Many ecommerce and retail businesses realize 60% to 70% of their profits in the fourth quarter. Weekly order processing during peak holiday season may be 10 to 15 times higher than average. For multichannel businesses and wholesalers, their peaks start months earlier to supply retail and ecommerce businesses.
Take the time after each holiday peak season to analyze your ecommerce operations successes and failures and develop an improvement plan using this multi-faceted approach. What were the strengths and weaknesses? Start with asking your key managers. Frontline managers can often identify the symptoms. Their involvement starts getting the buy-in necessary to make major changes.
For instance, you may identify absenteeism as a problem, leading to a significant percentage of orders carried over to the following day. Later, a deeper dive will help you determine the causes. Use data to validate everyone’s impressions and figure out how you can improve processes, layout and material handling throughout the ecommerce fulfillment center.
Here are 6 things to do assess peak season performance of your ecommerce operations.
Assess Your Supply Chain
In order to fully understand your customer service and total fulfillment costs, you need to assess your supply chain and its efficiency. These 8 supply chain strategies should be used as a guide regardless of the size of your facility or the markets you serve.
We’re not saying every company can fully utilize or should employ all of these strategies. Determine which ones will give you the greatest benefits for the effort and investment.
Review Key Metrics
What internal metrics give you the most accurate picture of your ecommerce operations performance? Consider these metrics and what they point out:
- Initial customer order fill rates: What percent of orders initially filled are complete? Were there inventory availability problems which created backorders and additional costs?
- Excess stock: Is low inventory turnover tying up a large number of ecommerce fulfillment center slots? Is there excess inventory that needs to be liquidated?
- Call center and customer service complaints: From your reporting, what were the major categories? This will help you the key issues to address.What were the error rates, i.e. items damaged in transit and mis-picks?Return rates: Are these excessive for certain products or vendors? 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 or other marketplace and fulfillment partners? If you’re omnichannel, how well did you support store fulfillment operations?
Do these metrics point to potential problems requiring a deep dive?
Analyze Shipping, Carrier Costs
This is the number one cost of order fulfillment. Were your shipping costs in line with the budget? Did carriers meet your objectives for dropping a trailer daily and meeting cutoffs? Analyze costs vs. shipping and handling revenue 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 and lowering ramp-up costs? Which seasonal associates do want to hire full time? Set up a plan to stay in touch with them during the year. Did you offer a bonus for “refer a friend” and staying the entire season?
If you use temp agencies, how well did they meet your goals and budget? How were second shifts managed? Was it difficult or more expensive to staff for peak, and was absenteeism or errors higher than expected? Do you know what employee turnover costs you? Is it excessive for your company?
Labor Performance and Process Change
Direct and indirect labor is often more than 50% of fulfillment costs in ecommerce operations excluding shipping. Where are the labor dollars spent? Typically, the two largest functions are picking and packing. If the business is apparel, returns processing is a major expense. At the heart of making operational changes should be creating flow diagrams of all processes. Slotting, picking, packing and shipping are key processes to streamline order throughput and reduce costs.
Effective slotting significantly reduces the picker’s travel time, order turnaround and costs considerably. This previous blog post covers ways to improve ecommerce fulfillment center slotting
Many companies need to improve the basics of picking in their ecommerce operations. Others are ready to transition to more advanced methods of picking. This blog post lists 11 alternatives to consider to improve picking.
All aspects including process, ergonomics, packing, branding outer cartons, shipping systems and automation should be considered for improvement. Seasonal employees that don’t know your operations or are unfamiliar with ecommerce 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?
Develop an Improvement Plan
Armed with flowcharts, metrics and possible options, develop a plan for improvement. Which areas represent the low-hanging fruit that should be evaluated and implemented immediately? Chances are you can’t do everything. Set priorities in terms of where you can realize the greatest payback. Some of these findings can be held for re-evaluation and use later.
Some recommendations may require capital investment and budgeting. Going through a rigorous process of review and analysis of ecommerce operations now will pay dividends as you get into the new year and look ahead to planning for the next peak.
Brian Barry is President of F. Curtis Barry & Company