Fine-tuning fulfillment

May 01, 1999 9:30 PM  By

Unlike their consumer brethren, which typically offer fewer products, many business-to-business mailers stock and sell tens of thousands of SKUs. Moreover, “b-to-b catalogers generally process larger orders than consumer mailers, so the pick/pack process is more time-consuming and costly,” notes Bill Kuipers, a partner in Haskell, NJ, operations consultancy Spaide, Kuipers & Co. And as many b-to-b catalog customers are placing more frequent orders closer to need, they’re demanding faster turnaround of their orders.

All of which is pressuring b-to-b catalogers to improve their operational efficiencies without cutting into their profits. Mailers are approaching the challenge two ways: by upgrading their technology, and by offering employees (and even customers) monetary incentives.

Automation improvements Kuipers recommends that b-to-b catalogers group and route picking tickets more efficiently by batching orders to shorten pickers’ routes around large warehouses. “Or better yet, they should do away with picking slips in favor of hand-held scanners.”

Among b-to-b catalogers that have gone to paperless order processing, $200 million-plus educational products marketer J.L. Hammett Co. over the past two years began supplying pickers with hand-held radio frequency (RF) scanners that are part of the cataloger’s electronic invoice system. Not only do the scanners receive catalog and online orders electronically, but they also read the product barcodes and reject items whose codes don’t match those of the requested merchandise.

“We’re at the threshold of a paperless environment in the fulfillment center,” says Dave Merigold, director of marketing for Braintree, MA-based Hammett. The electronic system has improved picking speed, Merigold says (though he won’t disclose by how much), and the cataloger’s accuracy rate now exceeds 97%.

Though he again won’t specify amounts, Merigold claims that the more organized and efficient RF invoicing has helped to reduce costs. “We have less keypunching, invoices aren’t typed manually, and overall, processes have been streamlined,” he explains. “By invoicing electronically, we also anticipate quicker turnaround of payments.”

Bankers Systems, a $101 million catalog distributor of compliance documents and software for banks, has embraced warehouse automation as well, since its customers are moving closer to just-in-time delivery, says director of fulfillment services Rick Baron. “Customers place smaller but more frequent orders. In the past, we may have shipped out a one- or two-month supply of a particular product to a customer; now, they want less than a month’s worth.” For instance, whereas St. Cloud, MN-based Bankers Systems used to pack 100 forms in shrink-wrap packages, customers now want quantities of 25. “So we’ve automated that process with shrink-wrapping equipment and can put packages of 25 together right in the warehouse,” Baron says.

To improve order accuracy and keep costs in check, Bankers Systems tries “to reduce cycle times in our manufacturing, and carry more inventory to be more responsive to customers’ needs,” Baron says. (The cataloger produces 50%-60% of its document products inhouse.) Ten years ago, Bankers Systems needed 30 days to produce and fulfill documents internally; now it has reduced its turnaround time to three days.

Incentives pay off While improved technology has contributed to Bankers Systems’ improved turnaround time, its employee incentive program helped too. Since introducing the incentive program two years ago, “we saw our performance jump dramatically,” Baron says. “In terms of accuracy, we’ve improved from the low-90th percentile to 99.9% accuracy.”

Warehouse employees can earn incentives adding up to 10%-15% of their normal compensation, Baron says, an amount that “pays for itself” in improved productivity. “And we pay that out on a quarterly basis so that they can see the immediate gratification of doing a good job.” The cataloger monitors productivity through reports from the customer service department regarding order accuracy and other types of shipping problems. Incentives are based on the speed and accuracy of the entire warehouse, Baron says, rather than on individual performance, so as to foster team play and camaraderie.

J.L. Hammett also uses incentives to improve operations-but it offers them to customers. “We have a customer database of 280,000 public schools, and they all want their materials at the same time, just before the school year starts,” Merigold says. But this flood of orders can cause a serious backlog in the warehouse, “so we’ve done a few things to influence off-time buying, such as offering customers 5%-10% discounts to buy in May or June.” Hammett also promotes a “layaway” process in which it receives and packs orders in the spring and holds them for shipment in late August.