What’s at the heart of the customer experience for online buyers?
Order fulfillment. All those things that happen after the click – accurately picked and carefully packaged orders, on-time delivery, customer service, returns processing.
Many growth-oriented brands don’t recognize customer experience, and order fulfillment along with it, as the growth driver that it is. They sink most of their energy and capital into getting the click and not into fulfilling that order in the best, fastest and most efficient way possible.
In this article, we preview the Amware eBook, Want to Grow Faster? Fix Fulfillment, which examines 9 strategic questions about eCommerce order fulfillment that can make or break your online business. Here are a few of them.
How Many Fulfillment Warehouses Should I Have?
It’s certainly possible to fulfill orders to a national customer base from one US warehouse. A single site keeps operations simple and reduces rent, equipment, labor and inventory costs. But there’s a downside. Your parcel shipping costs will be higher and you won’t be able to achieve 2-day delivery to all US customers.
What’s the right answer for your business? Here are 5 questions that will help you determine if you need a multi-DC strategy.
- How much do your customers care about fast delivery? People who think your shipping takes too long will tell you loud and clear with their wallets. If that’s not happening, your current model is likely working.
- Is your product unique, or is it a commodity? If your product is as common as white tube socks, you’ll likely need to match your competitors for delivery speed. But if it’s somewhat unique or your brand carries a certain cachet, customers will likely wait 2-3 days extra for fulfillment from your single DC.
- Can your business withstand an interruption to fulfillment operations? A single-DC distribution strategy puts your business at risk if you can’t ship orders due to a pandemic, a natural disaster, a systems hack or other event impacting that location. Only you can say whether your business could withstand a service interruption of a week or more.
- What’s your SKU count? High SKU counts raise complexity. If you add a fulfillment center, do you double the inventory or split existing inventory across DCs? If you split it, how much of each item should you keep in each location? You’ll need good data and strong forecasting to balance inventory. Even when other factors suggest a multi-DC strategy, inventory costs may push you in a different direction.
- Will parcel savings from adding fulfillment locations offset expansion costs? More fulfillment centers means more costs for buildings, equipment, labor, and inventory. But as expansion puts products closer to customers, you reduce parcel shipping costs – your largest fulfillment expense. Most times your parcel savings will more than outweigh expansion costs, delivering significant net savings.
There’s no “right” number of US warehouses required to serve a national customer base for online sales. Your responses to the questions above will make this decision clearer for your situation.
When Should I Invest to Automate My Fulfillment Warehouse?
When rapid business growth runs up against rising costs for warehouse labor and a shrinking labor pool, it makes sense to think about warehouse process automation. But rather than what to automate and how, the toughest question for fast-growing eTailers is when.
Large, one-time capital outlays are not popular boardroom conversations. That’s why, most often, a modular approach to warehouse automation makes sense.
In the early stages, as your brand gains traction, you’re learning about order patterns and SKU velocity and all those business details that will inform future technology deployment. At this stage, a manual pick and pack model could be the way to go.
As order volumes increase, you can incorporate low-level automation solutions, such as box erectors, auto-tape machines and even poly-bagging machines to significantly increase throughput without major capital investments.
Finally, as your business matures and requires high-volume, high-velocity picking and shipping, a move to automated/smart conveyors and more advanced picking strategies like voice picking and pick-to-light makes sense. With the current labor shortage, collaborative robots, or cobots, can be part of a strategy to maximize throughput with the same or fewer associates.
Do I Require Multichannel Fulfillment?
Fulfillment operations for online sales differ drastically from retail fulfillment. Despite these differences, it’s still most efficient to combine fulfillment for all sales channels under a single strategy and from one central pool of inventory. Otherwise, you end up with too much stock, too much warehouse space, too many truck runs, and redundant management structures.
But it’s not easy. With each new sales channel you add, you have to consider variations in demand and product velocity and the complexities of returns and shipping. You also have to merge SKUs and keep a sharp eye on available inventory to support all channels. If you outsource fulfillment, it’s tough to find a 3PL that is equally adept at both D2C and bulk retail replenishment. Most have their roots in one or the other and are evolving to become proficient at multi-channel fulfillment.
B2B fulfillment typically involves a high frequency of similar bulk orders. Inventory is stored and shipped by the pallet or case, and there is less labor involved per sellable unit due to the bulk nature of the business. Warehousing bulk products requires racking built for pallets and cases, forklift trucks to move them, large spaces for receiving and staging outbound freight, and docks for loading and unloading trucks. Plus, retailer compliance is critical. Retailers set their own shipping and receiving demands for pallet size, labeling and more. Run afoul of their routing guide directives and you’ll pay hefty fines. You need a 3PL that understands this world.
B2C fulfillment volumes are less predictable because they depend on the changing needs and desires of the buying public. In B2C, you're dealing with lots of individual consumer orders and order picks that are more labor-intensive per sellable unit, making labor a far more significant portion of costs. To control these labor costs in high-volume, eCommerce order fulfillment operations, it’s wise to deploy advanced systems and automation.
Because the 2 operating models are so different, it’s challenging to master all the distinct nuances of each sales channel's inventory, infrastructure and information requirements. One answer is to outsource to a 3PL that helps many brands manage multi-channel distribution. But first look for clear evidence that they’ve mastered the fulfillment requirements of each channel. You don’t want to be anyone’s guinea pig.
Check out the full eBook
For more on how to improve the order fulfillment process, read the full eBook, Want to Grow Faster? Fix Fulfillment. Use all 9 of our questions to help build a superior order fulfillment solution.