1. SEGMENT YOUR INVENTORY
One way to keep a lid on spiraling fulfillment costs is to
avoid omnichannel entirely … for certain products, that
is. Retailers that keep a close eye on their costs know that
there are some items that can never be profitably shipped
to the consumer from a retail store. By the time a heavy
tent or bulky flatscreen TV reaches that store, it has already
accrued so much shipping and handling cost that a retailer
could never recoup those fees at a reasonable sales price,
SCApath’s Zalowitz argues.
“Historically with fulfillment in the store, you put the
product in the store for a consumer to pull off the shelf and
buy it there,” he said. “But if you put the product in a DC
and then a store, you’ve moved it twice. Those labor and
transportation costs add up. Each time you touch it, it’s
eroding margin, to the point where it’s almost better if you
didn’t expose it to the store in the first place.”
Smart retailers simply exclude those items from their
omnichannel operations. Businesses can use distributed
order management (DOM) or store inventory management
system (SIMS) software to track those accumulated costs
on each product, he said. If the software shows an item
wouldn’t retain its profit margin after being shipped from
a store, the retailer could ship it from a more cost-effective
location instead, placating the customer by offering him
or her a discount or coupon to make up for any delay in
delivery.
“I get it that everyone’s trying to keep up with two-day
shipping from Amazon, but people are a little loose in their
logic when they [offer] everything in their inventory to be
shipped from a store,” Zalowitz said.
2. TIGHTEN UP INTERNAL PROCESSES TO
ALLOW MORE TIME FOR DELIVERY
Another way to rein in fulfillment costs is to tighten up
internal order fulfillment processes, thus buying more time
for shipping. Whisk that order out the DC door and you
may be able to send it via low-cost ground transportation
instead of premium-priced express service, and still reach
the buyer on time.
Destination Maternity Corp. discovered that benefit after
it moved into a 406,000-square-foot omnichannel distribution center in Florence, N.J., that feeds its 1,800 retail locations in addition to handling e-commerce orders, wholesale
shipments, and returns.
To build the new DC, the maternity apparel designer
and retailer had to bite the bullet and invest in equipment
such as an automated storage and retrieval system (AS/RS),
an outbound unit sorter, a light-directed display put wall,
extensive routing and sorting conveyor systems, and wearable radio-frequency identification technology, all directed
by a warehouse execution system (WES).
But that investment is paying off in a variety of ways, said
Jay Morris, president of Conshohocken, Pa.-based Invata
Intralogistics Inc., which designed the system.
For instance, running at full bore, the waveless fulfillment
system can process 15,000 pieces per hour regardless of the
destination, Morris said. That speed allows Destination
Maternity to ship 99 percent of its e-commerce orders within an eight-hour period, accomplishing tasks in one shift
that used to require three days, according to Invata.
The accelerated fulfillment process has helped cut shipping costs by giving Destination Maternity more time to
reach customers. “If someone wants second-day delivery,
UPS may be able to get it there with standard ground,”
because the shipment gets out the warehouse door so fast,
Morris said. “If you’re going to wait two or three days to get
it out of your facility, you’re going to have to use premium
express.”
3. LEVERAGE YOUR FULFILLMENT PROWESS
Swift fulfillment is a good way to keep customers happy,
but it can also generate “likes” and “tweets” that resound
far beyond a single sale. In the age of social media, well-executed fulfillment can elicit the kind of customer feedback
that’s pure gold from a marketing and public relations
standpoint.
“Customers want to have immediate visibility on their
order—everybody wants that instant gratification—and
those end-consumers are giving our clients immediate
feedback online,” said Tom Patterson, senior vice president
of warehouse operations at Saddle Creek Logistics Services,
a third-party logistics service provider (3PL) that provides
omnichannel fulfillment services for its clients.
Retailers often face a challenge in holding down omni-channel fulfillment costs while still providing the kind of
service that generates positive customer feedback on social
media. The key is to focus on the customer experience,
Patterson said. When it’s done right, omnichannel fulfillment can pay off by generating good publicity for the
company.
“You don’t get a week’s leadtime to ship a truckload;
you get an hour’s leadtime to ship a bracelet,” Patterson
said. “And by noon the next day, the customer will [let you
know] over social media whether you did a good job.”
Retailers are paying close attention. During a recent visit
to a client in the beverage industry, Patterson noticed that
the traditional stack of annual reports in the waiting room
had been replaced by a screen showing the continuous
chirps of customer chatter about the brand, displayed in a
digital flow of Twitter, Facebook, and Instagram updates.
Keeping up with consumer expectations at that pace can
be difficult, he admitted. “But it’s fun stuff. We wouldn’t
want to be in any other business.”
