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
- 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.
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.
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.
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.