Ecommerce is a growth industry that has been breaking records year after year. Last holiday season was no exception. According to Adobe Digital Insights, online sales for the November through December period totaled a record $108.15 billion, a 14.7% increase over 2016! And 2018 is predicted to be a 13% increase over 2017.
Yet, with rapid growth comes great challenges. In 2017, holiday fulfillment was once again challenged by an unexpected surge in holiday orders that overwhelmed carriers. Thousands of highly anticipated holiday shipments were delayed, and customers were not impressed in the least by failed promises of “2-day” shipping. While ecommerce retailers can’t expect to control carrier actions — online retailers can make improvements to their order fulfillment process just in time for the upcoming holiday season.
Improving Your Holiday Fulfillment Process
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 a successful order fulfillment process. 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 regarding fulfillment, there are a few important fulfillment metrics that directly relate to overall delivery timelines and resulting customer satisfaction. By reviewing your most recent fulfillment metrics you will understand how your order fulfillment process performs when it is running at maximum capacity. If you have migrated to an automated warehouse management system, you likely have access to a treasure trove of accurate fulfillment measurements. However, if your fulfillment operations are 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. 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 fulfillment metrics to help understand your fulfillment speed and accuracy include:
- Speed = Production Pick Rate (Orders picked over hours worked)
- Accuracy = Rate of Order Accuracy (Number of 100% Accurate Orders over Total Orders Shipped)
- Fulfillment Cycle Time = Time spent for order to ship (Number of days from date of order to date of shipment)
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, online retailers must strive to keep fulfillment costs low, to remain competitive in their marketplace with low-cost shipping options. While it may not be a direct measurement, you should compare and optimize your shipping rates on an ongoing basis. Other fulfillment metrics that will reveal areas to improve on costs and waste include:
- Rate of Inventory Turnover (Typical ecommerce goal 8x – 12x/year)
- Inventory Shrinkage (Average rate of inventory loss is about 2%)
- 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 anxious customer 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 the area of 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
The expected demand of the upcoming holiday season is guaranteed to place stress on retailers and carriers to fulfill millions of holiday shipments on time and in perfect condition. While factors such as shipping delays are outside of retailers control, other fulfillment metrics can be improved by retailers.
Speed and accuracy are the two metrics fulfillment centers can control the most. It could be as simple as ensuring warehouses are properly staffed to accommodate the holiday demand and ensuring that staff is properly trained. Using technology to improve the picking and packing process is another area that order fulfillment facilities can optimize. Be sure to measure costs and waste to determine areas of improvement that will increase margins and allow you to compete with low-cost shipping for your customers. Lastly, and most importantly, analyze customer satisfaction measurements to guarantee happy customer this season, and repeat customers for many years to follow.