Optimizing an eCommerce Order Fulfillment Centre

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In the retail business, the online marketing is the only channel that has gained the maximum exposure and market share in the total retail sales.
According to Forrester, an independent market research company, eCommerce sales exceeded $ 200 billion in 2011 and are expected to increase till $327 billion by 2016.
Online sales or eCommerce channel is not only restricted to the developed countries such as the US and the UK but is also widespread in North America, Asia Pacific and the European countries too.
There are various factors that are attributed to increase in the market share of eCommerce vertical such as increased internet & mobile penetration, widespread availability of free or cheap technology and search for new markets & marketplaces.
The customer or the user experience is also one of the factors that have an effect on the online sales.
Online retailers can increase the users' or customers' experience by providing easy & simple access to products, safe & simple payment options, displaying policies clearly, adopting customer feedback and the impeccable Order fulfillment centre services.
The order fulfillment service in the online vertical is generally a crucial point that has an immediate effect to the buyers' expectations.
Factors such as delivery time consumed, type of products to be delivered, time and place of delivery, additional categories of the products and hassle free returns also has an absolute impact on the Order fulfillment centre that in turns affects customers' expectations.
Following are the key areas that an online retailer has to focus so as to optimize the Order fulfillment centre services of his eCommerce store:
  • Speed: Optimizing the time taken to deliver the product is of the deciding factor for enhancing the performance of Order fulfillment centre services.
    Online customers expect the same kind of instant gratification from the online purchasing as when they are buying from physical stores.
Since the online customers expect fast delivery of the goods purchased, a few online retailers have started 'same day delivery' or 'next day delivery' services at no extra cost.
This type of speedy delivery of goods has become a differentiating factor for an eCommerce Order fulfillment centre services.
Following are the suggestions that online retailers can implement to optimize the speedy delivery of product orders:
  • Location of Order fulfillment centre centers: The location of Order fulfillment centre centers regarding an online product has a substantial impact on the delivery of the products.
    Online retailers should analyze the geographic regions that generate additional demand for online sales.
    Accordingly, they can establish their Order fulfillment centre centers to minimize the time taken in placing orders for delivery.
  • Synchronizes systems: Online retailers should have access to real-time data on all the subordinating systems, including order management services, warehouse management systems and supply chain management systems.
    It reduces the time lag while placing the orders, packing, shipping & final delivery of the products.
  • Optimizing Order fulfillment centre: This factor has two issues to be made absolute.
    First is the location of the Order fulfillment centre centres so that no products ordered through web stores are left undelivered.
    This can be achieved by getting real time access of data across different systems and dispatching products either through Order fulfillment centre centers or through the concerned vendor.
    Second is optimizing the cost involved in delivering the products.
    Online retailers should dispatch the products through that Order fulfillment centre center which helps in minimizing the overall cost of the product.
  • Order preference: Online retailers have to set the order preference based on the Order Management System& Warehouse management system.
    They can fix the priority based on the expected shipment time and the time required for shipping orders.
  • Accuracy: Accuracy in eCommerce jargon means ensuring the correct products are dispatched on time and delivered timely at the correct location.
    Any negligence on this part cost not only a loss of sales but also result in a lost customer, perceiving negatively about the web store and managing bad publicity on the social media channels.
    In addition to this, any product returns led to erosion of the profits and increased cost.
    To enhance the accuracy in delivering the products online, retailers can consider the following points:
  • Automation: Mechanization at the Order fulfillment centres simplifies the complex processes to improve the accuracy of the Order fulfillment centre.
    The automation at these centers depends on various factors such as SKU count, their types and order profiles.
    Automation at this level is necessary to reduce the level human involvement.
    Online retailers can use automation in various types of processes such as packaging processes, scaling to check the weight of the outbound goods and sizes of the goods.
  • Unique Stock Keeping Units (SKUs): Unique SKU numbers should be used for every product displayed on the web store for increasing accuracy in Order fulfillment centre.
    This also helps in tracking the exact number of the products left in the inventory and the number of products sold of a particular category.
    Online retailers can use such SKU numbers on the selected products such as high priced products and electronic items.
  • Auditing non-compliance: Online retailer should have the mechanism to track inconsistencies in order deliveries before and after shipment.
    This involves auditing at various levels such as checking on the pre-shipment level and taking customer feedback post-shipment.
  • Grading supplier/vendor: It is very important for the online retailers to partner with those vendors or suppliers who have standardized shipment processes.
    This is critical as any negligence on behalf of them tantamount to negative brand perception and loss of sales.
    Standardizing the selection process for partnering with vendors/suppliers save efforts in auditing the merchandise from selected vendors and further deciding whether to continue transacting with them or not.
  • Network design: Operating a web store requires a flexible, responsive, financially feasible and well-connected network.
    A multi-channel orientation is necessary to meet the customers' expectations
Facilities such as order placement through any marketing channel, Order fulfillment centre from any channel, shipping to any location and sales return to any Order fulfillment centre are a handful of criteria that are necessary to be considered while meeting the clients' expectations.
For increasing the efficiency of a network design the following points can be considered:
  • Spoke-hub distribution system: In order to meet the requirements of the online customers quickly & easily, retailers can build online fulfillment centers in a location nearby to their customers.
    This type of design can be optimized to get same day delivery of goods to specific geographical locations.
  • Order fulfillment centre center near the logistic hub: Online retailers should build their Order fulfillment centre centers near to the logistic hub such as ports, airports or competitor facilities.
    This gives an opportunity to optimize human resources, shared transportation, adding goods into the inventories and finally reducing the time to deliver goods
  • Shared inventory: Online customers are using Omni-channels to access information to get a seamless experience across different channels.
    Due to this, online retailers are facing problems in handling and sharing inventory across different channels.
    Online retailers should have a network that supports shared inventory and fulfillment across different channels.
  • Automation: Automating the processes at the online fulfillment centres is definitely going to help online retailers.
    Processes such as automated storage & retrieval, item sorters, conveyors, cranes, stackers etc.
    are helpful in reducing the order cycle time, increases accuracy in Order fulfillment centre and enhance inventory storage density.
Online retailers can consider the following points for automating the Order fulfillment centre centers:
  • Automates storage & retrieval system: It is helpful in storing high-density material for optimizing available space.
  • Conveyors: This is helpful in picking, sorting and packing for rapid transmission of products.
  • Using RFID: This helps in tracking inventories on the real-time basis.
  • Enhancing product offerings: Online customers are more interested in purchasing various types of products making it more cumbersome for retailers to manage a wide variety of products.
    The main challenge is in managing the additional product categories and number of products SKUs.
    One of the major factors attributed to this is the technological advancements that lead to continuous innovation in the product categories.
    The following points can help online retailersmanage a huge assortment of products and their categories:
  • Analysing SKU and segmentation: Online retailers can categorize their products based on the velocity with which they are ordered.
    Cataloging the SKUs helps in deciding the fulfillment channel, the network capacity required by that particular product category or SKU and deciding about the inventory levels.
Additionally, segmentation helps in the cataloging of SKU based on the essential products to popular/on-demand products and deciding on the source & fulfillment strategy.
  • Rationalizing SKUs and exit planning: Online retailers must have a strategy to move products from one network to another to make them available from the web store in the physical stores or discontinue carrying/obsolete products and shipping them directly from the vendors.
  • Reverse logistics: A simple and easy return of goods process that is suitable to the customer helps in establishing a positive image of the online retailer.
    Online retailers must accept goods returned via mail or returned to the physical store or return to the vendor or to any other Order fulfillment centres without any additional cost.
    Most of the online customers find this return of the goods policy as a differentiating factor when comparing products on other web stores and thus becoming a key customer retention factor.
    The following steps help online retailers in building effective reverse logistics strategy:
  • Prevent returns: The information displayed beforehand at the time of purchase has an important role in preventing any kind of return of goods.
    Features like zoom facility, product images from different angles, detailed product descriptions and further product usage guidelines help retailers in curbing returns.
  • Defining return policies: Online retailers should have a clear, easy and a standard return of goods policies so that the customer can be informed about the further processing and payment can be returned.
  • Integrated return network: Online retailers should have an integrated and synchronized capability to enable web products to be returned.
    Synchronized systems help online customers to return goods via mail or return in-store or any Order fulfillment centre centers.
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