Operations and Management: Trimming Some Off the Back End

Between renting and paying the utilities for the distribution center, employing and training customer service and fulfillment staff, maintaining the machinery, and continually stocking supplies, the back end of a catalog operation racks up its share of expenses. The good news is that because the back end is for the most part invisible to customers (as long as their orders are taken, packed, and delivered accurately and efficiently), you can often find relatively painless ways to cut operational costs. To wit:

  • Reslot SKUs frequently. Efficient catalogers aim to slot their fastest-moving products closest to the packing station to reduce the traveling time of pickers and packers. But you have to continually track your best-sellers and update your slotting locations accordingly.

    Michael Wohlwend, director of alliances for Atlanta-based operations consultancy Manhattan Associates, recommends reslotting your warehouse at least quarterly: “If you store a new product in the back of the warehouse because that’s where you see available space, you’re needlessly making your pickers travel more distance.” Proper slotting, he adds, can net a 20% gain in picking efficiency — not only by reducing the distance that workers have to travel but also by cutting down on mistakes caused by sheer fatigue.

  • Employ more part-timers and fewer full-timers. Particularly if your business is seasonal, staffing the appropriate number of workers can be tricky. To staff more efficiently, Cranston, RI-based jewelry and gifts marketer Ross-Simons is increasing the number of part-time workers it hires, changing the ratio of part-timers to full-time staff, says vice president of marketing Cindy Marshall. “This way we can flex staffing hours depending on the level of sales coming in.”

  • Invest in staffing software. Another way to make sure you don’t overstaff your customer contact center during slow periods and understaff it during peak times is to invest in workforce management software such as Vantage Point from St. Louis-based Pipkins and eWorkforce from San Jose, CA-based Aspect. The software interacts with the automatic call distributor (ACD) to assess call volume and determine the staffing needed, also taking into account other factors such as the target call abandonment rates.

    According to Paul Sobota, vice president of Richmond, VA-based operations consultancy F. Curtis Barry & Co., the software packages cost $30,000-$100,000. “But we have seen as much as a 31% reduction in cost per call from companies that are using these types of packages,” he adds.

  • Renegotiate your terms. In difficult economic times, you’ll find there’s a lot of room to negotiate with almost every type of vendor.

    For instance, Duane Abbajay, CEO of Just for Redheads, was able to decrease the rent for his offices and distribution center 5% when the lease came up for renewal last year. The cataloger of hair and beauty products is based in Scottsdale, AZ, where the vacancy rate for commercial space doubled from 4% in 2000 to 8% in 2001. “I used this fact, which I got from the Chamber of Commerce, to renegotiate the rent,” Abbajay says. “Nothing is ever set in stone in terms of pricing, and the worst that they can say is no.”

    Boca Raton, FL-based multititle cataloger The Mark Group has even renegotiated the rates it pays its temporary employment agency, says vice president of operations Scott Bryant, cutting costs significantly.

  • Use a freight consolidator. Several mailers have found that switching to the U.S. Postal Service and a freight consolidator provides parcel delivery service comparable to that of private carriers at lower prices. Support Plus, a Medfield, MA-based cataloger of products for seniors, made the switch from United Parcel Service to USPS plus a consolidator in June 2000. Purchasing/fulfillment manager Michael McDevitt estimates that the move has saved the cataloger $1,700 a week.