Subscription enrollment is on the rise, up 41% across all verticals, according to data from Ordergroove. As companies rush to fill greater order volume, many are experiencing a corresponding rise in subscription fulfillment costs.
What can you do to keep these costs in check? Here are four strategies that have proven effective for leading subscription companies.
Subscription fulfillment can be a labor-intensive process. Since boxes typically include a number of individual pieces, there’s greater need for picking, kitting and packaging.
Pay careful attention to how many touches are required to build your box. How many items are included in each? How many folds does it take to make the box itself? How many marketing inserts must be added? Remember, there is a cost associated with every touch.
Look for ways to streamline the subscription fulfillment process. Use a pop-up box instead of one that requires ten folds. Bundle marketing materials at the printer rather than adding each item to the box individually.
As a rule of thumb, keep the complexity of your subscription offerings proportional to your order volume. You don’t want to offer hundreds of SKUs or product combinations until you can achieve economies of scale. Keep options to a minimum to start and then build in more variety as volume warrants.
With industrial warehouse space at a premium, effective inventory management is essential for controlling your storage footprint.
Keep an eye on your inbound volume. While it’s important to have safety stock products on hand in case vendor issues arise, you likely don’t need to store six months of inventory. For most subscription companies, six to eight weeks of stock is the sweet spot.
And don’t forget about managing inventory on the back end. The products left over after each run take up space. Find a way to use them in timely manner. Think mystery boxes, giveaways, ecommerce sales, etc.
Explore Transportation Options
With ever-rising parcel rates and increasing capacity challenges, transportation costs can also add up quickly for direct-to-consumer shipments. Look for ways to build in efficiencies.
If you use a batch subscription model, you probably have a high volume of orders going to certain geographic areas. In that case, zone skipping could be a cost-effective alternative to shipping packages individually.
You may not have the density for daily truckload volume direct to California, for example, but you could consolidate orders and build out a full truck over the course of a week. When the shipment arrives at the sortation facility, orders will be sorted and delivered the final mile. Bypassing zones and taking advantage of regional, rather than national, freight rates often results in significant cost savings.
Approach Distribution Strategically
Moving products closer to subscribers also can help to reduce transit time and cost. By utilizing multiple distribution or fulfillment centers, you’re likely to reach most of your customer base using cost-effective ground service. Many companies opt to have one facility on the East coast and a second on the West coast or in a central location like Ohio, Kentucky or Indiana.
It’s also wise to take labor needs into account when selecting facility locations. A competitive job market can drive up wages and increase your recruiting and retention costs, especially with labor so tight these days. To keep costs under control, consider locating facilities in areas where warehouse workers are more readily available. It often can be more cost advantageous to fulfill orders where labor is more accessible and then truck them to the desired market.
Having multiple fulfillment locations also can help you adjust to the ebb and flow of the labor market. If it’s particularly tight in one area, you may be able to avoid downtime and control costs by temporarily shifting order volume to another facility.
Exploring strategies like these can help you to better manage subscription fulfillment costs and embrace the growing opportunities available in today’s marketplace.
Nicole Lee is Director of Fulfillment for Saddle Creek Logistics Services