As the percent of online sales grow and as the line between web and traditional retail store fulfillment blurs, E-retailers and brands need to assess their fulfillment capabilities and those of their 3PL omnichannel distribution partners.
Following are 8 tips to maximize efficiency in an omnichannel environment.
1. Co-locate inventory for B2B and B2C channels and manage it using a single system.
This may seem obvious, but some companies continue to segregate inventory by channel. By replenishing pallet, case pick and each pick areas from a single inventory pool, you keep your fulfillment costs, and your inventory, as low as possible. Maintaining your inventory on one system facilitates buy online/pick up at store – the largest sales growth opportunity for retailers and brands.
2. Maintain visibility to all the inventory in the system.
Knowing where your stuff is – obviously that's a critical requirement for omnichannel distribution. You need real-time visibility to all your products, whether they sit in a distribution center or at a store, to make decisions on where to place inventory and the best location to fulfill specific orders. If you plan to use a 3PL, test out their visibility tool to see how easy it is to use. Also, understand the frequency with which the WMS is updated.
3. Choose a fulfillment partner that can offer flexibility and scalability.
Some 3PLs are very good at regular, predictable fulfillment volumes, but have a tough time managing unanticipated volume spikes without a disproportionate increase in time and costs. They may not have a good solution for temporary labor, or perhaps their systems aren't up to par.
In omnichannel distribution, you need to be ready for anything, like flash sales from a QVC airing. Discuss this key requirement with your 3PLs until you have a comfort level with their process and capabilities to efficiently handle large volume swings. When demand requires expansion beyond the current footprint, can your 3PL scale with you and offer additional locations? This has become more important as brands try to meet a two-day shipping promise.
4. Make sure your 3PL’s warehouse management system enables optimally efficient picking processes.
Particularly for labor intensive pick and pack operations, you want to minimize labor costs. That requires a smart warehouse management system, and not all fulfillment companies have made this investment. Advanced systems like KANE’s Manhattan WMS are able to:
- Analyze and combine similar orders on the same pick cart to reduce travel time. Direct labor costs are about 35–40 percent of total operational expense, so excellent picker productivity is a real profit driver.
- Automatically choose the right carton size to minimize shipping costs. This saves time involved in determining the right box to use. But more importantly, the system minimizes dim weight charges from carriers that kick in when shipping box sizes are larger than needed.
- Scan products as they are picked to reduce costs and improve accuracy. Make sure your fulfillment partners have this capability or you’ll pay the price in higher error rates and increased costs to fix picking errors.
5. Automate when it makes sense.
In large, high-volume B2C operations, the most dramatic labor savings will come from automated picking technology, such as pick-to-light and voice-directed systems. This is really an ROI decision. How much can the new technology cut labor costs and will this meet your company’s ROI requirements for capital equipment. In an outsourced environment, your 3PL should be proactively reviewing automation options with you as volumes rise. One factor that may hasten the automation decision is the shortage of suitable labor. The traditional labor force for warehouse work, a tough job, is being lured away by other industries where they can earn the same money for less physical work.
6. Pre-kit common orders involving multiple SKUs.
In B2C fulfillment, often the same SKUs are ordered at the same time. A smart WMS system will flag these common orders, allowing you to pre-build most of the order in a very efficient manner. For instance, let’s say two products are always ordered together, along with another SKU. Rather than picking three items for every order, you can pre-pick and box the two popular SKUs so you are only doing one pick to complete the order. The pre-kitting process is done in volume, so you’re picking full pallets and pre-building the orders as your associates have the time.
7. Button up returns processes.
Returns can be a real profit suck if they are not managed well. Here’s a tale of two companies who manage returns quite differently.
- COMPANY A has little idea what products are coming back from retail partners. Its 3PL partner must sift through the returns, determine the products, the lot codes and possibly even look up the tracking number to determine the source of the return in order to process a credit. It’s a labor-intensive and expensive process.
- COMPANY B acknowledges returns by issuing a return merchandise authorization (RMA) to the retailer. The 3PL-operated returns center receives an advanced shipping notice (ASN) on exactly what is coming back. When returns arrive, they are processed immediately. The 3PL puts the RMA number in the ASN, so when the ASN is closed out, the manufacturer gets an EDI feed of what was received and can process the customer credit. It’s a fast, efficient process.
Efficient handling of returns is important for any brand, but it’s particularly important when you sell through multiple channels.
8. Choose a partner that can SHOW YOU, not just tell you.
Omnichannel distribution requires a flexible 3PL equally capable of managing bulk distribution and pick and pack operations for B2C fulfillment. The processes used for bulk versus direct-to-consumer are very different. Beware of 3PLs who lack the experience you need in B2C fulfillment. Seeing is believing. Visit a 3PL fulfillment warehouse that serves clients whose needs and volumes are similar to your own. That way you'll get a sense of how your account might be managed.