Efficiency Essentials for Order Fulfillment

Continuous process improvement strategies can make or break businesses in the order fulfillment industry. But with day-to-day operations as complex as they are, it can be challenging to rethink processes in order to find and fix inefficiencies. If you find yourself struggling with improving your fulfillment capabilities, stop and look closely at these essential areas.

Costs per order

Group and measure your fulfillment expenses into categories of

  • Freight
  • Management
  • Direct and indirect labor
  • Facilities (including operating expenses like utilities and security)
  • Shipping supplies

By understanding the financial impact each area has, you'll be better prepared for identifying where improvements will net the greatest ROI. Since freight expenses are usually greater than all of the other areas combined, renegotiating with carriers for better rates is a common starting point for improving cost efficiency. Enterprise shipping systems (like what we provide to our clients at Fulfillment Works) are excellent for streamlining this process for ongoing freight cost optimization.

Time costs

Analyze your service workflows and their performance metrics. Compare your metrics with industry averages to see how you measure up. Similar to understanding your costs per order, the goal here is to hone in on the areas that will benefit the most by improving efficiency.

Space utilization

Optimizing the layout of your facility and how you slot inventory can yield major efficiency improvements. Be sure to periodically review your slotting assignments to account for feedback from pickers or changes in order volume.

Growth strategy

Consider whether opening more distribution centers would help you reduce shipping costs and delivery times. Strategically located DCs put inventory closer to customers, which improves sales through better satisfaction rates. In most cases, an in-house multi-DC network is not cost-effective to implement – but that doesn't mean you can't enjoy the logistical advantages of a new distribution center. For many companies, outsourcing fulfillment to a third-party logistics provider (3PL) is a better way to efficiently set the stage for rapid growth and improvement of services. Since 3PL providers already have robust distribution networks established, they can help clients ship products to more customers, faster and at reduced cost.

Back Office Efficiency for Ecommerce Businesses

Expanding an ecommerce business is more than just expanding product catalogs and opening more distribution centers. The administrative strategy and operational support functions of your back office are vital – and their capabilities need to scale alongside business growth for overall success. In this blog post, we'll cover some fundamental elements to consider when evaluating your current back office's capabilities and ensuring they keep pace with the growth of your business.
    

Customer Relations

You need more than just a well-designed website to provide a great customer experience. Accessible and attentive customer service shape the final perception of unsatisfactory experiences and are a must for long-term success – so it's critical to assess your company's approach to customer relations from multiple angles and improve where necessary. Periodically review customer service call monitoring stats, product reviews, and fulfillment reporting you have in place and look for gaps to fill. If your reporting doesn't identify any ongoing problems, you may be able to find new growth opportunities through customer satisfaction surveys.
    

Taxes & Accounting

Tax laws and financial reporting requirements relevant to ecommerce can be more difficult and time consuming to manage as your business expands. Evaluate whether the software, staff, and strategies you’re using to maintain compliance are "right sized" for your current, and future, business goals.

Billing & Invoicing

Providing multiple payment options for your customers certainly has its benefits, but it can add complexity to back office operations. Verify your level of protection from payment fraud, optimize your chargeback management process, and ensure you are able to efficiently process refunds for all of the payment methods you accept.

Data Reporting & Analysis

Data plays a big role in the decision-making process for product expansions/reductions and is important for growing your audience and sales numbers. You’ll need to make sure your warehouse management solution can provide this data in actionable reports that can provide clear insight into the future of your business.

At Fulfillment Works, we support our clients’ back office operations with Manhattan Active™ Supply Chain software, which provides enterprise-level solutions for all of the above areas (and then some). To learn more about how we can support your business growth behind the scenes, contact us today.

How to Evaluate 3PL Performance

So, you've decided to partner with a third-party logistics provider. Compared to trying to juggle 100% of fulfillment duties in-house, you've most likely seen several KPI improvements since contracting outside help. However, do you have a methodology in place to more objectively evaluate your 3PL's performance – and make a case for either renewing that partnership or seeking out a new one? Although every ecommerce business has different goals and priorities, you can use these broad considerations to help determine whether the terms of your current 3PL partnership should be reevaluated:

Size

If your company has grown significantly, it may have reached the point where in-house fulfillment management is finally viable. Or perhaps you may find that your current provider lacks the flexible space and staffing required to handle fluctuations in sales volume or product offerings.

Capabilities

For many e-tailers, fulfillment has become quite complex. You might decide to seek out a new 3PL in order to access strategically located distribution centers, better warehouse technology, or new customization capabilities to improve your fulfillment operations.

Costs

If warehouse space, labor, and/or shipping costs are having a disproportionate impact on your bottom line, it may be time to find a 3PL that can reduce your overhead in some or all of these areas.

Customer satisfaction

Ensuring a positive experience for the customer should be your 3PL’s top priority. Inventory issues, inaccurate orders, and delivery delays are signals that you need a 3PL that does a better job of adhering to your expectations for customer service.

In-House Expansion vs. 3PL Services

As your ecommerce business grows, the pressure increases to obtain more SKUs, staff, and facility upgrades. There are two paths you can take to invest in your growth: in-house managed expansion, or outsourced expansion through a third-party logistics provider (3PL).

Generally, your available resources, immediate needs, and planned rate of growth all factor in to deciding which path offers the better ROI. Since each strategy has its pros and cons, choosing between the two can be harder than it sounds. To help you decide which expansion path is best for your business and long-term strategy, you should consider the following areas.

Packaging & kitting considerations

Do your orders require simple packaging that can be prepared inexpensively in bulk quantities, or do they demand a more complex packaging procedure? If an intricate package is part of your product’s appeal or branding strategy, it may be worth keeping production in-house to maintain close control over the process and/or avoid transitional hiccups. But, if you have no such customization concerns, a 3PL may be a more cost-effective option. Although, depending on your customization needs and the 3PL’s capabilities, outsourcing may still be a good choice. For example, at Fulfillment Works, we have lots of resources to design and produce custom packaging for our clients at minimal cost.

Human capital considerations

3PL providers usually have all the resources needed to help clients start expanding right away. If you have a small staff or your executive team lacks the experience or availability to execute on growth initiatives in a timely manner, outsourcing is typically the better path for expansion.

Technology & equipment considerations

Upgrading to a new WMS or adding new equipment to distribution facility requires a sufficient budget and an integration strategy that minimizes operational disruption. The more complicated your expansion needs are, the more difficult they will be to accomplish entirely in-house. Since 3PL providers already have the technology and equipment in place, they may be the better choice for businesses that need rapid expansion of facilities or operational capabilities.  

3 Signs it's time for a 3PL Partnership

At some point, every ecommerce business asks itself, "is it time to partner with a 3PL provider?" The answer depends on several variables such as your long-term business goals, availability of internal resources, and your level of operational efficiency. Every business has different needs and priorities, so 3PL partnerships aren't the best answer for everyone. However, if you find yourself dealing with any of the following challenges on a regular basis, it may be time to bring in a 3PL provider.

Growth

Third-party logistics and fulfillment providers are among the best strategic options for helping ecommerce retailers (especially new ones) efficiently set the stage for rapid growth and/or improvement of services. Since 3PL providers already have robust distribution networks established, they can often help clients ship products to more customers, faster and at reduced cost.

Capital Investment

In some cases, partnering with a 3PL provider is a better alternative than investing in new facilities or technology. For example, upgrading to a new order processing system or adding new equipment to an already-full warehouse may require enormous amounts of time and capital to implement properly. However, 3PLs have already gone through those processes – and fine-tuned the results to accommodate the needs and demands of their clients.   

Operational Capacity

Order fulfillment is a complex and demanding aspect of ecommerce. If you find yourself already stretched thin with marketing, merchandizing, customer service, and other initiatives that are critical to the success of your business, outsourcing to a 3PL provider can help you keep your focus on those areas rather than managing fulfillment.