August 4, 2016

After we recently looked at the efforts of big box retailers to whip their suppliers into shape and streamline inventory flow, it’s natural that we return to cover the topic of chargebacks.

The term is used to describe the infamous financial penalties that are levied across many different business types, which are especially prominent in the supply chain. Continue reading Unpacking: Supply Chain Chargebacks

March 10, 2016

With more than 15 years under our belts in the order fulfillment business and decades of collective experience, it feels like there’s very little the Capacity team has not done or seen. Fulfillment changes on a regular basis and requires frequent reviews to stay on course.

We’ve moved from the early days of the Internet to a world where connectivity and data transfer defines our industry, while keeping real-world service and customer satisfaction at the top of our agenda throughout.

That doesn’t mean we can rest on our laurels, however. It always pays to stay on top of any evolving supply chain, whether to drive improvements, reduce costs, or anticipate potential issues on the road ahead. Continue reading 10 Changes Set to Shape Order Fulfillment in the Next 10 Years

July 29, 2015

We recently held a webinar to explore the fundamental elements of order fulfillment. Capacity’s co-founder and CSO Thom Campbell identified five key areas to focus on if you truly want to develop a fulfillment process that keeps customers coming back to your business time and time again.

Today we look at  how you can keep fulfillment costs down, with regular process reviews and by building constructive partnerships in the industry. You can read the rest of the entries in this compelling series under the tag Fulfillment Fundamentals.

 

 

The fulfillment landscape can be complex, even confusing if you have little experience with the industry. That’s especially true when it comes to pricing, which makes it all the more important to understand how providers set their prices and how you can use that knowledge to better manage your own shipping costs.

Fulfillment providers work from a variety of cost models. Some ship goods based on an agreed percentage of a client’s gross revenues, while others set prices based on the cost of transactions.

Most service providers who specialize in B2C fulfillment offer transactional pricing, where orders and items shipped have a set fee. Some providers prefer to use cost plus pricing, whereby prices are marked up according to a set percentage. In this scenario, you hope that the company details specific costs, otherwise you have far less visibility of where service expenditure ends and profiteering begins.

Percentage-based pricing can be attractive because it clarifies what order fulfillment will cost as a proportion of your gross. Here it’s important to focus on a collaborative partnership with your fulfillment provider in order to keep costs down.

For a closer look at how to evaluate fulfillment provider pricing, read our full post on the topic.

So how do you know when to outsource and when to keep your fulfillment in-house?

There’s very little research at the low end of the volume spectrum, mostly because there is not very much data. It’s fair to say that the early days of a business see smaller volumes that can be managed by a skeleton staff.

As volumes grow and a company expands, however, the idea that your time is valuable, and perhaps better used across other functions, should fuel the consideration of outsourcing at an early stage. Even if you find time and again that you do not need to outsource, going through the exercise is a valuable monitor.

There are several reasons to keep your fulfillment and customer service functions in-house at the beginning:

  • You gain an understanding of what’s involved and your company’s unique fulfillment challenges,
  • You can document the fulfillment process and create standards specific to your business,
  • You get closer to your customers, creating more touch points with them and learning opportunities,
  • You ensure your brand is being represented by its #1 brand ambassador: you.

 

Clearly those advantages are attractive, but this isn’t a scalable system as you seek to expand your business.

The demands on your time grow, distractions increase, and order fulfillment inevitably threatens to fall through the cracks. This is why we find that the point at which your fulfillment drives you crazy on a daily basis, is also the time to look for a partner to take the weight off your shoulders, no matter how broad you assumed they are!

At the other end of the spectrum, Forrester did research back in the late 90s which indicated that at about 10,000 orders per day you may be better served by bringing fulfillment back in-house. You can afford a facility, a top shelf manager and the appropriate technology and equipment, if you have the million dollars or so in up-front costs (which you should if your order value is more than $1.)

The landscape of third party order fulfillment providers is broad and highly fragmented. It is confusing to attempt to distill these varied offerings and price models. A well-informed, well-prepared consumer of any service is always going to be more successful.

For example, consider the parts and packaging suppliers, McMaster Carr and Uline.

Both of these organizations have very large operational arms.  They both fulfill as many complex multi-line items and orders as anyone in business. Lines per order are the number of unique items on an order; units are the total quantity. This means they would be very hard pressed to outsource these activities. There is simply too much labor in picking from hundreds of thousands of SKUs and too much real estate to house them. There would not be anything left over for a fulfillment providerto make a profit.

Conversely, a single SKU (or small SKU base) is a fairly straightforward fulfillment challenge. Even a modestly competent provider should be able to handle this work, as it involves very little planning and minimal travel time during picking. With pick time a major driver of labor costs, it is therefore considerably easier to manage costs when less complex fulfillment challenges are presented.

The Bottom Line

Make sure you understand your pricing. Lay out anything you currently pay and question potential new providers about their cost structure and any unlikely or unexpected extras you could incur. Although there will always be extraordinary circumstances with some fulfillment challenges, they should be the exception, not the norm, and any reputable provider should be willing to discuss exceptional pricing

Model sample orders, including your most regular scenarios and a selection of emergency situations, and ask the provider to confirm them. This way, you can understand excessive costs early on and decide how much weight to allocate them in your decision to go with a certain provider

Finally, go to see the warehouse. There is so much you can tell about a provider in a single visit, from their security to cleanliness, organization and morale. All are key to a successful partnership and any questions your visit raises should be answered there on the spot.

July 22, 2015

We had a close call here recently in New Jersey, as a facility next to us on Corporate Road in North Brunswick was hit by a fire.

It’s always scary to see that much smoke up close and personal, and seriously disheartening to note the damage done as crucial company equipment goes up in flames.

Thankfully, no-one was hurt in the incident and, with the proper insurance, property can always be replaced. Continue reading A Local Reminder on Insurance and Preparedness

July 1, 2015

We recently held a webinar to explore the fundamental elements of order fulfillment. Capacity’s co-founder and CSO Thom Campbell identified five key areas to focus on if you truly want to develop a fulfillment process that keeps customers coming back to your business time and time again.

To follow up on that event we’re unpacking each of these elements in more detail. Today we look at the importance of using the most suitable order fulfillment technology to ensure that you can deliver on your fulfillment promises to customers. You can read the rest of the entries in this compelling series under the tag Fulfillment Fundamentals.

Before we get started, let’s clarify one thing: fulfillment technology is not going to trouble NASA. We’re not landing on the moon, even if we are getting an important package, your product, from A to B (and often in challenging conditions!)

What the tech in our industry must provide is a stable and consistent platform on which we can deliver the goods, literally, and delight customers with prompt service and clearly communicated tracking. That’s what makes it a fulfillment fundamental, and why we dedicated an entire section to the tech in our presentation.

When you consider a 3PL provider, the key is finding that appropriate balance between best practices in technology and a solid service platform.

 

Identifying the Appropriate ORDER FULFILLMENT Technology FOR YOU

Your business needs a provider who offers a warehouse management system (WMS), the foundation of any stock tracking and inventory control operations. These software platforms allow companies to track all inventory through bar codes and radio-frequency identification (RFID) scanning devices.

Some common characteristics of an effective WMS include the following:

  • End-to-end tracking through the key stages of your fulfillment process,
  • Easy to set-up, with a quick learning curve,
  • Integrates seamlessly with your own core systems,
  • Clear measurement and reporting,
  • Flexibility to scale with your business needs and upgrade alongside new tech developments.

An online portal is another provision of a 3PL service that is a requirement in most cases. You need to be able to access the information you need, when you need it and in a format that makes it easy to do your job. This tends to mean you’ll need close integration capabilities and custom reporting in any fulfillment solution, if your brand is to be truly tech-ready. Think about the key performance indicators that you’ll need to measure and the data points that must be captured to effectively track. Our ‘Unpacking’ article on supply chain metrics will also be helpful here.

data visualization
The ability to efficiently analyze and visualize your fulfillment operations is a key element of appropriate technology.

So while your 3PL must be a partner in your order fulfillment, don’t rely solely on them to tell you what you need in terms of technology, at least in the first instance.

Any decision to outsource some or all of your fulfillment should be taken in the confidence that you know what you require from a provider, have communicated it clearly to them, and vetted their systems to confirm they can deliver what they say.

Expect, Accept and Improve on Errors

It’s tempting to think that the right technology will solve all our fulfillment issues and eliminate errors, but this is never the case. Errors are part and parcel on any system, whether they’re caused by human hands or ghosts in the machine.

It’s how you react and learn from them that counts. The right technology will help you to analyze issues that arise and identify the most suitable solution. You’ll be able to review the order’s movement through the fulfillment process, pinpoint exactly where things went wrong and identify contributing factors that can be remedied for the future. Here’s where a 3PL can again be a great help, as they’ll not only show you what to look for but also help you to come up with a solution for the future.

In a broader sense, the best way to handle errors is to think of them as an opportunity to get closer to your customer. If something has gone wrong, you have a chance to address the issue and solve a problem for your buyer.

All of us have had a negative customer service experience, whether it’s a car break down where we’re told that everything including the rear view mirror needs to be replaced, or hours on hold only to be told that our issue cannot be resolved over the phone. That’s what an error can turn into if the wrong attitude is adopted.

Conversely, we also all have customer service experiences which were real standouts. Occasions where the person on the other side of the counter or phone really makes you feel like they were a caring human being who wanted to help. These interactions can be deeply positive, no less so because they often come on the heels of a disappointment.

Being able to turn the former situation into the latter is a skill that requires both a deft, skilled human touch and the appropriate technology to deliver a solution. Much like the wider supply chain, when you have these two components working in harmony, errors are reduced and those inevitably occur are a lot easier to deal with.