5 Ways your Fulfillment and Distribution is Draining your Wallet

expensive fulfillment empties your wallet

02 Jun 5 Ways your Fulfillment and Distribution is Draining your Wallet

Although Bill Gates is quoted as saying, “Your most unhappy customers are your greatest source of learning,” he most definitely did not build the Microsoft empire off of bad logistics. As a matter of fact, Microsoft has one of the best logistics structures in the world, with much of its fulfillment and distribution actually piggybacking on the resources of hardware developers. Most companies do not think this far ahead, and they suffer the consequences. Here are five ways that your fulfillment and distribution is likely draining your wallet today.

You Are Paying For Traditionally Designed Material Handling Equipment (MHE).

Traditional methods of MHE are fine until you begin to work your way into the world of digital fulfillment. Because of the increased number of peak periods and inventory turns that e-commerce creates throughout the year, the average number for SKUs went up by just over 18 percent in the year 2015, with the trend expected to increase in subsequent years. In order to minimize your costs for fulfillment and distribution, you must take into consideration how to move many small orders promptly as well as sparsely placed large orders. This requires a different philosophy about handling, a philosophy that your inventory management company may not be fully ready for. This is costing you money and possibly sales as the world becomes more digital by the day.

You Are Paying for Multiple Distribution Centers.

The ability to drop ship and utilize virtual distribution should completely negate your need for multiple physical locations for distribution. Your accessibility and reporting become exponentially easier when you are performing those duties from a single location, whether physical or virtual. Although your transportation costs may rise in the short term, the overall cost of fulfillment will go down because of the efficiency that you gain. You also reduce the possibility of customer dissatisfaction as you reduce confusion between the inventory that you hold between separate centers. Finally, you save on the cost of having to maintain several physical locations as opposed to a single one; you will pay more for the same square footage in different locations than you will in a central location.

You Are Using Manual Inventory Control Strategies.

This is a problem for many companies that are on the cusp of expansion. In order to fully actualize the growth that you have in your head, you must go completely digital when it comes to your inventory management. Your competitors have already lapped you if you are taking any of your inventory by hand, and you are likely losing sales that you did not even know about. As the number of peak periods in all industries increases due to the increase in digital commerce, you simply cannot keep up with rotating product schedules versus products with a manageable shelf life or products that are in season by hand. Computers do not make the inevitable mistakes that humans will, and there is no reason to lose a whale just because you wrote down the wrong order number because you were rushing to rotate an inventory in another warehouse. Let the computers handle the exacting nature of the numbers that make everything run smoothly, and you will save money.

You Do Not Perform Operational Audits on a Regular Basis.

The constantly changing nature of fulfillment, distribution and electronic commerce means that you must take an assessment of your operational costs, areas of improvement and process bottlenecks on a regular basis. If you are not improving, you are falling behind, because there is no such thing as standing still in a business landscape of accelerated technological progress. There is always a way to reduce the space that you are using with virtual fulfillment, drop shipping and e-distribution. You have opportunities now to administrate your orders using virtual assistants from around the world, reducing your overhead and health care costs. Your inbound and outbound freight costs should be consistently monitored because of the volatile climate that is surrounding freight supplies in all industries. You may be able to take advantage of a freight consortium, which has a history of reducing freight costs by anywhere from 15 to 24 percent. In short, you can always improve.

Benchmarking is a great way to make sure that you are never leaving a possible improvement behind. One of the most important metrics to consider is the cost per order. Every company should understand the variables that most affect this metric and form a benchmark analysis around those variables.

You Mismanage Your Work Force.

Even with all of the digital upgrades that you should consider, the most important part of your work force is the people behind it. Until the world is completely automated, your workers are still the input engineers who guarantee that the process of distribution and fulfillment starts off on the right foot. However, labor is the largest controllable expense in your distribution chain, with about 50 percent of that expense going to picking and packing within the average company. If you cannot think of a place to start improving on your labor costs, you can always start here.

You may look towards a more independent work force, as you will not likely be able to staff for peak seasons any more. 1099 employees who work when needed are a much more cost effective option for companies who do not need to maintain a labor force above a certain baseline on a regular basis. You may have to deal with some extra regulations due to new federal mandates concerning health care but there are still ways to reduce costs here. One of the best ways to ensure a low turnover is to “keep it in the family,” as they say. Use your current staff to recommend your new hires to you.

Remember the wise words of Charles Darwin: “It is not the strongest species that survives, nor the most intelligent, but the most responsive to change.” If your fulfillment is draining your resources, then you must take steps immediately to change that. The cost of moving your product is one of the most substantial that you will take on in business, and you owe it to your company to get the best prices that you possibly can.

Ottawa Logistics wants to be there for you when it comes to cost effective product movement. Give us a call or an email as soon as you discern that your fulfillment and distribution are costing you money. We look forward to helping you find a better way to move your products and services.`

 

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