Today’s consumers are focused on convenience, and they want retailers to provide this convenience across all channels. As an internet retailer, e-commerce, or direct sales company, you work hard to build the customer relationship in many different ways. Order fulfillment is a critical part of customer experience, and retailers need to make sure that customers are taken care of so they will continue to order from them. There are many factors involved at every link in the supply chain for customer satisfaction, but optimizing store and e-commerce fulfillment is key.
In the past, retailers built two types of distribution centers, one (or two) on the east and west coasts of the US to handle store fulfillment, and another to handle strictly e-commerce. These distribution centers were built to handle their own specific type of fulfillment and none other. The retail stores on the East Coast were fulfilled from the closest DC, while the outlets on the West Coast were fulfilled from a DC located in the western US. Fulfillment typically took one to two days, but for stores in the central US, they had to live with three- to five-day fulfillment. If the retailer received an e-commerce order, regardless of the location of the buyer, that order was fulfilled out of the e-commerce-only warehouse. The consumer could be located next door to the West Coast distribution center, but since he ordered his item online, it would only be shipped from the e-commerce DC, and he’d have to wait to receive it.
Large retailers, because of the heavy footprint they have with physical stores, have to leverage every piece of square-footage to maximize profit and revenue. Some retailers offer ship-from-store to customers. Using stores as distribution points lowers parcel shipment costs and drives a decrease in cost of goods sold. Plus, ship-from-store leads to increased inventory turns and decreased safety stock at distribution centers. Many retailers may be best able to meet omni-channel fulfillment challenges by retrofitting existing operations or adding new processes and technology. However, very few existing distribution centers of more than a few years old are set up to accommodate the needs of an omni-channel distribution strategy.
Retailers can significantly reduce fulfillment times by consolidating their store-replenishment and direct-to-customer shipping operations into a single facility.
Fulfilling both store and e-commerce distribution channels from the same inventory stock has its complexities, mainly because stores order in bulk while e-commerce orders are smaller, often containing only one or two items. As a result, material handling equipment and processes are different for each. But sharing a single set of inventory between channels offers the huge advantage of making all merchandise fully available at all times to both channels. Sharing inventory reduces the need to have duplicate goods sitting in bulk storage.
An effective combined fulfillment solution must be modular and flexible, so that orders for each channel can be filled simultaneously; at the same time, processes should be dynamic, so that capacity can be shifted according to each channel’s fluctuating demand. Combined fulfillment systems can be a cost-effective way to optimize fulfillment flexibility and processing speed, regardless of the source or destination of the order.
Many traditional warehouse operations are not set up to efficiently accommodate a large range of orders with varying units and lines per order characteristics typical of multi-channel orders. When your operation tops 3000+ orders each day with 500+ SKUs in inventory, you will need an order fulfillment automation solution to keep throughput and accuracy numbers satisfactory.
To be successful and profitable in omni-channel retailing, retailers need to have distribution centers that are flexible and offer:
- Real-time visibility into the entire pool of inventory to reduce safety stock and inventory carrying costs.
- Dynamic control over access and allocation of inventory in real-time.
- Processing and shipping of individual orders at the lowest cost, either direct-to-consumer or direct-to-store.
- Fully automated distribution processes that will increase productivity and fulfillment rates using a variety of material handling equipment.
- Flexible fulfillment paths to meet demand, regardless of which channel it comes from.
- Maximized efficiency in every part of the supply chain to meet customer expectations.
- Minimum cost to serve.
Material-handling systems are a requirement in fulfillment operations to get products into the hands of customers more quickly and at less cost. Typical equipment used in fulfillment includes:
- An inventory management system that spans the entire supply chain for achieving real-time visibility
- A distributed order management system to decide cost-effectively whether to drop orders into a DC, e-commerce fulfillment center, combination DC, or store to meet customer service levels
- Warehouse Management System
- Warehouse Control System to direct the flow of materials within the warehouse and communicate with all the material handling equipment
- Conveyors for moving products around the warehouse to appropriate locations
- Sortation units that deliver items to shipping locations
- Picking/Packing Systems for directing workers what to pick, how many, where to pick or pack, etc. Some DCs are starting to use robotic picking technology, too.
- Automatic Storage and Retrieval Systems (AS/RS)
- Miscellaneous: Robotics, goods-to-person, transportation management systems, RFID, equipment to apply labels to cartons, etc.
While there are many challenges in optimizing order fulfillment operations, businesses need to design their operations with the customer in mind, providing flexibility to handle any kind of order delivered to any location at any time.
Done right, the result is a win-win for distribution and supply-chain providers, retailers, and consumers.
Also Consider the Following:
There are also extra services you can provide within your fulfillment operations to ensure customer loyalty. These include:
· Special Boxes or Packaging - Having a special box for your store is a good way to stand out, and it also helps with branding. It can make a strong impression on your customers. Make sure your box includes your logo and company name along with the URL so people can easily find you again. I know one retailer that has a beautiful yellow box that items are shipped in. Each item is wrapped in matching yellow paper and the box is tied with a big yellow bow. The boxes are so pretty you can’t help but want to open it, and the packaging makes you feel like this retailer really cares about their products.
· Give Out Free Samples or Small Gifts - Anytime I order something from 1-800-Pet-Meds, I get a dog bone with my order. It is a nice touch. Including samples of new products or small gifts in your next shipment is a good way for customers to experience other products that you offer. Hopefully customers will end up buying the new product after they try it. You can include a discount coupon for the new products also as a way to entice consumers to purchase your products. If it fits your product type, have trial sizes you can include in the order. Your customer gets an unexpected reward and you get to introduce them to a new product they may later buy. Even a mint or refrigerator magnet may brighten someone’s day and differentiate your service from the others at very low cost. Throwing in a little extra in your shipments can go a long way both in customer retention and word of mouth referrals.
· Give Something Extra if Shipments Are Delayed - If you have a delay in a shipment, do something extra so your customer won’t be unhappy with you. You can upgrade the shipping method to overnight express or give them free shipping. You can also include an extra product or two for free within your shipment. I once ordered a pair of bowling shoes, and for some reason, the order was lost. When I notified the company, they overnighted me the shoes along with a free bowling bag. Next time I need some bowling equipment, you can be sure that I will check this company out first.
· Include a New Catalog or Flyer - Make the most of your shipments by including catalogs, flyers, or brochures. Doing so gives you a chance to cross-sell other products or services. Personalize the customer experience by adding flyers that showcase items related to the ones that the customers purchased. Alternatively, you can tailor the flyers based on the season or time of year. For instance, if your annual holiday sale is coming up, then advertise it on flyers during the months leading up to it. Alternatively, you can print your company story on the back of the packing slip or advertise new products.
· Write a Personalized Note - A personalized, hand-written note is a nice touch that will make you more memorable to the customer. It shows that you are happy to have them as a customer and makes them feel more welcome. If you can spend a few minutes each day adding a personal thank you to just a few of your orders, you can help build the goodwill and “star” rating that helps build your brand. Sign a hundred thank-you cards during a boring meeting and have the fulfillment team add them to the next order wave. If you collect data from your customers, find out when their birthday or anniversary is. Then send them a discount coupon or note prior to the date. Everybody loves a Happy Birthday card with a 20% discount; this encourages consumers to spend more with you. There are many ways to let the customer know they are special.
· Offer Shipping Deals - Free shipping is here to stay and can help you to win business, especially if you compete against big box retailers. It’s an effective incentive that can drive conversions and keep your best customers coming back. If you can’t waive shipping costs altogether, try to give customers a complimentary upgrade from one shipping method to another. Plus, automating your fulfillment processes with material handling equipment that moves products faster through your warehouse can lower fulfillment costs while speeding delivery to your end customers.
Jim McLafferty is Director, Professional Services Group, DMW&H. With 25+ years of experience in the material handling and supply chain industries, Jim brings to the DMW&H team industry knowledge of the warehousing and distribution sectors, along with the ability to build lasting partnerships with clients by delivering cost effective, high quality, systems integration services. Jim is a thought leader in postal deliveries and parcel shipments, and the equipment and systems needed within a warehouse or distribution center to facilitate package deliveries.