eCommerce is a growth industry that has been breaking records year after year. This holiday season was no exception. According to comScore, online sales for the November through December period jumped approximately 11% and totals hit a record $91.7 billion.
Yet, with rapid growth comes great challenges. In 2016, holiday fulfillment was once again challenged by an unexpected surge in holiday orders that overwhelmed many carriers. While, eCommerce retailers can’t expect to control carrier actions — what can eCommerce retailers do to improve their order fulfillment in the coming year?
You can start by fine-tuning and streamlining your order fulfillment processes until they operate with effective precision. Order fulfillment is the most critical and labor-intensive process within the supply chain. While you cannot control every factor related to shipping and fulfillment, such as inclement weather delays or over-taxed carriers, a fast hand-off is a crucial first-step that is within your control.
Every serious eCommerce retailer should engage in ongoing and strategic improvements to their order fulfillment processes. The best way to understand where improvements are made, is to begin by measuring the critical factors that determine successful fulfillment. Taking a close look at your order fulfillment metrics will help you plan the most efficient route to improved performance.
While there are countless measurements that can be taken in regard to fulfillment, a some important metrics directly relate to overall delivery time lines and resulting customer satisfaction. Holiday order volumes test all eRetailers, by reviewing your most recent metrics you will understand how your fulfillment performs when it is running at maximum capacity. If you have migrated to an automated warehouse management system, you will have access to a treasure trove of accurate fulfillment measurements. However, if your fulfillment operations are still manual, here is what you should be measuring:
Speed & Accuracy
The easiest way to avoid the unnecessary stress of an upset customer is to ensure that their orders are fulfilled and shipped quickly and accurately. In order to do so, you must have an optimized picking, packing and shipping process that ensures orders are both accurate and received by your customers in a timely manner. A few simple metrics to measure to help understand your fulfillment speed and accuracy include:
- Speed = Production Pick Rate (Orders Picked over Hours Worked)
- Accuracy = Number of 100% Accurate Orders over Total Orders Shipped (Target: 99.5% accurate)
- Fulfillment Cycle Time (Date of Shipment vs Date of Order)
Costs & Waste
In addition to measuring your fulfillment operations, you must also take a close look at the various costs associated with your fulfillment. The hard costs associated with fulfillment continue to rise on a regular basis, this includes fees associated with annual carrier rate increases, rising costs in storage and materials, increasing labor and insurance costs — and more. However, eTailers must strive to keep fulfillment costs low, because ultimately you will not remain competitive in your marketplaces if you can’t keep your costs down. While it may not be a direct measurement, you should compare and optimize your shipping rates on an ongoing basis. Other measurements that will reveal areas to improve on costs and waste include:
- Rate of Inventory Turnover (Typical eCommerce Goal 8x – 12x/year)
- Loss Prevention (Compare both annual and seasonal costs, average loss to employee theft is 7% )
- Storage Space Utilization (Percentage of space used in your warehouse)
The most important fulfillment metric is the overall satisfaction of your customers. The only thing worse than receiving a late or wrong gift, is being the one who sent it. Slow and inaccurate order fulfillment will inevitably lead to unhappy customers, especially during the holidays. Your metrics regarding order accuracy and your fulfillment cycle will already provide some clues regarding how you measure up in regards to customer satisfaction. A few other areas you should look at include:
- Rate of Returns due to Fulfillment Errors
- Customer Complaints
- Negative Online Reviews
- On-time Delivery
Get Smart About Your Fulfillment
If you handle your eCommerce fulfillment in-house, you should have ongoing plans and preparations to continue to improve and expand your logistics processes. It is important to take ongoing measurements and set goals that will lead to a verified, expandable system. With the expected stress and time constraints that the holidays are guaranteed to bring, busy eTailers who plan to ship more than 25 orders per day should consider outsourcing their fulfillment to a third party logistics provider. If you’re ready to learn more about smart order fulfillment that saves you time and money, contact us for a free fulfillment consultation.