Preparing your Fulfillment Operations for 2018

A well-designed website and great products can draw customers in, but it's actually fulfillment that convinces them to stay. Recurring assessments and planning ahead are the keys for successful fulfillment operations. With that in mind, prepare for 2018 and beyond by looking for ways to improve your fulfillment performance. To start, focus on the following areas.

Resources & Staffing

From forklifts to scanners, warehouse equipment is critical for maintaining productivity and organization. Take stock of these resources and make sure there are enough to accommodate peak seasons and inventory growth. Of course, the staff using the equipment is even more important. Review your annual staffing needs and budget accordingly for anticipated increases. When the time comes to increase staff, evaluate the depth of their training to identify any gaps or common pain points.

Workflow

You can have the best equipment, resources, and facilities, but none of it will matter if your fulfillment processes and operations are inefficient. Make sure to take a close look into the following areas:

  • Receiving – Are incoming products properly labeled and packaged? Is there anything your suppliers can do to make restocking faster and easier for you?
  • Picking & Packing – Are there recurring tasks that are overly complex or time-consuming? Consult with your staff to identify common bottlenecks and come up with solutions.
  • Systems & Software – A robust fulfillment management system will give you the data you need to find inefficiencies and reduce the demand on your internal resources.

Inventory Optimization

Are you losing money from storing unpopular SKUs or from underestimating customer demand? Make sure your inventory management software and the data it provides is being used properly. You should be getting a robust picture of how inventory moves across all of your points of sale. By analyzing the order history from each channel, you can determine purchasing trends and adjust your inventory to avoid stockouts or over purchasing.

UPS & FedEx's Seasonal Surcharges for 2017

UPS and FedEx have both announced pricing changes for holiday season 2017. Typically, these two shipping providers adjust their pricing in tandem - when one announces a change to their shipping & handling rates, the other announces a similar strategy soon after. But this year, that's not the case.

Effective 11/20 through 12/24, FedEx's holiday season rates are pretty straightforward. Essentially, there will be no increased residential holiday season surcharges, except in the case of packages that are oversized (increased to $97.50 per package), unauthorized (increased to $415 per package), or that require additional handling (increased to $14 per package).

UPS on the other hand, is taking a very different approach by implementing peak season surge pricing for all packages. This pricing (+$0.27) goes into effect for Ground Residential packages from 11/19 to 12/2, stops for 2 weeks, then resumes from 12/17 to 12/23. Peak season pricing for Next-Day Air residential (+$0.81), 2nd Day Air residential (+$0.97), and 3-Day Select residential (+$0.97) will only be in effect from 12/17 to 12/23. On top of that, UPS plans to add peak surcharges to packages that exceed maximum size and weight limits.

The goal behind UPS' peak season pricing is to offset the costs of increasing their fleet's cargo capacity, opening temporary facilities, and hiring additional sorting and delivery staff. However, this strategy is not only different from FedEx - it's different from UPS' past tactics. Traditionally, UPS has handled seasonal cost overruns by negotiating the level of volume discounts with a limited number of major retail shippers. For 2017, UPS is basically passing these costs on to their clients by spreading general surge pricing across all shippers. We’ll be looking forward to hearing about the effectiveness of UPS’ pricing strategy once the holiday season ends.

Fulfillment Fundamentals for Ecommerce

Since order fulfillment is a "behind the scenes" process, newcomers to ecommerce don't usually have a strong strategy in place for efficient fulfillment processes. In this post, we'll cover some fulfillment fundamentals to help beginners avoid the costly mistakes of over-stretching or over-complicating their fulfillment operations.

Free shipping vs. fast shipping

Yes, offering free shipping is a surefire way to increase sales. However, it's not free for the seller – and the costs can add up. Fortunately, there are many strategies you can use to reduce or recoup the costs of free shipping. For example, increasing the transit time decreases the cost while still appealing to most customers. In their 2016 "Pulse of the Online Shopper" study, UPS reported that 85% of shoppers are willing to wait 5-7 days for delivery if shipping is free.

Larger orders give you better margins on shipping

Packaging and fulfillment expenses aside, it's cheaper to ship two units instead of one. The profit margin from selling an additional unit will offset the increased shipping costs that result from sending a bigger, heavier package. This is important to remember when adding new SKUs or running promotions. For example, it may be more cost effective to kit products together, rather than offering them for sale individually. When it comes to promotions, the above UPS survey also found that 52% of consumers added items to their cart to qualify for free shipping.

Too many SKUs can negatively impact fulfillment

It can be a great idea to provide flexibility for your customers by offering multiple SKUs containing variations of the same product. However, it’s important to strike a balance. While larger orders return higher margins, too much variety and volume can increase the costs and reduce the efficiency of your inventory management and order fulfillment processes. Before running a promotion, adding SKUs, or entering peak season, don't forget to account for the impact on your fulfillment operations.