E-commerce sales grew by more than $62 billion in 2017, according to Internet Retailer, and e-commerce accounted for almost half of all retail growth last year. The Wall Street Journal recently reported "a strong hiring drive in sectors tied to e-commerce" as a sign of breakneck growth in the sector. As the industry burgeons, so does demand for fulfillment-related services like warehousing and delivery.
Gearing Up: E-commerce Fulfillment
E-commerce is a high-demand channel for retailers. It requires flexible and robust fulfillment operations that can scale with growth and meet intensive direct-to-consumer customer expectations. At FIDELITONE, we work closely with clients to optimize e-commerce fulfillment operations. Here are 6 ideas for designing the optimal e-commerce fulfillment center network.
1. Examine fulfillment center geography
Defining locations can affect your service levels and your order fulfillment expenses. Your fulfillment center network should allow you to reach a large percentage of your customers within 1-2 days, so identifying the right locations is important based on where your retail sales originate.
Order cycle time can vary based on fulfillment center locations. Ask yourself what service level is acceptable - and viable - for your business. Should 70% of your customers receive their order within 1 day? Should 98% of your customers receive their order within 2 days? 99% within 3 days? Most e-commerce customers today expect to receive orders within 1-2 days, and timing factors into competitive advantage and ongoing customer loyalty. These service level goals will influence decisions.
2. Consider your freight costs
E-commerce fulfillment center locations will have a significant impact on freight costs and your expense as a percentage of revenue. What matters is not only the freight cost at each service level, but also your inbound freight expense of supplying the fulfillment center with products. Analyzing costs by location and order patterns is imperative. In some scenarios, the savings in outbound freight costs can more than offset the cost of inbound shipping to a particular fulfillment center. Zone skipping can also reduce freight expenses when there are multiple fulfillment centers.
3. Analyze your SKU count by location
It is not always cost-effective to duplicate all SKUs across all fulfillment center locations. Sometimes this introduces unnecessary expense. Careful analysis, the right technology and order management can help you determine the inventory levels to carry at each fulfillment center.
4. Fine-tune your order management processes
By now, it's clear that desired service level, freight costs, and inventory levels all influence efficiency and order fulfillment expenses. The most effective order management processes take all these components into account to generate optimal procedures, balancing customer loyalty with operational expense management. Possibilities are endless when we apply the right technology to your specific business requirements.
5. Evaluate your sales and growth projections
Knowing when and how much to invest in building a fulfillment center network is important. Timing is everything. In turn, capacity-building is driven by sales projections. You need to be able to identify the right type and size of fulfillment centers so your operation can scale up in response to spurts in e-commerce sales. Consider, too, the ability to expand quickly and cost-effectively. Analyzing tomorrow's growth up front will influence the decisions you make today and position you for maintaining a positive customer experience. How will you continue earning customer loyalty and ensure uninterrupted growth in e-commerce revenues?
6. Conduct an order fulfillment network analysis
A mosaic of data points and what-if scenarios makes decisions about establishing and optimizing order fulfillment centers a staggering task. Wondering where your operation stands? Take a look at our Order Fulfillment Services ROI Checkup. Realize, too, that as emerging logistics trends take hold, having a strategic partner can help you navigate changes and seize opportunities.
FIDELITONE offers comprehensive order fulfillment services. Partnering with an e-commerce fulfillment expert like FIDELITONE can help you design and implement the optimal e-commerce fulfillment network. How can we help you? Call 866.787.6356 or contact us online.