Fulfillment Flexing: How to Get Closer to Your Customers

When analyzing fulfillment strategies, including omnichannel operations, the first questions retailers and brands need to ask themselves are: ‘Is my current fulfillment strategy meeting the current and future needs of my customers?’, ‘Is my fulfillment operation close enough to deliver to my customers in a 1-4 day timeframe?, and ‘What level of risk do I have in my operation currently? As retailers and brands continue to grow these questions will become more relevant and rise on the agenda. And, in endeavoring to get closer to customers, retailers and brands must heed internal data to create their most effective fulfillment strategy for the future.

IS LOCATION EVERYTHING?

Maximizing warehouse space will always be an important factor in fulfillment. As will be technological enablement and continuous improvement. However, when assessing how best to meet growing consumer expectations, the location of your warehouse will have a big impact on how effective you will be at achieving your objective of putting the customer first. Not only will it determine how quickly customer orders can be processed and shipped but you should also take into consideration key external factors, such as access to labor markets – particularly important in order to flex your workforce to meet increased demand, especially the peak holiday season. As eCommerce continues to boom and omnichannel options keep emerging, logistics and fulfillment challenges are taking center stage. Business Process Outsourcers (BPOs) and Third-Party Logistics (3PL) partners are stepping up to not only offer the best alternative solutions, including multi-node fulfillment, pop-up distribution sites and store fulfillment, but will also help interpret your data to ensure a futureproof fulfillment strategy.

DATA DRIVES DECISIONS

An average retailer with today’s technology knows where shipments are lagging, bottlenecks are occurring, and geographical clusters of clients are unhappy. But, some lack the visibility and ability to understand why they’re occurring and how to make change.

To meet the customized needs of retailers and brands, BPOs and 3PLs preparing for tomorrow have been taking time to intricately plan traditional and omnichannel fulfillment networks to effect a multi-node fulfillment strategy that is not just ideally located, but also considers factors such as inventory balancing and a feedback mechanism that’s on prime form (feedback from website, user experience, and customer service teams). In considering how to leverage your existing operation to achieve a better outcome today, retailers and brands must be guided by the data.

SCENARIO

Challenge: A retail brand’s primary customer base is pinpointed to one particular location and 20% of the SKUs equate to 80% of the volume. The brand has been operating a centralized fulfillment strategy but seeks to get closer to their customer, take advantage of access to a new workforce and open new transportation options.

Solution: The brand in this scenario can strategically leverage their internal data to their advantage. Although their centralized fulfillment strategy may have been successful in growing their eCommerce business to where it is today, there is more to be done to both leverage the existing operation and build a strategy for the future. The data indicates one strategic consideration to be inventory consolidation of the top 20% SKUs into one warehouse location, situated closest to the core customer base. Through this exercise, the brand might take their average delivery time from four to two days, even one day – getting closer to their customers and delivering with speed.

LEVERAGING INVENTORY IN YOUR NETWORK

Data should always be used to guide decision-making. It enables each and every brand an opportunity to find their center of gravity – insight into where customers are based, regionally, and where their inventory is turning with recent fluctuations in the point of sale. With this information, a brand can lean into the complexities of multi-node fulfillment and can be guided by outsourced eCommerce providers.

Keeping supply in specific locations to facilitate effective operations and avoid pain points (an effective Distributed Order Management (DOM) system), alongside your futureproof multi-node fulfillment strategy, can be a game changer. With DOM in place, brands can go from delivering orders in four days from two nodes, to shipping anywhere within two days by leveraging three nodes. Larger brands have started to flex further still by expanding their network to eight nodes, achieving one-day shipping. But, however successful this method is, navigating multiple fulfillment channels and locations can be cumbersome and costly, particularly for brands in hyper-growth that need to move fast. Outsourced BPOs and 3PLs offer an alleviation, easing nervousness and taking guidance from your data to make you successful.

CORE DELIVERY STRATEGY VS. PEAK VOLUME STRATEGY

The wildly anticipated 2021 peak season went as quickly as it came and many retailers had not placed the appropriate resource into solving the previous year’s pain points. As the eCommerce landscape adapts to consumer demand it will become more common for retailers and brands to adopt a new mindset for two strategies: the core delivery strategy, operational year-round, and a specific, unique strategy for peak capacity volume, that can be eight times (or more) larger than the average ordering volume. Although this isn’t new to eCommerce, some brands, particularly accelerators, might have found in recent years they need to begin adopting this – more targeted – two-pronged approach.

One key peak season disruptor remains: transportation. Retailers and brands can act now – off the back of pain points experienced in 2021 –  to decentralize their transportation by onboarding independent, local, last-mile carriers or delivery partners. Companies such as Lone Star Overnight announced the expansion of their coverage area in 2021, in time for peak season. This is also not in isolation. It’s a trend amongst regional parcel delivery companies, in response to retail business complaints against the big carriers, who raised rates, imposed peak-season surcharges and volume caps at the end of last year – and subsequently, caused price increases as higher shipping costs are not going anywhere anytime soon.