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.
Most folks think of warehouse buildings as big empty rooms for sale or lease. But if you've ever considered expanding your ecommerce business by opening or moving to a new distribution center, you know there's a lot more to those "big empty rooms" than meets the eye. Before touring potential properties, identifying your space requirements in detail is crucial for finding facilities that meet your needs today, and in the future. When shopping for warehouses, keep the following ideas in mind to help you find facilities that will fit your space and functionality requirements.
In product fulfillment and distribution, the height of a warehouse is just as important as its square footage. A low ceiling building obviously requires many more square feet of footprint space to have the same cubic capacity. Use square feet when planning how much space is needed for all department functions (staging areas, packing stations, office areas, etc.). Use cubic feet when planning bulk storage areas - making sure to account for your maximum pallet height, the total number of pallets you are planning to store, and the minimum clear height required by local regulations.
Finding a building with the right amount of cubic space doesn’t mean much if it’s arranged in a sub-optimal footprint. Consider how the warehouse’s shape will influence space planning, workflow, and peak productivity. For example, a long, narrow, or L-shaped building may negatively affect the flow of merchandise, create congestion points, and extend travel time for pickers.
Lot size & expansion potential
If you were to expand a facility in the future, what’s the maximum footprint you could achieve? Would there still be sufficient space for employee parking and shipping truck access? If you’d only be able to expand linearly, beware of creating a sub-optimal building shape.
Certain types of products and warehouse devices need stable and clean environments with minimal exposure to things like dust, temperature swings (which create condensation), humidity, and excessive heat. Evaluate facilities for the quality of climate control units, airflow, ambient temperature, and maintenance requirements for minimizing dust and dirt.
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.
When sales drop or product returns increase, you may find your warehouse filling up with excess inventory. Excess inventory occupies warehouse space, ties up your working capital (especially if you need to lease additional space just for overstock), and in some cases, continues to lose value. For example, if you start selling a new & improved version of an old product, demand for the previous version may drop so low that even big discounts aren't good enough incentives for customers.
Liquidations and auctions are common solutions for dealing with overstock. However, the time it takes for them to start showing ROI and the labor of coordinating them are not conducive to every situation. Conversely, making in-kind donations of overstock can be easier (i.e. no negotiating with liquidators, no creating online auctions), faster, and better for your bottom line. Not many companies realize it, but simply giving away your unprofitable inventory can yield a number of business benefits, such as:
Inventory donations are tax deductible in the US. If your business is eligible for them, the federal tax deductions you receive may even be better than what you’d get from liquidation.
Unless you're in the business of rare collectibles, the total costs of storing outdated inventory can quickly exceed its value. By donating overstock, you free up valuable warehouse space to make room for more profitable products. On top of that, you save on transportation and disposal costs while helping communities in need.
Retain Brand Value
Repeatedly discounting and liquidating your products lessens their value and detracts from your brand. By partnering with a gifts-in-kind organization, you can avoid this scenario. These groups are licensed 501(c)(3) nonprofits that collect all types of unwanted merchandise from member businesses, then redistribute it across a tightly-closed "market" of member-NPOs like small charities, churches and schools.
In-kind giving is ideal for offloading overstocks, obsolete merchandise, discontinued products and returns. Even though unwanted inventory no longer benefits your business, don't forget that it can still be very useful to those in need.
A good customer experience (CX) comes from consistently meeting shoppers' expectations during ALL touchpoints with your ecommerce business. Things like the UX design of your website, the tone and content of social media posts & marketing emails, your returns policy, customer service interactions, and the unboxing experience are just a few examples of customer experience factors that e-tailers tend to prioritize. However, despite improved understanding and measurement of how supply chains impact customers, little progress has been made in recent years towards using this information to make CX better.
In a joint study from logistics companies, Convey and eft, designed to assess the importance of customer experience in last mile delivery, 96% of survey respondents said CX is a critical measure of last-mile success. Despite this, just 5% of respondents said their current supply chain management systems fully support efforts to improve CX, while 61% said their systems do nothing to improve CX.
For e-tailers who want to improve their CX through last-mile fulfillment, increasing the level of transparency into your supply chain is a great starting point. For one, you can’t make improvements to your supply chain unless you understand all of the moving parts involved – so building up your visibility into the chain should be a natural extension of your work to uncover opportunities for improvement. Secondly, sharing supply chain visibility and inventory levels with your customers can improve their shopping experience.
The result is a win-win scenario. By enhancing fulfillment visibility, you can improve CX by providing inventory levels on product pages, back-in-stock alerts, accurate order tracking, and other features that help remove friction and uncertainty from the buyer’s journey. On the fulfillment side, better visibility into your supply chain and inventory levels can help you increase process efficiency to provide faster order delivery.