It’s a month after your annual conference and you’re on a high. Your company, a direct selling organization, introduced two new products during the conference and sales agents across the country left excited and ready to sell. In fact, new orders are pouring in.
But an email from your warehouse fulfillment company stops you dead in your tracks. New orders are severely backlogged, and they are looking for approval on a $25,000 overtime bill to cut into the logjam.
You’ve got no choice but to approve, but shouldn’t they have anticipated the increase volume?
Fulfillment companies unfamiliar with direct selling and multi-level marketing (MLM) businesses may struggle with some of the unique requirements to serve this market. Following are 5 keys to success in fulfillment operations for direct sellers and what to look for in a fulfillment partner.
As a direct seller, you’re one good Instagram post from a big demand spike and one product launch from exponential growth. Having a virtual sales organization makes it possible for you to rapidly convert market demand into profit. So, it’s critical that your direct selling fulfillment partner can keep up.
Look for the following capabilities to determine if your 3PL can scale:
Nationwide locations. The fulfillment industry is dominated by small, one-location operations. This may be ideal as you build traction but as you grow, you’ll want the ability to add locations to reduce transportation costs and delivery times.
Engineering and design expertise. To minimize your cost-per-order, your warehouse layout, processes and automation must adapt to changing order profiles and increasing volumes. Choose a provider with the industrial engineering resources to analyze and recommend automation options to control labor costs. These upgrades can be deployed in a modular fashion, as your volume dictates.
Full-featured warehouse management system (WMS). Basic WMS systems can handle basic operations. But what happens if you need your system to integrate with conveyor systems and other automation? Will that require a major, unplanned capital investment? Choose a provider with a robust full-featured WMS that can easily handle common direct sales fulfillment requirements, like batching similar orders and kit building.
Real-world experience. It’s one thing to say, “We can handle it,” it’s another to see proof of your provider’s ability to scale its operations with each stage of your company’s growth. Ask them to show you how they helped other direct sellers to scale.
Parcel cost reduction. As you grow, so will your parcel shipping costs. These costs, which account for about 70% of your total fulfillment costs, can be a drain on profits if they're not managed well. Many direct sellers ship under the parcel accounts of their 3PL warehouse partners to achieve substantial savings. These 3PLs negotiate rates based on their aggregate spend across all customers and pass the savings on.
All businesses have their fair share of volatility; but there are times when it seems like direct selling companies wrote the book on it. For example, it’s not unusual for BOGOs (buy one get one free), continuity days, month-end promotions, or post-convention excitement to create massive surges in demand that are followed by equally dramatic dips in the other direction. In addition, a new product launch has the potential to go viral really quickly, especially if consultants decide the product is so noteworthy it merits an extra social media push.
As a result, you should look for a direct sales fulfillment partner that can effortlessly flex its operations to absorb this added volume and then quickly ratchet down activity so that your fulfillment costs parallel your revenue stream.
Key requirements in this regard include:
A multi-client warehouse where staff are cross-trained on the requirements of multiple accounts. Staff can be "borrowed" from other accounts in a 3PL warehouse to avoid excess overtime costs and over-reliance on outside temporary workers.
A knowledgeable operations team that can forecast based on a known promotion schedule. For example, one large direct sales company does special orders on renewal days and its fulfillment partner prepares these shipments in advance to cope with the large uptick in volume.
Fulfillment companies with direct selling experience understand that advance notice of sales-triggering marketing events is not a given. Direct sellers and MLMs are marketing-driven organizations that do not necessarily consider the fulfillment implications of a new product introduction or advertising campaign. Look for a partner that knows the importance of staying close to the marketing organization.
Systems that can’t adapt to your requirements can bring your business to its knees. Proper vetting of providers in this area is critical.
First, you’ll want a high level of confidence that orders will flow seamlessly between that provider's WMS and your system. Look for partners that serve companies using top commerce platforms like NetSuite, Exigo, Magento and InfoTrax. You don’t want to be the guinea pig. Many fulfillment companies talk about data integration like it’s no big deal, but lack the systems expertise to build the required application program interfaces (APIs). Talk directly to the key IT people at potential fulfillment providers. Seek the detailed answers necessary to make you and your own IT team 100% comfortable.
Kit building is also common in the direct selling/MLM space, where multiple SKUs are bundled to create new products. Systems must enable creation of these “build-on-the-fly” kits as a core function. And you’ll want real-time visibility into order and inventory data. Look for a provider that can provide you with an online portal to retrieve this data and also push the data automatically to your system.
If you're a direct seller, you're part of a big industry that's getting bigger every year. Following are some direct sales industry statistics.
Direct selling companies represent $40.1 billion in annual sales (Direct Selling Association).
There are 7.7 million people involved in direct selling and 41.6 million customers - this number was just 15.6 million in 2011.
Women account for 75% of direct sellers and customers
Wellness products top the list of the types of products sold - accounting for 37% of the market.
Customers of direct selling companies are not buying a commodity from the lowest cost supplier. They are making a lifestyle choice. As such, the relationship is more with the brand than the product.
That’s why direct sellers want a high-quality presentation at delivery with a package that has their logo (not Amazon’s!). They want the paper inside to be folded just so, and the product to be positioned a certain way in a box that may contain a personal note to the buyer. Basically, they want the package to arrive looking like a personal gift.
It's more than just an ability to place items in boxes in a certain way. You'll want a partner that has relationships with packaging suppliers and can recommend changes with both aesthetic and cost-saving benefits. For instance, every MLM has some SKUs that could be shipped in a polybag vs a box. Depending on the volume of items shipped, the weight differential between the two packaging options could trigger 6-figure parcel savings.
Your MLM fulfillment partner must be capable of delivering a high level of packaging customization, and they must do it as part of a high-volume, rapid-turn warehouse operation. Choose a partner that understands the importance of the WOW factor in product presentation and can handle all of the unique shipping tasks you may require.
Many of the fulfillment challenges in the direct selling industry mirror those for eCommerce fulfillment. But there are enough nuances where there are real advantages to working with a 3PL that works with other direct selling companies. Here are some:
All B2C fulfillment is not the same. For direct selling companies, complex inventory management, unexpected volume spikes, and custom packaging requirements are business-as-usual challenges that must be managed.
Direct sellers benefit from working with direct sales fulfillment partners that have the experience in the industry to bring best practices to the table.
To learn more about these best practices and how you can take your direct selling fulfillment program to the next level, contact Amware Fulfillment to arrange a discussion.