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March 2009 | Volume 12/ Number 3
The Channel Perspective

Fulfillment – How Do You Weigh In?

Every LEC, CLEC, ITSP and VoIP telephony provider needs to answer the question, “Who should perform the fulfillment operation for the VoIP products to be shipped to the end customer?” Should it be performed in-house or should it be outsourced? Depending on how you answer this question could mean success or failure for your company.

In most cases you will find that the answer to the question will come from knowing:

  • Your core business
  • Technical capabilities
  • Financial strength
  • Time constraints
  • Support staff and space availability
  • Size of your organization (e.g., how much do you outsource?)
  • Standard product

What to do?

This is usually a straightforward decision. If you are starting your operation, it is usually best to get the revenue stream started to cover costs. Thus you can focus on your core business, providing telephony services to your customer base. If you are thinking about providing the service in house, do you have to have the space, staff and capability to fund the operation. At this point most companies will choose to outsource.

Some organizations plan to differentiate themselves via the handsets used by their customers. In these cases, they are not going to be using standard product. They need to have their own organization provision and test the units then ship them to the user. Other organizations are going for the ease of use and operation to help with the sale of the telephony services. This would be done with some web-based graphic interfaces. There is a long lead time to accomplish this and it would be substantially more expensive.

What Product to Ship

If the decision is to outsource, your product decision is very important. There are several aspects of this decision:

  • Provisioning
  • Ease of installation
  • Product quality
  • Product return rate

You may find that you can offer an inexpensive unit to provide the same service. This decision will generally come back to haunt you. Poor quality of service overtime will force your customer to move to another provider.

Make sure to select a product that has a low return rate. Product return rates will range from 5% to 50%. If you selected the product with the 50% return rate, you will experience:

  • Customer turn over
  • Increased inventory
  • Increased engineering costs
  • Increased manufacturing costs
  • And many more negative effects

The product decision is the second most important decision in the outsource process.

Outsourcing Choice

Find an outsource organization that will meet your needs. There are many organizations that can provide outsourcing services but all can do it well. Check the following when looking for your outsource service organization.

  • Cost
  • Inventory
  • Order Requirements
  • Provisioning capabilities
  • Support capabilities

The cost for the service will range from $4 to $10 a unit. This can be significant based on your approach to the market. When compared to internal staff, the cost is quite low. Many outsource organizations will have to place orders with the manufacturer prior to your shipments. Make sure a sufficient inventory is available for the products you select. Outsource companies will tend to work better with one manufacturer. You may have to select the outsource organization based on product alone.

Order requirements can cause problems. Your organization may have to order 100 at a time. Make sure to identify any order lead times that may interfere with the delivery process to your customer. Your product cost may also be based on volume. Negotiate the best deal for your volume and make sure to renegotiate when you volume increases.

Lastly, make sure that the outsource provider will be able to provision the equipment properly and provide you the necessary shipping reports. Check their online support for ease of use. Make sure you have direct access to their order management and support organizations. IT

Don Witt is President of cyLogistics (News - Alert) (

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