Electronic Retailer - July 2012 - 40

BY AYAL LATZ

Design a Winning Fulfillment Strategy in 5 Steps
CHANNEL CROSSING: FULFILLMENT
Every campaign needs fulfillment, as well as other back-end functions such as order management, customer service, payment processing and returns management. This much is obvious. But it’s a bit trickier to design a process that is both cost-effective and will also put a smile on your customers’ faces. New marketers need to think through the many options available. Experienced marketers should also continuously examine how they are doing things. Why? Each campaign is different. One size does not fit all. What is best for one program is not always the best fit for another. Being a creature of habit can be costly. New ideas and methods are constantly being developed. Don’t miss out on efficiencies and savings that your competition is enjoying. Here are the top subjects you should consider when evaluating options for back-end solutions. 1. Order Processing Turn Time: How quickly are your orders processed and shipped? Same day is better than 24 or 48 hours. Why? The faster orders are shipped, the quicker customers receive their orders. That reduces costs associated with customer service. It reduces the amount of time for buyer’s remorse to set in. You collect funds faster. Continuity program cycles start sooner. Are orders processed in batches, or in real time? Batch processing is inherently slower because there is an interval between batches. With real-time processing, the order is completed and ready to go without delay. That speeds payment processing and allows a communication to be sent to customers informing them of order status. And, in case of problems such as card decline, it provides more time to solve the problem. 2. Storage Costs: What percentage of your cost structure is dedicated to storage? Several variables can affect this. How is your inventory delivered – in bulk container quantities or in small, LTL-sized replenishment quantities? If you have a lot to store, then your storage costs will be higher. What is your inventory turn? Faster turns should result in lower quantities on hand and lower storage costs. If you are handling fulfillment yourself, what are the true costs of your storage? The answers to these questions can help point you to the proper storage solution. Basically, larger items, lower sales price, lower turns will force you to find lower cost storage alternatives. Otherwise, your cost structure will be impacted negatively. But regardless of the specific characteristics of your product, storage costs need to be calculated and compared. 3. Shipping Method: Different methods come with various trade-offs. Select between faster and slower, cheaper and more expensive. Which is better? That’s for you to decide, but keep in mind that lower cost shipping methods that are slow may end up costing you much more in customer service costs, cancellations and negative feedback on social media. There are options that balance cost with performance so that you can have your cake and eat it, too. 4. Location of Fulfillment Center: Where are your customers located? Are they concentrated in one area, or scattered across the country? Where are the population centers that make up significant portions of your volume? With this knowledge, you can locate your product closer to your customers and deliver it quickly at the lowest possible cost. That’s effectively the same as getting a huge discount off of your shipping costs. With much of today’s DR product being sourced in Asia, it is a common assumption that product should be shipped to the West Coast and fulfilled from there. Not necessarily true. The vast majority of the U.S. population resides east of the Mississippi River. This is the driving force behind the widening of the Panama Canal, which will make movement of goods to the East Coast more common and costeffective. It is estimated that more than 30 percent of current volume to the West Coast will soon move east through the Canal. What other cost factors are associated with each shipping location? Is the location subject to inventory taxes, or is there a Freeport exemption? How much is the inventory tax rate? What are the storage and handling costs associated with each solution? And what are the incremental costs associated with transporting the product to the fulfillment center? All of these factors contribute to the overall best solution for your campaign. 5. Returns Processing: Can your fulfillment center handle returns effectively? Capitalize on returns by developing a refurbishment program and reuse product and components when appropriate. Ask your provider if they have experience reworking products similar to yours. Read more ideas for how to have a successful fulfillment campaign by Ayal Latz of a2b Fulfillment at electronicretailermag.com. Ayal Latz is president of a2b Fulfillment, Inc. in Greensboro, Ga. Contact him at (866) 843-3837 or ayal@a2bf.com.

electronicRETAILER | July 2012

Electronic Retailer - July 2012

Table of Contents for the Digital Edition of Electronic Retailer - July 2012