Question: How prepared is your company to deal with change today and be profitable in the future?
As we work with multichannel retailers, this is the overall question we work to help management teams assess and then develop strategic programs for operational improvement.
This is the first of a four-part series on reducing costs, increasing productivity and improving customer service in multichannel businesses.
Over the next three weeks we will offer installments on improving inventory management, contact center and information technology. These four sections will give you over 70 ways to improve your fulfillment operations, all of them time-tested solutions that our clients have implemented.
Our hope is that “38 Ways to Improve Your Fulfillment Operation” will give you a valuable list of areas of improvement to consider.
Here are a few of them:
- Benchmarking and improving performance: A key to efficiency in the warehouse and distribution operation starts with good data and analysis. As the British scientist Lord Kelvin said, “You can’t improve something you haven’t measured.” Measure the key units of work produced per hour by department. We have found that providing feedback of productivity results to the employees will greatly improve performance. Look at benchmarking in a broader sense including measuring customer service and time-based metrics (e.g. order turnaround, dock-to-stock, returns processing, etc.).
- Better manage the labor force: Labor in many operations represents 50% to 70% of the total cost of fulfillment, excluding shipping. In many companies the rate for direct labor is approaching $15 per hour. In many markets unemployment is low and the quality and quantity of labor makes hiring, recruitment and retention a challenge. We see companies designing career paths in operations vs. just filling jobs. To remain efficient, changes to how you manage labor is key.
- Continual process improvement, reduction in handling and eliminate unnecessary “touches”: In our 33 years, process improvement has been the most consistent activity that has helped clients reduce costs and improve service. Often there are many beneficial changes to implement but they can’t all be made at once. Many companies get distracted and never get back to the changes they initially committed to. Implementing slotting, vendor compliance, improving workflow, changing picking options for your business and building customer confidence through your fulfillment are a few things to consider.
- Applying warehouse automation and technology: As warehouse labor costs increase, companies are implementing technologies that provide a return on investment. Voice-enabled technologies used throughout the fulfillment process – not just in picking – generally have a proven ROI. In our report we cite 8 technologies you should investigate.
- Inventory management in the warehouse: Inventory is the largest balance sheet asset in most businesses. Tracking location and status is key to profitability. Having four inventory metrics – inventory turns, inventory aging, order fill rates and inventory carrying cost – will provide the metrics required to monitor inventory.
- Time-to-customer and lower freight costs: In most multichannel operations the cost of outbound shipping is higher than all other fulfillment costs combined. The major carriers continue to increase published rates at 3% to 5% annually. For some multichannel companies, multi-DC strategies are realistic, while for others zone skipping or last-mile delivery provides lower costs. Other companies are using multi-DC strategies to improve customer service and reduce freight costs.
- Use of third-party fulfillment: While this isn’t for everyone, many multichannel businesses have found partners that provide competitive cost per order and good customer service. It generally allows them to avoid infrastructure and capital costs for new facilities and systems. Using a 3PL also allows a faster, lower-cost implementation of a multi-DC strategy.
We hope this assists you in developing programs to reduce costs, increase productivity and improve customer service in your business. You can download 38 Ways to Improve Your Fulfillment Operation by clicking here.
Next week look for 23 Ways to Improve Inventory Management.
Curt Barry is president of F. Curtis Barry & Company