As online sales grow, ecommerce fulfillment services are becoming better and more sophisticated. But etailers and manufacturers are still a long way from mastering the operational nuances of direct-to-consumer fulfillment. Until that happens, the profitability of the online channel will be compromised
Here are some common ecommerce fulfillment mistakes to guard against.
- Lack of data on which to base operational decisions. Start-ups, in particular, struggle to provide volume and other data required to size a facility and determine labor and equipment needs. Fulfillment partners need as much acurate data as you can provide.
- Failure to forecast volume spikes. If an ecommerce fulfillment services partner averages out your total volume by month only to see 75% of that volume hit in late November, you will likely have a whole lot of angry customers who don't get their packages on time. Volume spikes are very manageable, but with advanced planning.
- Sub-optimized fulfillment warehouse network. A careful analysis of inbound/outbound freight costs and inventory carrying costs is needed to balance the amount of product and whether to centralize distribution or use multiple fulfillment warehouse locations. High-velocity/low SKU items can support the incremental inbound costs of storing close to the customer. Lower velocity/high SKU items will create significant extra costs. The margin of the product, the freight cost and the customer's shipping urgency will help determine whether to pursue a single or multiple DC strategy.
- Ignoring drop shipping as an alternative for select items. Retailers could save significant sums by having the manufacturer ship the product. For instance, large or heavy items will always ship alone. Retailers can display these items side by side on their website, but there's no real need for them to be stored in the same warehouse.
If you're examining your eCommerce fulfillment strategy, it pays to fully understand your volumes and to weigh all the relevant costs of developing a direct-to-consumer fulfillment capability. Otherwise, the incremental profits you gain through online sales could simply leak out as costs on the other end.
More to come in our next blog post.