Consider the Customer Before Warehouse Cutbacks

Oct 08, 2008 3:24 AM  By

Given the recent chaos on Wall Street, now is a good time to be concerned about the financial health of your organization. And if there is any one place where you should be looking to find efficiencies and cost savings, it’s in the supply chain.

But before you head into your warehouse with a machete, looking to hack every function down to the bare bone, keep in mind the potential impact your actions will have on customer satisfaction. Chances are it’s more prudent to go in there with a scalpel and try to carefully excise the “waste” you find. Otherwise you may end up wrecking the customer service framework you worked so hard to establish.

Bear in mind the four main things customers want to know when they do business with you:

1) Is your inventory accurate?
If your customer service reps are spending a lot of time verifying if the quantities on their screens actually match the quantities in the bin, you are headed for a disaster. You should have a system in place that allows for accurate inventory tracking and order restocking — one that enables your customer service reps to have real-time access to the data.

Remember that delivering what your customers ordered is a lot more time consuming and expensive if your inventory is not accurate: You will have more backorders, more substitutions, more overnight (rush) deliveries, and more overtime spent on having employees search for products.

On average 6% to 20% of an organization’s capital is tied up in its inventory – don’t let that investment end up working against you! Remember that slow moving or “dead” inventory can erode your profits. The key to efficiency, as always, is to keep just enough of what you need in stock and to keep everything moving.

2) Will you deliver what they ordered?
Okay, so things are slowing down and you have fewer orders to process. But before you start laying-off personnel, remember the value of quickly and accurately filling orders from all sections of your warehouse. Will you still be able to fill orders quickly from all parts of your facility if you lay certain people off?

If you currently have returns sitting on the warehouse floor waiting to be processed, I can tell you that you are not delivering what the customer ordered. According to the Council of Supply Chain Management Professionals, 20% of all orders shipped are shipped inaccurately. If you cut your operations to the bone, there’s a good chance are your inaccuracy rates will go even higher.

3) Will the delivery arrive when it is supposed to?
Keep in mind that the transportation company you select is a direct reflection of your organization. When an order is not delivered on time, who does your customer call — you or the transportation company?

You must ensure your transportation providers are on time and responsive. Remember that your customer’s perception of you is, more than anything else, based on when your product arrives at their receiving dock, jobsite or office.

4) Will the items and related shipping come in at a competitive price?

If your inventory is not accurate and you have a backlog of returns, what affect do these things have on your pricing model?

Chances are you will have to charge more for the things you’re selling – and that will be reflected in each customer’s invoice. So not only does an inefficient warehouse mean delayed deliveries, it also results in higher prices, further eroding customer satisfaction.

I know you are saying to yourself right now, “My customers do not care about my inefficiencies.” I beg to differ. Stand at your will-call counter, attend sales calls, have a customer-only meeting and listen to what your customers have to say about your inefficiencies. Chances are, it is not good!

Yes, now is good time to find efficiencies your fulfillment and warehouse operations. But remember that you have many loyal customers who’ve come to appreciate the level of service you currently provide. Any changes you make in your operations today will play a role in how many of these customers will be with you tomorrow.

Rene Jones is the founder of Total Logistics Solutions, a warehouse consulting organization headquartered in Burbank, CA.