Improving the efficiency of your fulfillment operations is something you should always be striving for. Because the peaks in your annual sales cycle test the maximum capacity of your operations, these times are an excellent opportunity to identify challenges or inefficiencies. Unfortunately, this can be almost impossible to do while you're in the thick of things - even outside of peak season.
A 3PL provider is an invaluable solution to this common problem. Not only can they objectively analyze your current operations, but they can also leverage their experience to find solutions that work for your unique situation. In this blog post, we'll cover a few of the main areas your 3PL provider will investigate at the beginning of your partnership. The more data that you can provide, the better that they can help you. During your peak season when you are facing the most challenges, try to be cognizant of the following areas so your 3PL provider can learn where the best opportunities for improvement are.
- What are your current procedures for recruiting and training?
- When hiring for peak season, which areas do you hire for?
- What is the average number of staff used to accomplish different types of workloads?
- Are there recurring tasks that are overly complex or time-consuming?
- When productivity drops occur, are there identifiable causes?
Warehouse layout and inventory storage
- Are there ways to reorganize or upgrade pallet racks and storage systems to get more capacity?
- Are there bottlenecks in your current layout that affect picking productivity?
- Would a new warehouse facility be a cost effective solution?
Well-organized data tracking is not only important for sales and marketing - it's also critical for understanding your fulfillment capabilities. Fulfillment providers track a variety of metrics to help you ensure product availability, accurate shipping times, and operational efficiency. Below, we define some important metrics and explain why you should be reviewing with your 3PL provider on a regular basis.
Transportation Time & Cost
Shipping times and costs directly factor into your customer experience. Monitoring the average time-in-transit and transportation cost per package enables you to spot opportunities for improvement.
Units Fulfilled Per Hour
The number of units your fulfillment team can process per hour helps determine your throughput. Once you know what your capabilities are, you can proactively provide resources to your fulfillment team during product promotions or peak sales periods.
Average Units Per Order
The average number of product units required to fulfill an order is good information to have, from an operational standpoint. For example, a business averaging one unit per order can usually operate with fewer employees in the fulfillment department than a business that averages 10 units per order. You can use this information to ensure you have the right amount of staff for the holidays, or other peak seasons.
Average Lines Per Order
Lines represent the variations available for each of your product units. As an example, if a t-shirt is a product unit, then each color and size is a different line for that unit. Similar to the units per order metric, tracking the average lines per order is useful for operational planning – a higher average could indicate the need for more warehouse space (to ensure there is enough stock for each line) and more employees to pick, pack, and ship each order.
The cost of shipping is one of the biggest competitive differentiators in ecommerce. Customers will readily abandon a cart or buy from a competitor if it means they will save money on shipping. But if you want to reduce shipping charges for your customers without taking a hit to the profit margins of every order, you need to examine your shipping pipeline for ways to improve efficiency and/or eliminate unnecessary expenses. Fortunately, there are many strategies you can consider, such as:
Negotiate with your carriers
The best step you can take toward reducing your shipping costs over the long-term is to negotiate with your shipping or 3PL providers. Review your previous shipping bills to find the major cost driving factors, and research the prices from competitors to get a better understanding of average shipping costs. At Fulfillment Works, we pass 100% of our shipping discounts on to our clients, which allows them to give better shipping rates to their customers.
You can drive down your packaging costs by eliminating unnecessary dimensional space and excess dunnage. Examine your typical order sizes and order packaging assortments that suit them. Depending on your needs, custom packaging and kitting may be the best solution.
Remember to collect shipping refunds
Many shipping companies offer on-time shipping assurance as standard. As part of this benefit, you may be entitled to refunds on any deliveries that are delayed. If this kind of assurance is included in the agreement you have with your carrier, don’t forget to periodically review your shipping records and claim your refunds.
Accurate tracking, measuring, and forecasting of inventory is crucial for seamless order fulfillment, financial decision-making, customer satisfaction, brand perception, and other aspects that drive the success of an ecommerce company. That is why even if your sales are through the roof, your success will be short-lived without capable inventory management. These guiding principles can help ensure that your inventory management stays successful and contributes to the growth of your business.
Inventory data is an important consideration when making logistical, purchasing, and fulfillment decisions. Inaccurate or unclear data negatively impacts these areas - so it's critical to have inventory data that is clear, accessible, and up-to-date (ideally, in real-time).
Inventory velocity is the time it takes to sell each individual item in stock. When you need to predict when inventory will need to be replenished, or decide if a product line should be liquidated, inventory velocity is a useful metric to have. It may not be tracked by your inventory management system, but it's something you should keep an eye on.
Compare your inventory management metrics with industry benchmarks on a regular basis. If your inventory performance falls behind industry averages, it’s time to reevaluate your approach to inventory management and create a plan for improvement. Outside perspective can prove invaluable in such a situation; by collaborating with the right 3PL provider, you can get the expertise required to fix issues, and even improve growth and stability.
Returning customers provide the best ROI for ecommerce companies. While there are lots of things you can do to retain customers, it’s important to remember the primary factor that influences whether a customer will continue to order from you: do you provide a good customer experience? To answer this question and make any necessary improvements, you have multiple options for assessing customer experience.
One excellent method is to become your own customer. Contact your company for help with placing an order. Buy something from yourself and evaluate your checkout process. After the order arrives, call customer service to troubleshoot some issues. Go through your returns process. Evaluate what you see from this perspective and ask yourself which areas have the highest need for change.
You can also assess your customer experience by looking at collected feedback. To start, you can analyze the latest product return codes to look for common themes (or, you can decide to implement new codes to get more granular data). If your customer service department uses call monitoring and/or complaint logging/reporting, that’s also an excellent way to find areas of the customer experience that need improvement. Finally, you can always ask your customers for constructive feedback with survey tools.
Don't forget: your competition's offerings and customer expectations are always evolving. Since it's a major competitive differentiator, it's critical to periodically assess your customer experience and make improvements where necessary.