If a $300 million company isn’t willing to invest $350,000 into a license-plate-based inventory tracking system, Jeff Kaiden, founder and CEO of Capacity LLC, knew the small and mid-sized businesses he and his partners were targeting with their warehouse order fulfillment services wouldn’t be either. So when he and co-founders Thom Campbell, chief strategy officer, and Arlen Fish, chief financial officer, began building the business plan for their company, they knew they needed to develop services with a twist.

Prior to founding Capacity, Kaiden worked as a material handling design consultant, designing warehouses and distribution centers and the software that runs them. He primarily worked with private companies with revenues between $30 million and $300 million.

“We would do a whole layout, show the companies where their conveyors would go, and tell them how much labor they would save, what kind of software they were going to put in, and what the software was going to control in the business,” said Kaiden. “The price of the software was always a sticking point, though.”

With that in mind, Kaiden, Fish, and Campbell decided to develop a service that multiple companies could share without decreasing the value of what they received. They also wanted to make sure the quality of their services was at par with what larger companies were being offered but at a lower cost.

Full-service fulfillment

Eleven years later, that’s exactly what Capacity does. But what Capacity’s clients share goes beyond the software solution.

For companies willing to hand over their entire warehouse and fulfillment process, there are also human resources components to be considered. From warehouse managers to receiving managers, shipping departments to inventory control departments, Capacity enables smaller companies to share all warehouse management and fulfillment fixed costs.

The scope of Capacity’s clients’ needs can be broken down into three channels. The first is e-commerce, selling product at full retail value directly to e-commerce customers. The second is through the EDI channel, which means distributing and selling large orders to companies such as Target, Walmart, CVS, Whole Foods, Toys“R”Us, or Home Depot.

“We’re a bit unusual among 3PLs because we don’t focus on one channel,” said Kaiden. “We handle hard goods, soft goods, pharmaceuticals, cosmetics, toys, clothing, medical devices, solar panels, and we have an institutional familiarity with almost every retailer in the US. We even ship to Tractor Supply Company.”

The third channel covers a wide range of client needs for retailers such as mom-and-pop pharmacies and clothing stores, small chains, and companies like TJ Maxx that do not use EDI but instead buy remainder lots. “We call it the manual channel, which also includes the drop-ship channel,” Kaiden said.

In addition, 10% to 15% of Capacity’s revenue comes from product assembly. And for small companies with products being made in one location, packaging in another, and instructions in yet another, the company’s ability to remove the stress of having to bring the various components together is welcome.

“We make the products here, meaning we comply with GMPs (good manufacturing processes),” said Kaiden. Capacity is also a registered with the FDA as a contract labeler and as a hold site for the Department of Fish, Game and Wildlife. “Essentially, our customers can ship their various components to us, and we make the actual finished product.”

Campbell said all of these components combined distinguish Capacity from others in its industry. “We ship EDI and e-commerce rather than doing one or the other, and we’ll touch a product on the level of the individual unit,” he said. “Those services are hard to come by in most fulfillment centers.”

“Most of our competitors can’t capture serial numbers or lot numbers, both on the inbound and outbound, like we can,” said Kaiden. “We’re a full-service 3PL fulfillment house.”

The extra mile

Perhaps the biggest boon for companies working with Capacity is how the New Jersey-based company helps them grow their businesses. For small start-ups, taking orders and then picking, packing, and shipping them takes a tremendous amount of time away from customer care, product development, and merchandising—all important elements when trying to grow a business.

“We help businesses by freeing up the principals so they’re not focused on areas they shouldn’t be,” said Kaiden. In addition, because it is at all times staffed with more than 200 warehouse associates, if a customer suddenly gets a big job from a major retailer, with a day’s notice, Capacity can fill the order.

“With that type of service, your retailer customers are more than satisfied, and your e-commerce customers aren’t being neglected because your attentions were drawn elsewhere,” Kaiden said. “Then, of course, we help facilitate the EDI relationships.”

Because Capacity already trades so many documents with retailers, the time to launch with a new retail customer can take, at the most, three weeks. In addition, Capacity will help its customers fight what it deems as unfair compliance charge backs, which are the result of missteps in how a customer handles a retailer’s rules as to which types of carriers to use, what kinds of labels need to go on boxes, and what types of EDI documents need to be transmitted.

“If there is a charge back and we felt we followed the letter of the law with respect to the routing requirements, we can often substantiate it,” said Kaiden. “We will go the extra mile to help our clients fight customer charge backs, and, in the future, those retailers tend to respect our clients’ abilities to execute those kinds of requirements.”

Direct participation

Capacity’s founders are also focused on making sure their company grows and evolves beyond their control. It recently completed a SAS-70 audit, is cGMP certified, and is focused on achieving ISO 9000 certification in 2012.

Kaiden said these certifications are important because for a company to have a life beyond the entrepreneurs that founded it, it eventually needs to be able to develop its own expertise. Each of the 225 employees at Capacity is given a numeric designation, and each has designated SOPs they must know, must follow, and can revise. In this way, Capacity will continue to function and grow without the direct participation of its founders.

“The idea is to not develop a cult of personality,” said Campbell. “You want to enshrine a positive corporate culture to the greatest extent possible so you can develop documented quality indicators about how the company does what it does so well.”

These steps are setting the table for Capacity’s future, which Campbell sees as a new era of growth. He said in becoming cGMP certified, the company has moved out of young adulthood and into a mature position, prepared to handle almost any challenge the industry offers. He admits Capacity isn’t the biggest provider of warehousing fulfillment services out there, but being big doesn’t necessarily mean being the best.

“We want to create a brand that is identified with fulfillment excellence,” he said. “Through work with our clients and our partners, we believe we can create a best-of-breed service in an area that doesn’t currently have a branded offering.”