Reality Check: The Life and Times of a Fulfillment Operation

Previously on “Reality Check”: When we last ran entrepreneur Matias Zeledon’s column on Nov. 17, we left him worrying about how to handle the fulfillment problems posed by the rapid growth of Down to Earth, his Costa-Rica based coffee and gifts mail order company. Eager to bump up operational efficiency, Zeledon brought in IT folks from Costa Rica’s Tech Institute to help him revamp his systems. Are they succeeding? Will Zeledon ever realize his dream of establishing a “model” operation? The story continues . . .

As I presented it in my first column, reality has been tough to us. We have discovered that operations and fulfillment are not as easy as I thought.

So, our first action is to set up a single inventory software system that will address the very complex inventory needs of our entire operation: promotion, production, packaging, and finished product inventory for our stores.

The challenge in the creation of this system is to be able to integrate the different order/reorder time periods, ranging from 12 hours to two months. The critical point in our operation is the 12-hour period prior to shipping the gourmet coffee where there is no room for mistakes. The process includes the use of foil bags and resealers, the back label, personalized main labels with the names of the buyers, a beans/ground identifier label, and a sealing label with the roasting date and the name of the buyer.

Even though we ship only full pounds to consumers in the U.S., we also supply other organizations and our own stores that require a full range of sizes. The total gourmet coffee operation includes four different roasts in two presentations and six different sizes: 32 oz, 16 oz, 12 oz, 8 oz, 2 oz, and 1 oz.

The software system that we are designing needs to also keep track of the promotional materials and the packaging materials. The promotional materials are currently produced by a mail order software system and the inventory is kept there. The average warehouse life of the promotional materials is three months, but besides the mailing of straight promotions, some of these pieces are also included in the shipments.

Then we have a separate inventory system for the packaging and shipping materials, which include the foil bags for our coffee and chocolate-covered coffee beans, plus the bottles and caps for our body care lotion. Coffee liqueur is outsourced, but we still have to produce and affix its labels.

Last but not least, the inventory for our stores includes about 250 products that have a shelf life ranging from seven to 60 days. Some of them are mass-produced, but most are handcrafted items with a re-order level of 30 days.

We estimate the first test of the inventory system to take place in 90 days. We will keep you posted on the process and would like to hear your suggestions on the topic.

Keep checking back, reality is setting in.

Got any advice for Matias? Send your comments to rramaswami@primediabusiness.com.

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Reality Check: The Life and Times of a Fulfillment Operation

Reality shows are all the rage on TV. We didn’t want to be left out! Starting this week, the Advisor brings you a unique look into how one start-up mail order business dealt with rapid growth—and the resulting fulfillment challenges. Written by Matias Zeledon, founder of Down to Earth, a coffee and gifts retailer based in Costa Rica, “Reality Check” examines the journey from order to delivery, the dozens of things that can go wrong in between, and what Zeledon’s doing to streamline his operation. Expect his column every other week or so. In the meantime, please feel free to send him your advice, suggestions, and feedback! Write to rramaswami@primediabusiness.com.

Reality is tough, especially when the success of your business depends on it.

Three years ago I founded Down to Earth, a mail order company based in Costa Rica and serving the U.S. market. Consumers in the U.S. could go online or call us toll-free, buy our fresh-roasted gourmet coffee, and we would deliver it to them a few days later.

Easy, right? Well, reality says no.

Operationally, the fulfillment of these orders quickly became very tricky. The process became taxing due to the cost of making a mistake. We had pre-set shipping dates to maximize our volume with the airlines and get a lower cargo rate. If an order was left behind or the wrong roast sent out, another order had to ship immediately. This compensation was four or five times more expensive because we had to use FedEx directly from Costa Rica.

Still, our customers loved us, and we were extremely successful. We grew exponentially—and so did our fulfillment headaches.

The problem was compounded by the fact that we opened stores in hot tourist spots and offered delivery of goods to the hotel the day before the buyer departed Costa Rica; if you have ever been on vacation, you know this is music to a tourist’s ears. But then, tourists did not want only coffee: How about T-shirts, coffee paper journals, handcrafted items? Soon, we were handling an inventory of hundreds of items from suppliers who sometimes did not even have a phone. Add to that the fact that our coffee is roasted upon order, and you are brewing chaos.

Three years of this was enough. We reached a point where we needed to take drastic action. We had been applying small solutions to parts of the problem and were tangled up in a maze of an operations system conceived by a marketer.

So, I made a decision: We would become a model operation to match the success of our products. We enlisted the help of Costa Rica’s Tech Institute to undergo a major revamping of all our systems. The main goal is to integrate four different proprietary software programs that address specific steps of what I now know is one process.

We will share this process with you with the idea of having our experience help you in your business but at the same time hoping to get valuable feedback. Keep checking back! Reality is setting in.

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Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
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Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.