a client's materials (literature or products, for instance) to the client's distribution outlets or end users. Fulfillment services can range from basic pick-and-pack operations to sophisticated, Web-enabled programs that provide client interfaces and order and inventory management.

When implemented properly, fulfillment can have a positive impact on the sales and profit performance of the entire organization. According to the NAPL 2005 Survey of Fulfillment Practices:

* 76.2 percent of survey respondents reported an increase in overall print volume from clients using their fulfillment services.

* 61.9 percent said overall client profitability increased as a result of offering fulfillment services.

* Fulfillment decreased client turnover from 13.1 percent for customers purchasing printing only to 5.7 percent among clients buying both print and fulfillment.

But there are several challenges for printers seeking to establish a successful fulfillment operation. For instance, graphic communications industry analyst Heidi Tolliver-Nigro, author of NAPL's "Diversifying With Value-Added Services: Unlocking Hidden Profit Potential," and project manager of NAPL's upcoming book on fulfillment, notes that many printers have been doing a form of fulfillment for years for free by storing customers' printed materials and not charging for it.

Nothing Is Free Anymore

"The first challenge in setting up a profitable fulfillment operation is transitioning from a 'free storage' business model to a revenue-based model," she notes.

A key part of developing a revenue-based model is to implement an appropriate pricing strategy. "Understanding the full costs of fulfillment can be difficult, but you need to understand the costs in order to price at a profitable margin," adds Tolliver-Nigro. "Fulfillment is an entirely different business from printing or prepress, with different rules, requirements and cost structures."

Part of the challenge for printers is that most of the costs incurred by fulfillment services do not arise from producing something, as they do with printing. "When you offer fulfillment, you're charging for your time, space on the floor, and the tracking, monitoring and reporting associated with the service," she says. "These are things printers are notorious for under-valuing. But there are costs associated with these activities and, to make a profit, you need to know what they are."

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