Congratulations! Your new ecommerce website just went live, you’re doing some great marketing to attract new customers, and you’re eagerly awaiting for orders to come flooding in. But you might have neglected one of the most overlooked aspects of ecommerce: fulfillment. Your entire business will be at risk if you ship products late, incorrectly package items or ship the wrong merchandise entirely.
In this article, I’ll focus on how to excel at fulfillment and grow your operation so that you keep costs low, maintain accuracy and effectively scale your operation.
Benchmark Fulfillment Metrics
You can only improve what you can measure. And to improve your fulfillment process, the first step is to establish a baseline for the performance metrics that matter the most to your business. For example, if speed of delivery is key to your competitiveness, ensuring that orders are prepared for shipment as quickly as possible should be at the top of your list.
I asked Brian Schoenbaechler, General Manager at third-party logistics (3PL) company IntegraCore, how he’s improved speed and efficiency without sacrificing accuracy as he’s grown his fulfillment operation. In his business, he focuses on:
|Metric||Definition and Importance|
|Order turnaround time||Time from order placement to shipment. This ensures that orders that come in are fulfilled quickly and shipped on-time to the customer.|
|Inventory accuracy||The difference between actual inventory counts and what is indicated by the inventory software. This is especially important for a logistics provider that manages the inventory for other merchants. Any discrepancies may lead to the inability to fulfill orders.|
|Return rate||The percentage of items returned from the customer. High return rates are indicative of systemic problems.|
When these metrics don’t improve over time–or fall, or stagnate–it’s important to dig into the root cause. If return rates are high, for instance, is that due to defective products, items damaged during packing or transit or incorrect addressing? Or, if order turnaround time is poor, is that because you’re short-staffed?
Software, such as inventory management systems, can help you pinpoint the cause of problems and run your ecommerce business more efficiently. But Schoenbaechler is careful to advise against haphazardly investing in technology that doesn’t enable a desired outcome.
“We always look to invest in technology that reinforces established processes for our logistics team,” comments Schoenbaechler.
For example, Schoenbaechler's team developed a dashboard solution in-house that prioritizes orders based on customers’ service-level agreements.
Specialize, Reduce Waste and Communicate
As important as measurement and technology is for fulfillment, operational efficiency ultimately rests on the shoulders of your employees. As your operation grows and you begin to hire individuals to assist with fulfillment, sound processes will enable your operation to scale.
As his own 3PL company has grown, Schoenbaechler has found success in the following:
- Assign fulfillment specializations. From updating inventory counts to boxing orders for shipping, having specializations on your fulfillment team increases productivity. This means having dedicated pickers, packers, shippers, order processors and anyone else in between to ensure that each process is done well, Schoenbaechler suggests. Inform workers that they will be measured (and compensated) on their importance, and show how their increased productivity will directly impact the business.
- Ask your team to help improve processes. Your specialists will know better than you what impacts their operations, so lean on their expertise. For example, Schoenbaechler describes how one member of his packing team was able to successfully redesign the shipping department to increase capacity, improve safety and make the entire zone easier to navigate.
Additionally, Schoenbaechler has found it useful to hold short fulfillment team meetings to start each day. In these, the team reviews key metrics and shares updates on goals, and each team member voices their thoughts on what needs to be done.
Know When to Outsource
At the end of the day, fulfilling orders yourself may be too time-consuming or stunting your potential for growth. If you aren’t willing to invest in improving your fulfillment capabilities, or would rather focus your energies elsewhere, consider outsourcing your fulfillment.
If you decide fulfilling orders yourself isn’t right for your business, you have two options: outsourcing and drop shipping.
Outsourced Fulfillment: One of the more popular solutions for smaller online merchants is Fulfillment By Amazon. Here, Amazon warehouses and ships purchased items to customers, whether they’re purchased on Amazon.com or not.
Retailers who wish to maintain their own online storefront can often directly integrate their shopping cart software with Amazon and other fulfillment operations. Jimmy Rodriguez, co-founder and CTO of shopping cart software 3dcart, says approximately 30 percent of their 16,000 customers utilize one of its 13 fulfillment integrations.
Drop-Shipped Fulfillment: As with Amazon and other outsourced fulfillment providers, a drop shipper handles all fulfillment aspects for you. The difference is that a drop shipper–not you–owns the merchandise until it sells. While you won’t have to pay for the merchandise up-front, you will pay the drop shipper a premium for this added service. To offset those added costs, drop shipping is a better option with either high-volume or high-margin products.
Alternatively, you can combine drop shipping with traditional outsourcing and in-house fulfillment. For example, stocking and fulling high-volume, low-margin merchandise yourself and delegating infrequently-purchased, high-margin merchandise to a drop shipper.
What other advice would you provide merchants looking to build an effective fulfillment operation? Leave your suggestions in the comments.
Thumbnail image created by Akira Ohgaki.