E-commerce: The Direct to Consumer Shipment Problem

E-commerce: The Direct to Consumer Shipment Problem

If you’re not already doing direct to consumer (drop ship) orders they are very likely in your future.  While those big, high dollar pallet shipments are never going away, your retail trading partners are certainly scrambling to become more nimble and grow revenues by offering it to consumers.

If you are already participating in this trend, you are very aware of the challenges and problems this can cause for a supplier.  

It all starts with the use of the retailer’s portal to download the order by your order processing team.  Or, if you are semi-fortunate, SPS Commerce, CommerceHub, HighJump or some other 3rd party company is downloading that order for you and putting it into your order management system (QuickBooks, Sage, NetSuite, etc.).  The reason I refer to this as “semi” fortunate is that they are charging you for every order downloaded.

Next comes the order processing tasks.  This includes things like creating the Packing List, determining the number of boxes and weights, entering the shipping information into the FedEx, UPS, or USPS portal or another 3rd party shipping software, generating shipping labels, printing everything, and having the warehouse pick, pack and ship.

And then there’s order tracking that includes entering the tracking number in your order management system, entering the tracking number in the retailer’s portal, updating inventory and carefully filing the order –  just in case – something goes wrong and you have to troubleshoot it later.

I’m sure you agree that’s a lot of time and effort for what can be a one-item, relatively small basket size order. 

IF ANY OF THIS SOUNDS FAMILIAR, consider the following example:

 

But that’s only half of it.  Now, what about the load on your pickers and packers in the warehouse?  They aren’t picking cartons and putting them on pallets anymore. They have to pick and pack individual items for shipping one at a time.  Another huge amount of time and effort for a relatively small basket size order.   

To this end, OPAL also provides further savings in the pick, pack and ship process.  It’s surprising but many business owners can’t actually identify the utilization of their pickers and packers and this labor can be another $4+ in the cost to complete that drop ship order that has already absorbed the EDI cost and order processing labor cost.

To get a handle on this you need – at a minimum – the tools to know today’s order volume, determine the warehouse Location based on item availability and shipping location, determine the number of packers needed based on today’s order volume, determine the number of pickers needed based on today’s order volume, predict tomorrow’s order volume and staffing needed, and automatically generate Shipping Labels, Packing Slips, etc. without manual intervention. 

And wouldn’t it be awesome to track picker and packer productivity, the cost of pick and pack and ship, and increase the number of shipments you can complete each day?  Absolutely!

As I said earlier, IF ANY OF THIS SOUNDS FAMILIAR, then you should really take a look at OPAL, an order processing and logistics software solution designed to handle this workload autonomously and provide you with the rapid return on your investment your business needs.

 

The Perils of Overselling or Underselling

We all know that having an accurate count of stock is critical.  But how accurate is the individual SKU count that we report to our Retailers? 

This is a critical question.  If you have 10 of a specific SKU in stock and are reporting ALL 10 SKUs to ALL RETAILERS – it can be pretty risky.  It may be OK if you have only one or two retailers, but what if you have five (5), ten (10) or more retailers selling the same item?  If all of your retailers sell all ten 10 SKUs it can lead to serious OVERSELLING, as well as subsequent chargebacks and impacts on your Dealer Scorecard.

Inversely, UNDERSELLING is just as bad but for different reasons.  You may do your best to allocate and report SKU quantities to your retailers based on past sales performance but may still find yourself in a position where one retailer can sell more than expected or another retailer isn’t able to sell as much as expected.  This UNDERSELLING represents a significant lost revenue opportunity.

Unless you have the capability to monitor how each of your retailers is performing on a constant basis and the ability to dynamically adjust SKU reporting up or down as needed, you are very likely to get caught in one of these situations.  You can certainly try to control this manually, but unfortunately when you’re working with a large number of retailers it requires a great deal of data, is time consuming and can be error prone. 

The ideal situation is to know the order volume by retailer and adjust inventory reporting for each SKU based on each retailer’s real-time performance.  For example, if you have 20 SKUs in stock and Retailer ABC is given an inventory feed of 10 in stock and Retailer DEF is given an inventory feed of 10 in stock, it would be really advantageous to adjust this if Retailer ABC only sells 5 of the 10 SKUs allocated and Retailer DEF can sell much more. 

This is just some of the capabilities that OPAL provides within one platform and without the need for numerous integrated systems.  OPAL is a self-driving Order Processing and Warehouse Productivity Software Solution that enables your business to easily and quickly cut order processing costs to less than $1, increase the order handling capacity of your warehouse by 50% – 100% and achieve profitability expectations that you thought were unattainable.  

Even More Things to Think About When Tracking Warehouse Stock

We all understand that efficiency in a warehouse operation relies almost entirely upon the time and motion of its personnel – the fewer steps while performing activities the better labor utilization you have, the more shipments you can make, and the less cost incurred.

There are several key components to warehouse management: Tracking Stock, Efficient Storage, Pick, Pack and Ship and Decision Support.  In this article I will focus on Tracking Stock – enabling managers to know the amount of stock available and when restocking is required. 

Included in this are things like efficiency, accuracy and labor utilization.  But this also impacts things like the avoidance of overselling, underselling and retailer chargebacks.  Let’s look at each piece that needs to be considered. 

Inventory Management is obvious and certainly critical.  You have to manage and track item inventory. But this may also be tied to Bills of Material for “Kit” items or even inventory of individual parts where necessary.  You also need the ability to track Containers to determine status, project how it will impact warehouse load, determine back order dates, avoid demurrages and forecast item lead times.  All of this needs to be seamlessly included in Inventory Management.

To avoid finding yourself in an overselling, underselling and / or chargeback position, you also need the ability to feed accurate item quantities for sale to multiple retailers, e-tailers and / or e-commerce sites based on Item availability, number of trading partners, sales trends, profit and charge backs.

Also included in Inventory Management are things like SKU returns and tracking.  SKU returns refers to handling the return of any item, for any reason, back to you for disposition.  You need to be able to accept a return and track both the cause and reason of the return. To accompany this, you need to be able to return items that can go back into inventory by identifying if it is fixable, track those fixed items and update inventory appropriately.

And don’t forget about SKU liquidation.  To maintain efficiency and avoid unnecessary cost you need to keep track of non-moving, out of style or end of shelf-life items and alert the need for liquidation.

Lastly, you need to consider inventory allocation.  In stock item inventory needs to be allocated to sales orders based upon order priority, shipping method and order size, as well as visibility of kit items that can be pre-packed prior to shipment based on sales history. 

These are just some of the capabilities that OPAL provides within one platform and without the need for numerous integrated systems.  OPAL is a self-driving Order Processing and Warehouse Productivity Software Solution that enables your business to easily and quickly cut order processing costs to less than $1, increase the order handling capacity of your warehouse by 50% – 100% and achieve profitability expectations that you thought were unattainable.  

The Impact of Drop Shipping on Warehouse Management and Cost

We’ve often spoken of the order processing cost associated with drop shipping and OPAL’s ability to do things that reduce that cost to less than $1 per order.

But what about the cost of picking, packing and shipping by warehouse personnel?  90% of our customers did not know the utilization of their pickers and packers and we all know it’s difficult to manage what don’t measure.  The warehouse component alone can add $4+ to the cost of an order. 

So, obviously, this too is a significant cost component when it comes to drop shipping – or order fulfillment in general for that matter.  To get a handle on this you, at the very least, you need to:  

  •         Know today’s order volume
  •         Determine the Warehouse Location based on item availability and shipping location
  •         Determine the number of Packers needed based on today’s order volume
  •         Determine the number of Pickers needed based on today’s order volume
  •         Predict tomorrow’s order volume and staffing needed 

But then, to really maximize productivity you also need to provide them with the tools and processes needed to expedite warehouse processing:

  •         Print different Picklists for Drop ship vs LTL to facilitate the picking process if both are needed.
  •         Print different Picklists based on SKU Prints to facilitate the picking process so they can pick with the least travel time.
  •         Print Picklists for Bills of Material so they can stage kits and have them ready for packing.
  •         Suggest a brown box picklist every morning so they can have all the boxes staged and ready before beginning the packing process.
  •         Suggest to Packers what size box(s) to use for the order to avoid wasted space and excess shipping cost.
  •         Scan Sales Orders for order packing accuracy to ensure that the correct items are packed for the order.
  •         Automatically generate Shipping Labels, Packing Slips, UCC128 Labels or Bills of Lading / Commercial Invoices without manual intervention. 

These are just some of the capabilities that OPAL provides within one platform and without the need for numerous integrated systems.  OPAL is a self-driving Order Processing and Warehouse Productivity Software Solution that enables your business to easily and quickly cut order processing costs to less than $1, increase the order handling capacity of your warehouse by 50% – 100% and achieve profitability expectations that you thought were unattainable.      

Is Your Order Process “Automated” or “Autonomous”?

Now, really think about the difference for a minute.  My guess is that most everyone would say that they are “Automated”.  There’s probably an EDI service that downloads Purchase Orders from the retailer into an Accounting System or ERP System, and it probably also sends back documents to the retailer like Acknowledgement, Confirmation, ASN and invoice.  There’s also probably shipping software that creates shipping labels and feeds back the tracking number.  So, there are at least three (3) different pieces of software in the process with at least a few manual touches or interventions needed to keep everything on track.  AND the number of hours your team can work is usually limited, as well.

Now, what’s different about “Autonomous”?  Well, the definition of autonomous is: “Performed by a device capable of operating without direct human control”.  Here’s how that relates to order processing:

  • Receiving orders from your customer retailers and e-tailers in real-time
  • Managing all of their EDI transactions (i.e. 846, 850, 855, 856, 860, 997, etc.) with that retailer / e-tailer without a 3rd party company to retrieve, translate, send the data
  • Creating Sales Orders or Invoices in your ERP / Accounting System
  • Creating the custom branded 3rd party Packing Slips required by each retailer / e-tailer
  • Creating Carrier Shipping Labels, BOL and/or UCC128 Labels based on the PO received
  • Sending the Picklist to the warehouse, as well as all required shipping documentation, for pick, pack and ship operations
  • Tracking the shipment through that Carrier and communicating delivery status
  • Processing orders 24 hours per day, 7 days per week, even when no one is in the office
  • Achieving all of this WITHOUT EDI Document Cost
  • Achieving all of this with one, low cost software platform that maximizes your existing investment in an ERP or Accounting System.

AUTONOMOUS order processing also enables an order to be processed through all of these steps in as little as 6 seconds.

Here’s another aspect to consider when balancing “Automated” versus “Autonomous”.  Do you have an order processing team that works 24 hours a day, seven days a week for the cost of one part-time Customer Service Representative?  Probably not, but this is what an Autonomous Order Processing Solution gives you.  And, you do not need to have a one size fits all solution. It’s configured to your processing work flow.

OPAL is that AUTONOMOUS ORDER PROCESSING SOLUTION.

Who Needs EDI Anymore?

EDI continues to be a significant part of a supplier’s life.  It’s mandated by many of your retailers or e-tailers, whether it be for drop shipping product directly to consumers or doing warehouse fulfillment.  However, over the last 20 years a major shift has opened up new opportunities in the industry due to the proliferation of the Internet.  Business processes have changed because of the Internet and the speed of data transmission has increased by a 100 fold.  The only thing that has not changed is EDI.   

While it was awesome technology in its day, it’s expensive, requires manual intervention and monitoring – but most of all, it does not communicate information instantly.  Unfortunately, real-time communication is becoming more and more important to retailers and e-tailers for things like Order Acknowledgement and knowing your current Inventory Balances as they try to be more responsive and profitable when dealing with their consumers.

So, if that’s the case, then why do you still need EDI through an EDI company?   The simple answer is that it is has been in place for decades and retailers / e-tailers can still easily point you to it as a way of doing business with them.  Unfortunately, the speed and compliance they will require falls entirely upon your shoulders.

What’s interesting is that a growing number of these retailers / e-tailers have been developing alternative ways of sending and receiving the same information that does NOT require the use of EDI through an EDI company: Application Program Interfaces (API).  APIs are a messaging format that allows data to be transmitted from one system to another in nanoseconds WITHOUT those expensive EDI Document fees.

The reason for this is that retailers and e-tailers today are becoming far too dynamic to rely on an outdated tool to be the backbone of their business operation.  Its simple evolution, the Typewriter was replaced by the Telegram, the Telegram was replaced by Fax, and the Fax was replaced by EDI.  EDI is now being replaced by API, but you, as a supplier, have to be prepared to use it.

The good news is that there are tools available that take advantage of this new technology, eliminate pretty much all of your costs associated with communicating with your retailers and e-tailers and also even reduce the overhead and cost of order processing, adding profit to each order and removing the bottlenecks that keep you from growing your business with more customers and more orders.   

Check out OPAL.  The only truly autonomous (think Robotic) order processing fulfillment software solution that takes advantage of API technology, processes a drop ship order in less than 8 seconds, compliantly maintains all communication with your customers, does this all without any EDI cost and even simplifies the processing of large LTL, Truckload or Container orders.  All of which makes each order much more profitable to deliver.