Let’s start with the very basic principle of what order fulfillment is. A customer places an order, which is then picked, packed, and shipped from a fulfillment center. The carrier then picks up the trailer with hundreds to thousands of other customers’ orders and drives it to their hub, where the order is sorted to the appropriate trailer for its delivery to the customer’s doorstep.
The current problem is that there are many shortages throughout the supply chain making this relatively simple process very difficult. In order for the customer to place their order, customer service and technical support are required. The fulfillment center that processes the order requires labor, which is not readily available at peak shipping season when needed. The delivery step requires truck drivers and hub capacity at peak shipping times, both of which may not be readily available. And recently, it’s not just during peak holiday shipping season, but shippers are experiencing shortages throughout the year. All of these shortages are challenges and bottlenecks.
Shippers are seeking creative solutions to sustain and hopefully grow their business through these challenges. Rather than partaking in the insanity of doing things over and over and expecting different results, let’s review other options that some are considering.
When considering your order process, first think simple. What are the business processes that you have in place to support the order fulfillment practice? Having seen hundreds of operations at this point in my career, I would make the generalized statement that 80% or more of the problems we see are communication issues. Whether it’s not enough communication, mis-communication, or even lack of communication entirely. Consider setting up collaborative meetings with marketing and operations. Marketing is certainly working to determine which products will sell. The simple knowledge of knowing what products will be featured on the website will allow operations to re-slot the warehouse in preparation for efficient and timely order fulfillment. I remember studying Design for Manufacturability and Design for Maintenance. How about Marketing for Operations (MFO)?
The Labor Market
E-commerce is labor intensive at many levels, and the growth of e-commerce is significantly outpacing US population growth. Unless labor supply is made available from other areas of the US economy, supply and demand economics will continue driving up labor costs for order fulfillment jobs.
Labor availability is a constant struggle that you hear in every discussion these days. Increasing wages is the “easy” answer, but not very creative or effective long term. Not to mention the solution isn’t sustainable as competitors and the invisible hand of the supply and demand market erode your advantage. While all businesses should ensure their staff is fairly paid, there is a limit to how high payroll can be increased before the business itself becomes insolvent. Creative solutions for recruiting and retention are necessary for successful order fulfillment. Think of two sporting teams competing. One team is comprised of players and coaches that have been together for years, learning how to work together. The other team is a collection of high-priced individual contributors thrown together each year. How often have we seen the team with less talent outperform the collection of individuals? In the same way, it makes sense that if you can recruit team players to your order fulfillment team, train them, and give them time to gel into a cohesive unit, you have a much higher probability of operating at a higher level, achieving a lower cost, and, all other things being equal, increasing profitability.
Another creative approach to consider is how your company might make work more meaningful to their employees. Work is work, and family is family, but can you create a familial environment where associates feel committed not just to their job but to the people around them. When achieved, it is a true win/win situation where the employees have a rewarding and positive work environment, while the employer benefits from retention and the cohesion and productivity mentioned earlier. People are often less likely to leave when they feel they aren’t just leaving a job, but also the people they value and who value them.
Co-Opetition Could Be the Name of the Game
Many shippers naturally focus on the first two steps of order and pick/pack/ship because those are more within their sphere of influence. But let’s conclude by taking a moment to address the final order fulfillment steps of shipping and delivery. Collaborative/shared fulfillment or “co-opetition” is an alternative that is popping up. This economic model allows small- to mid-size companies to compete with the Amazons and Walmarts of the world by sharing supply chain resources, assets, and costs. As more companies join, the network expands by adding additional fulfillment centers. The intricacies of the concept are outside the scope of this article, but are available online for you to research. Shared services collaboration and co-opetition are an example of a creative solutions and, well, drones don’t seem like such a crazy idea anymore!
Unfortunately, there are no quick fixes or silver bullets. If it was easy, it wouldn’t be such a challenge. But these are the opportunities where winners thrive. They approach one day at a time. They realize that a collection of small ideas can lead to big results. Think really big, but start really small and get started. In the words of Nelson Mandela, “"Vision without action is just a dream, action without vision just passes the time, but vision with action can change the world." You may not change the world, but you can change your world with some creative thinking.
Matthew Kulp is EVP, Managing Partner, St. Onge Co. Visit www.stonge.com for more information.
This article originally appeared in the March/April, 2023 issue of PARCEL.