As fulfillment professionals limp toward the finish line after a grueling 2020, there’s one critical thing they still need to deal with.
That’s right, if you want to improve your order fulfillment process next year, you’ll need to take stock of your current operation and identify areas for improvement. Here are 5 strategic questions to start that assessment.
1. Do we have the right number of fulfillment locations?
The answer will depend on many factors, including how much your customers care about fast delivery, how unique your product is and your SKU count. More warehouses mean higher inventory and labor costs, but lower shipping costs and faster delivery. Check out our eBook on this topic: How many fulfillment warehouses do you really need?
The pandemic has caused many single warehouse fulfillment networks to add a location due to concerns about business continuity. If you are one of the many e-retailers with a single shipping fulfillment center, consider the risks inherent in such a strategy.
2. Are we paying too much for fulfillment center costs?
If you handle your own fulfillment, a third-party fulfillment company may be willing to audit your operations to identify opportunities to improve the order fulfillment process. If you handle that audit yourself, here are some key signs that costs might be higher than they should be:
- High associate turnover. If you lose 100 warehouse associates a year to attrition, cutting that number by 15% will save $112,500.
- Poor forecasting. Forecasts guide the labor plan and labor is your biggest warehouse expense. Scheduling too many people inflates payroll and scheduling too few people triggers costly overtime and use of temporary workers.
- Inefficient picking. Without an advanced warehouse management system that directs efficient storage and picking strategies, you’re probably paying at least 25% more than you should.
- Fully manual environment. Few e-retailers can afford full-scale automation, but even low-cost warehouse automation like tape machines and box erectors can save hundreds of thousands of dollars yearly.
Read our eBook for more ideas on how to reduce eCommerce fulfillment center costs.
3. Are we paying too much for parcel shipping?
This is a key question since shipping accounts for as much as 70% of an e-retailer’s total fulfillment costs. Here are common areas that inflate parcel costs:
- Delivery surcharges. According to Reveel Group research, about 35% of a company’s shipping expenses are accessorial surcharges. You can save 10–30% annually if you learn how to reduce parcel surcharges.
- Large number of high-zone moves. If you ship from a single fulfillment center or your facility is not in an ideal location for national fulfillment, you’ll pay for the added miles your product travels through the parcel carrier’s network.
- High rates based on low volumes. If you outsource fulfillment but still negotiate directly with parcel carriers, one of the quickest paths to savings is to leverage the volume discount your 3PL likely enjoys with the same carrier. Depending on your volume, six- and seven-figure savings are possible.
For more ideas, read our eBook on 10 ways to reduce parcel shipping costs.
4. Am I measuring fulfillment performance to drive continuous improvement?
You can’t manage what you don’t measure, so continuous improvement starts with a solid KPI management for fulfillment operations. Many e-retailers fall down in this critical area. Make 2021 the year you address this shortfall.
5. Should I outsource fulfillment?
About 50% of e-retailers outsource fulfillment, and that percentage is rising. Brands want to focus available resources and capital on growth, so they lean on fulfillment companies to help scale fulfillment operations in parallel with their revenue growth. For more on fulfillment outsourcing benefits, check out our blog on 19 advantages of logistics outsourcing.
Audit your operation to improve fulfillment processes
As 2020 winds mercifully down, it’s the ideal time to take stock of your current fulfillment operation to see where you can improve fulfillment processes for next year. Our 5-question audit may be a good place to start.