“What has destroyed every previous civilization has been the tendency to the unequal distribution of wealth and power,” Henry George wisely stated. If you consider your company a civilization of its own, and you are struggling with the cost effectiveness or the process of your order fulfillment, then you can understand the politics of distribution. Direct sales accounted for 37% of all retail sales in 2014, and that number is only rising as more business owners begin to understand the logistics of the internet age.
Most operations managers have a choice to make when it comes to order fulfillment: expand operations to shore up holes in the process or cut overhead and deal with more customer service complaints. However, there is a way to cut costs and improve function if you take advantage of the latest processes in direct order fulfillment. Here are 3 ways to actually cut your overhead with direct sales fulfillment.
KITTING AND ASSEMBLY
If your business is spending too much money on packaging and transportation costs, especially for items that are related, kitting may be a great way to cut down on your expenses. Kitting is the process of taking individual items and bundling them together in the same packaging with a single label. Kitting is an especially good strategy for a company that is growing. As your scale moves into higher volumes, the more prep work that you can automate and complete before shipping, the better that your per unit cost will be.
If you have a team that learns how to build kits from items that are related to one another, you also gain a bundle that you may be able to sell as its own item. However, the main advantage is a huge upgrade in the speed and efficiency of your packaging process, reducing costs and improving output.
PACKAGING
Every company should take an audit of its packaging at least once per year. The importance of the right packaging to the cost of operations has been detailed extensively; however, companies are sometimes unaware of the new types of packaging that can combine certain aspects of traditional packaging together to provide more protection for less money.
Vacuum packaging as a space saver and shock mount packaging for use in transporting fragile materials while still providing an attractive enough aesthetic for cover are just a few of the ways that new methods are helping companies to save money. Basically, companies should look for new packaging methods that combine two or more of the traditional functional requirements for packaging. Those functional requirements would be communication, containment, protection, transport and consumer aesthetic.
If you take an audit of new packaging once a quarter, you will have the opportunity to order that packaging in a larger volume and take advantage of a volume discount as well. You may also be able to save money by packaging kits instead of individual items, as kitting products together usually minimizes the space waste involved in transporting products to their final destination.
PROPER INVENTORY MANAGEMENT
Perhaps the most effective way to cut your overhead costs is to shorten up the lead times of your inventory, decreasing the total amount of time that your products actually stay in your possession before being shipped out. The more than you can move towards a just-in-time system, the less space you will need, the less capital you require and the faster your cash flow will turn over for you.
Moving towards just-in-time is difficult for many companies who do not want to let go of some of the more vulnerable aspects of operations and distribution, but this is quickly becoming the norm rather than a luxury for companies with larger budgets.
Although 66.4% of businesses are currently not employing just-in-time systems, they are moving in that direction. The lower warehouse costs, the improved supply chain management and the reduction of customer service complaints are just too much for a company to ignore, especially if all of the competition in an industry is reaping the benefits. Moving towards proper inventory management also ensures that you have less waste on your property at any given time, saving you money in many directions, especially over time.
Direct selling is becoming more and more prevalent every year. The Direct Selling Association has reported a continual rise in the year over year statistics of companies that are using direct sales methods – a 5.7% rise from 2012 to 2013, and a trend that will most likely move this number upwards in the future. With the right kinds of policies in place for your direct sales plan, you can reduce the costs of overhead drastically without a huge amount of change in your other company applications or a huge amount of extra expenditure on your part. As Steve Jobs himself said, “My favorite things in life don’t cost any money. It’s really clear that the most precious resource we all have is time.”
For a more cost effective direct sales fulfillment experience, call the dedicated experts at Ottawa Logistics. We offer full logistics and warehousing features including shipping, order processing, ecommerce order fulfillment, distribution, and warehousing services to companies of all sizes. We have the infrastructure to assist you; all that we really need to get started is your permission! Give us a call at 855-547-1527 or visit our website.
