How to Improve Your Order Fulfillment Process
by Staci Americas on Mar 30, 2023 10:00:00 AM
If you want to improve your order fulfillment process, start by taking stock of your current operation and identifying areas for improvement. Here are 8 strategic questions to start that assessment.
1. Do we have the right number of fulfillment locations?
The answer will depend on many factors, including how much your customers care about fast delivery, how unique your product is, and your SKU count. More warehouses mean higher inventory and labor costs, but lower shipping costs and faster delivery.
The pandemic has caused many single-warehouse fulfillment networks to add a location due to concerns about business continuity. If you are one of the many e-retailers with a single shipping fulfillment center, consider the risks inherent in such a strategy.
2. Are our fulfillment warehouses in the right places?
The location of your fulfillment centers is also relevant. Chances are the customers you have today are different than they were when you established your warehouse network. A distribution network analysis tells you how efficient that network is in reaching customers.
Optimizing your distribution network can yield 7-figure savings for high-volume D2C shippers. One brand we know shaved a million dollars off a $50 million freight spend after a modeling exercise determined it should add a second DC to lower parcel costs.
3. Are we paying too much for fulfillment center costs?
If you handle your own fulfillment, a third-party fulfillment company (3PL) may be willing to audit your operations to identify opportunities to improve order fulfillment processes. If you handle that audit yourself, here are some key signs that costs might be higher than they should be:
- High associate turnover. We estimate the total cost of warehouse worker turnover at $8,500 per associate. If you lose 50 warehouse associates a year to attrition, cutting that number in half will save over $200,000.
- Inefficient picking. Without an advanced warehouse management system that directs the right storage and picking strategies, you’re probably paying at least 25% more than you should.
- Fully manual environment. Few e-retailers can afford full-scale automation, but even low-cost warehouse automation like tape machines and box erectors can save hundreds of thousands of dollars yearly in high-volume pick and pack operations.
4. Are we paying too much for parcel shipping?
This is a key question since shipping accounts for as much as 70% of an e-retailer’s total fulfillment costs. Here are common areas that inflate parcel costs:
- Delivery surcharges. According to Reveel Group research, about 35% of a company’s shipping expenses are accessorial surcharges. You can save 10–30% annually if you learn how to reduce parcel surcharges.
- Large number of high-zone moves. If you ship from a single fulfillment center or your facility is not in an ideal location for national fulfillment, you’ll pay for the added miles your product travels through the parcel carrier’s network.
- High rates based on low volumes. If you outsource fulfillment but still negotiate directly with parcel carriers, one of the quickest paths to savings is to leverage the volume discount your 3PL likely enjoys with the same parcel carrier. Depending on your volume, 6- and 7-figure savings are possible.
5. Can we improve productivity and throughput?
If you need to ask this question, there’s a good chance you don’t have the productivity standards in place to make this determination. Surprisingly, many companies, including their 3PLs, don't do a good job measuring warehouse worker productivity. As a result, unproductive associates fly under the radar, and you have no real sense of what your throughput could or should be.
To improve fulfillment processes, you need an ideal set of pick and pack productivity standards. These can be developed by combining time studies on existing processes, input from WMS software, and feedback from supervisors and the people who do the work.
Studies show that associates, once informed of a target, want to meet or beat it. That’s human nature. Beyond that, having standards in place allows you to identify the sub-par performers and step in to provide additional training and guidance. Fulfillment operations that establish and monitor pick and pack productivity increase throughput 10–15%.
6. Should we invest to automate our fulfillment warehouse?
When rapid business growth runs up against rising costs for warehouse labor and a shrinking labor pool, it makes sense to think about warehouse process automation. But rather than what to automate and how, the toughest question for fast-growing eTailers is when.
Large, one-time capital outlays are not popular boardroom conversations. That’s why, most often, a modular approach to warehouse automation makes sense.
In the early stages, as your brand gains traction, you’re learning about order patterns and SKU velocity and all those business details that will inform future technology deployment. At this stage, a manual pick and pack model could be the way to go.
As order volumes increase, you can incorporate low-level automation solutions, such as box erectors, auto-tape machines, automatic label machines, and even poly-bagging machines to significantly increase throughput without major capital investments.
Finally, as your business matures and requires high-volume, high-velocity picking and shipping, a move to automated/smart conveyors and more automated picking strategies like voice picking and pick-to-light could be required to maximize throughput with the same or fewer associates.
7. Should we deploy robots on the warehouse floor?
A Berkshire Grey survey found that, while only 13% of supply chain executives are using warehouse robots, 51% are planning to adopt the technology. If you operate a high-volume fulfillment center, your company should probably be in one of these two groups.
Collaborative robots are a great option to start. They work in tandem with their human counterparts in the warehouse to improve the fulfillment process by eliminating much of the walking pickers must do to retrieve products in the aisles and then deliver those products to pack and ship stations. Collaborative robots eliminate that non-value-added travel and allow associates to remain in one area and pick the orders that are brought to them. This enables at least a 2x productivity improvement. Check out this short video tutorial on how Staci Americas uses robots.
Robots do not require large capital outlays. Using a “Robots as a Service” financing model, brands can introduce robots into the workforce very quickly and pay a monthly rental fee per robot. These fees are often offset by labor cost reductions linked to greater productivity.
8. Should we outsource fulfillment?
About 50% of e-retailers outsource order fulfillment, and that percentage is rising. Brands want to focus available resources and capital on growth, so they lean on fulfillment companies to deploy best-practices in the operation, and to help scale fulfillment operations in parallel with revenue growth. For more on fulfillment outsourcing, check out our eBook, Outsourcing Fulfillment: The Ultimate Guide.
Audit your operation to improve fulfillment processes
The busy peak season will be here before you know it, so use this time to take stock of your current fulfillment operation to see where you can improve your order fulfillment process. Our 8-question audit may be a good place to start.
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