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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.