Many ecommerce fulfillment centers spend much of their time implementing reactive tactics without ever thinking through the strategy of what they’re trying to achieve. The terms “tactics” and “strategy” are often confused and incorrectly used interchangeably.
Strategy defines the long-term goals fulfillment goals for your ecommerce business in alignment with its plans and how you’re going to get there.
Tactics are more specific activities involving the assessment of the problem, the development of options and decisions to proceed. Tactical decisions are then made by developing project plans and tasks, using appropriate best practices, identifying resources needed and starting initiatives to implement.
In short, strategy is the destination you’re trying to reach, and tactics help you get there.
No two companies will have the same strategies and tactics. We recommend performing a strategic assessment of your supply chain and then identify customized tactics to fit your ecommerce business objectives.
Supply Chain and Fulfillment Assessment
Defining your strategy starts with an assessment of your supply chain and fulfillment center. This should include an FC operations audit, which will help you determine if they’re as efficient as possible. Take into account quantitative and qualitative aspects of your processes and systems.
First, assess your center’s processes and costs, then answer these questions:
- How can you spend less on labor to receive product and fill orders?
- How can you ship to customers in the least amount of time and for the lowest cost?
- How can you improve inventory control to eliminate back orders and shrinkage?
- How can you increase the capacity of your existing space to store product?
These 8 supply chain strategies should help you regardless of FC size or the markets you serve. While every ecommerce business has different supply chain challenges, there’s something here for everyone.
Make the Inbound Supply Chain More Efficient
Your objective should be to receive product so that it can flow through to put away or be cross docked to fill orders. Assess what current problems exist and which costs are absorbed in reworking non-compliant receipts in both the fulfillment center and back office.
Multiple FCs to Lower Shipping Costs, Delivery Time
Market leaders influence customer expectations for fulfillment time and shipping costs. What are your customers’ current and future expectations for faster delivery and lower shipping costs? Investigate if a multi-FC strategy is the best approach. Recognize the costs and timeline needed to set up the operation in terms of additional facilities, inventory, staffing and management.
The cost of outbound shipping exceeds the sum of all other fulfillment costs and it will continue to go up. What room is there for better negotiation of rates? Do you use rate shopping? Can an enterprise shipping system help you lower costs?
Increase Paperwork Accuracy, Decrease Processing Time
One of the foundational technologies for warehouse systems and automation is implementing barcode technology. Barcodes let you track the what, who and when for all activities within the four walls. Here are 11 ways barcode technology can improve your fulfillment operations.
Manage Labor More Efficiently
Most FCs rely on manual labor, which is not cheap. If you can’t achieve a favorable return on investment in applying automation, managing labor more efficiently should be a major strategic goal. Make improving labor productivity a key objective.
Increase the Number of Picked Orders Per Day
Order picking is one of the highest labor costs, and order accuracy and timely fulfillment are keys to a successful customer experience. For larger FCs, voice picking, pick-to-light and put-to-light, picking modules and robotics can provide an ROI for many applications. But they must be designed to fit your facility, products and material handling. Here’s more on picking methods and discovering the best options for your business.
Use Your Existing FC Space More Efficiently
Warehouses are expensive to operate considering the total fulfillment costs of labor, occupancy, storage and material handling. Often, facility costs are 15% to 20% of the cost per order. Increasing efforts to gain space efficiency should consider options for layout, product flow, labor efficiency, storage and material handling, as well as safety, throughput and system functions.
Select and Implement a New Information System
This is something many companies need as a foundation for more advanced technologies and automation and to implement other strategies. However, about 50% of larger installs over $1 million are not delivered on time or within budget. Learn how project management should be part of your strategic thinking.
Use of Third-Party Logistics vs. Internal Fulfillment
Should your company continue to maintain and operate its own FC? Can you achieve faster delivery with multiple facilities operated by a 3PL? This strategy isn’t for everyone, but many large companies make cost effective use of a 3PL.
No two ecommerce companies have the same selling and merchandise strategies. Likewise, your fulfillment facilities, workforce, processes and systems are also different. A one-size strategy will not deliver results.
Brian Barry is President of F. Curtis Barry & Co.