If you haven’t formally evaluated your peak season fulfillment, make this the year you do so. Many businesses achieve 60% to 70% of their profits in the last quarter of the year, with order levels that are 10x to 15x over average. From your analysis of ecommerce operations successes and failures, develop a plan to make improvements using a multi-faceted approach.
Here are 10 ways to analyze your peak season fulfillment and develop a plan for improvement:
“Next Year, We Should Do This”
Solicit input from key employees to identify areas of success and those needing improvement. This is easy to do and gets people thinking about the process. For instance, you may learn your parcel shipper met cutoffs 98% of the time, or alternately, that absenteeism meant some orders were carried over to the following day. Later, a deeper dive will help you determine the whys; use data to validate the impressions and figure out how you can improve.
Review Key Metrics
What internal metrics give you the most accurate picture of your peak season fulfillment performance? How are they pointing to potential areas of improvement?
Here are a few areas to consider:
- Initial customer order fill rates: This is not the same as a backorder percentage. The initial fill rate is often 10% lower than the backorder rate.
- Call center complaints: From your reporting, what were the major categories of complaint? They will help you paint a picture of key issues to address.
- What are your error rates, such as items damaged in transit and mis-picks?
- Return rates: Are these excessive for certain products or vendors? Is the turnaround time making resaleable inventory available quickly? Are you crediting customer accounts within one week of receipt?
- Same-day shipment: To compete with Amazon, many ecommerce businesses are attempting to ship a higher percentage of orders the same day they arrive.
- Supporting other channels: How did you meet SLAs from Amazon, other marketplaces and fulfillment partners? If you’re omnichannel, how well did you support store fulfillment operations?
Analyzing Shipping and Carrier Costs
This is the number-one cost of order fulfillment. Were your shipping costs in line with the budget? Did shipping back orders separately drive costs up? Did carriers meet your objectives for dropping a trailer daily and meeting cutoffs? Analyze cost of shipping versus shipping and handling income to focus on this major expense.
Evaluate Hiring and Seasonal Ramp Up
How well did your hiring and recruitment process work? What was the cost in terms of management time? What improvements can you make for training employees and lowering ramp-up costs? Which seasonal associates do want to hire full time? Set up a plan to stay in touch with them. Do you offer a bonus for “refer a friend” and staying the entire season?
Direct labor is often more than 50% of the fulfillment costs in ecommerce operations, excluding shipping. How well did you meet your budget for both internal and temp labor? A good first step is to understand how marketing’s weekly demand plan compared actual to plan. Changes in demand plans can often affect labor cost and availability. What were the major causes of overtime? Did your incentive pay plan work as expected? What can you adjust to increase production in the new year as well your peak season fulfillment?
If you use temp agencies, how well did they meet your goals? How were second shifts managed? Was it difficult or more expensive to staff for peak, and was absenteeism or errors higher than expected?
Calculate employee turnover for the year both with and without seasonal workers. What are the costs of this attrition? Is it excessive for your company?
Workflow, Storage Needs and Congestion
At the heart of making operational changes is performing an overall assessment. While the topic is too lengthy to cover here, you can read more about it in this previous blog post.
Congestion slows processing. Quick cell phone pictures and videos help capture how bad this problem is. Racking and aisles crammed with product make it hard for associates to do their work and may result in forklift-related injuries. One recommendation is to do the replenishment in off hours, which improves safety.
Temp employees that don’t know your operations or are unfamiliar with fulfillment center work in general are probably best suited for simpler tasks. How can processes be simplified or broken into multiple steps to make functions easier?
With inbound receiving, how well did vendors perform? Did they create backorders, have problems with their purchase orders in terms of substitutions or deliver late? Did they fail to meet the terms of your compliance program? Overall this assessment will lead to great recommendations for the future.
Inventory Performance and Operations
While purchasing and inventory management generally aren’t the province of operations, inventory availability dramatically affects throughput and costs. Was the backorder rate higher than expected during peak season fulfillment? If so, did it cause customer service problems and higher internal and shipping costs? As the season is completed is there excess inventory that needs to be liquidated?
Drop Shipping and Vendor Management
While merchants set up these programs, fulfillment managers may be responsible for some aspects of managing customer service. Review drop ship vendors and determine how they met your agreement in terms of customer orders, costs of services and shipping.
Evaluating Multi-FC Operations
How well did your fulfillment network work? What level of customer service did it achieve? Were there excessive backorders adding to shipping costs?
Develop an Improvement Plan
Armed with details and options, develop a plan for peak season fulfillment in 2019. This may not be the total plan you’re considering for fulfillment, such as adding capacity or an additional facility. Set priorities in term of where you can realize the greatest payback. Some of these findings will also be input to objectives and bonus plans for the coming year.
Going through a rigorous process of review and analysis after the big rush is over will pay dividends as you get into the new year and look ahead to planning for the next holiday rush.
Brian Barry is President of F. Curtis Barry & Company