Last week we wrote about the value of auditing fulfillment center operations. Etailers, by nature, are entrepreneurs, so examining fulfillment infrastructures often sinks to the bottom of the priority list as sales initiatives rise to the top.
The problem is that you can’t have growth without a commensurate increase in fulfillment capacity. When sales spike, you don’t want to fumble the handoff in the fulfillment center and risk disappointing newfound customers.
So, resolve to take a hard look at your physical infrastructure and prepare your business to scale with a flexible fulfillment strategy. Here are a few key questions to ask yourself.
- Can we handle volume surges?
A look back at the past year should give you your answer. How did you handle holiday or seasonal spikes last year? Were orders handled without a hitch or were their delays and/or a rise in error rates when the system was stretched? Your fulfillment infrastructure needs to be flexible enough to handle small spikes without service issues. If that’s not happening, it’s likely that the system will be unable to handle any significant sales increase.
Whether you’re managing fulfillment on your own or outsourcing the function to a third party, create a flexible infrastructure that can quickly add space and staff, as needed. 3PL fulfillment companies are ideally suited to this task, with variable cost models that let you add space and labor as sales increase.
- Do we have enough physical space now and into the future?
The rise in distribution center space in the U.S. today is being driven largely by Ecommerce sales. Fulfillment space is in high demand so don’t assume that, when you are ready to expand your fulfillment infrastructure, choices will be abundant. It’s a seller’s market. It pays to plan well in advance.
- Do we need more than one distribution point?
Here it comes down to the expectations of your customers. If they are like most online buyers, they have been conditioned by Amazon to expect it fast – in two days if they are Amazon Prime members. Do you get ahead of the trend and create more inventory point for faster deliveries? Or, if you ship from one central point, do you stay the course and trust that your loyal customers will wait an extra day or two? Adding inventory points will decrease your transportation costs, but increase your space and inventory costs. A partnership with a 3PL that has a nationwide fulfillment warehouse network can add flexibility without increasing capital costs.
- Is our equipment adequate?
Part of auditing your fulfillment infrastructure includes looking at whether you have the right, and the right amount of, scanners, forklifts, and other material handling equipment. It’s like disaster planning, only in this case you’re getting ready for something good – breakthrough sales results.
- Are systems up to the task?
If you haven’t done it in a while, it’s time to look your computer system leader in the eye and ask for an honest answer to this question: “If our system goes down, is the business prepared?” Customers are unforgiving. They no longer except “systems issues” as an excuse for not shipping their order. They will simply cancel and go elsewhere. Make sure you have redundant and backup systems in place. If you work with an outside fulfillment partner, ask to be briefed on their disaster recovery plan
By auditing your fulfillment infrastructure, you’re managing risk and creating a firm foundation for future growth. Get to it.