Are You Ready for Holiday 2006?

Promises, promises. All businesses make them, but the best actually deliver. Now is the time to conduct a post mortem of how well your multichannel business performed in holiday 2005 and to develop plans for improvement for holiday 2006. While it may seem early to start planning for the coming holiday season, now is the best time because your people will remember vividly the good and bad incidents, and you will also have the operational and benchmark data available.

Take your operational pulse
At the heart of improving operations in the contact and fulfillment center is conducting an operations audit. An operations audit involves combining research analysis and on-site fact-finding to determine exactly what your operational performance is now and what you need to do to meet or exceed your goals. Operations audits can help you improve productivity, use distribution center space more efficiently, increase the capacity of orders processed, streamline work flowand generally achieve higher profits and lower costs. You can tailor your audit to analyze any one of these issues or to tackle a combination of areas at once.

Assuming that your chief concern at the moment is keeping your customer service promises, the first step is to gather all the research you already have and to collect any information that you are missing. Among the data you’ll need:

• Internal operations reports. All departments—including receiving, quality assurance, inventory control, replenishment, picking, packing, and shipping—contribute to your ability to achieve the desired level of efficiency and service. Weekly reports can reveal which departments are reaching desired levels, which aren’t, and how they are affecting one another. Reports should include units of work processed per paid hour, as well as error reporting.

• Returns reports. Most fulfillment software systems produce a “reasons for returns” report, which analyzes customer returns by product vendor, item, reasons, and quantity returned as a percentage of units shipped. Typical returns reasons include duplicate shipments; late delivery; wrong item, color, size, or quantity shipped; and damaged or missing parts. Analysis of any patterns in these reports can help you identify operations, creative, and merchandising areas in need of improvement.

• Contact center customer reports. Most direct-to-customer order management systems can create reports that analyze customer complaints and inquiries. These aren’t limited to operations and fulfillment issues, however, since customer complaints often cover pricing, creative depictions of product in the catalog, returns policies, and shipping charges. Customers are likely to ask about everything from merchandise availability to care requirements. And if a customer has any problems on the back end—incorrect item shipped, slow returns processing, less-than-helpful customer service reps—you’ll certainly hear about those too. Inquiries and complaints provide direct links to your customers; capturing what they’re saying and analyzing it can be invaluable in keeping your customer service promises.

• Contact center monitoring reports. Catalog companies have historically monitored telephone reps during training, but monitoring can also yield valuable customer information. Even if you don’t have the resources or personnel to conduct “live” call monitoring, you can record calls for the supervisor to listen to from a remote location hours later. Whatever the method, call monitoring can help you find out whether your rep training is effective; if your processes, such as database system prompts, work; and if consumers are happy with your service.

• Customer satisfaction cards. Customer satisfaction survey cards included with merchandise orders also provide valuable information. These cards typically ask customers to rate their shopping experience, including the knowledge and courtesy of customer service reps, the promptness of delivery, the condition of the package on arrival, the packaging quality, the product appearance, and service. These cards are most effective if you keep them simple by giving customers the choice of several responses, such as “excellent,” “good,” “average,” and “poor.” Prepaying postage can increase the response rate from an average of 1.5%-3% to as much as 5%.

• Secret-shopper studies. Designated “shoppers” from within your company who place orders by phone, by fax, and online get a firsthand view of how well the contact center, order fulfillment, returns, and invoicing functions are working.

• Quality assurance sampling reports. Spot-checking outgoing packages provides information about picking accuracy, insertion of paperwork and promotional materials, and package appearance.

Benchmark comparisons
Once you have gathered all the research and data available on your operation, you can begin your audit by comparing desired standards of service with actual performance. Comparing your figures—both actual and goals—to those of other multichannel businesses can also help you evaluate your performance. While there isn’t a public source of such information, you can find benchmark data through trade publications such as MULTICHANNEL MERCHANT or consulting firms.

It’s also effective to benchmark with one or several other multichannel companies and to compare operations audit results. But make certain that you compare apples to apples by measuring your company against other multichannel businesses of about the same size that sell the same type of product and have similar operations. For instance, apparel pack rates vary widely depending on the type of apparel and how it’s stored and packaged. Packing merchandise on a hanger involves carefully wrapping it in tissue paper and boxing it, which might allow for completion of only 15 orders an hour. On the other hand, flat-storage merchandise that’s already packaged in plastic can be inserted into envelopes, allowing the facility to move 100 orders an hour.

Being there
These sources of information about your operation are invaluable in identifying problem areas. But your audit doesn’t stop there: An on-site survey of the fulfillment center is vital. Here are some areas to focus on:

• Initial walk-through. As you walk through the center, look at it as though you were visiting for the first time. How organized is it? Are productivity boards or reports displayed for all employees to see and check themselves against? Does the operation look efficient? Are there areas of congestion and bottlenecks?

• Space, work flow, and processes. How much space do the various departments need? Do space requirements vary from peak season to the rest of the year? Is there any unnecessary or excessive movement from one department area to another? Are materials-handling systems and conveyors used appropriately to move product, orders, and returns through the center?

• Staff input. Interview managers and department personnel. They’ll know where the problems are and where improvements can be made. Don’t forget to ask questions about space, work flow, and processes.

From audit to action
Once you’ve gathered and analyzed all the operations information you can, patterns will emerge, and you’ll have a quantifiable picture of what you do well and what you need to improve. But the final step is the action plan—or what will make your audit yield meaningful results.

In creating a plan, remember that Rome wasn’t built in a day. Before you tally up a list of changes that could overwhelm your team, determine where you can achieve the biggest improvements from the smallest number of changes. Focus on the areas that will yield the greatest benefit, and outline the steps to take.

And before you invest in even a foot of conveyor belt, remember another saying: “Measure twice and cut once.” First develop a prototype design for any warehouse changes, and circulate it among management and staff for comments. Keep redesigning the plan until all concerned are satisfied that it’s an optimal, efficient design. Use the same philosophy to justify large capital investments; run the numbers and cost-justify making sure the payoff will be there.

Finally, write your action plan so that it provides for continual improvements over time. Manageable changes introduced gradually will be more effective and more readily accepted by your work force than one massive overhaul. Gradual change helps make continued improvement a part of your corporate culture.

And don’t assume that a one-time operations audit is enough. Comprehensive audits should be conducted on an ongoing basis—at least once a year—to stay in touch with customer needs, accommodate your company’s growth, keep pace with your competition’s improvements, and keep up with whatever promises your marketing department dreams up next.

Curt Barry is president of F. Curtis Barry & Co. ((, a Richmond, VA-based operations consultancy. Direct marketers that participate in the company’s Benchmarking ShareGroups compare operations audit results to improve back-end performance.

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