E-merchant Retailers and Warehouse Processes
In our last conversation we talked about why we have warehouses and how to cost-justify a Warehouse Management Software (WMS) system to operate a warehouse at optimal efficiency.
Let’s continue that discussion with a more concentrated focus on e-merchants – businesses that sell to consumers on the Internet (B-to-C).
A very large percentage of the merchandise we sell on the Internet to customers in America is manufactured in Asia. Assuming you are shipping to your domestic customers from a location in the United States, the reality of an Asian supply base has a significant impact. It takes at least a month to sail a ship from Asia to America and additional time to clear customs and move the freight to your warehouse. Storms at sea can cause delays. Ports are notorious for labor disputes that disrupt inbound shipments. Quality can be inconsistent, requiring both time for QC inspection and the purchase of increased amounts of inventory to guard against the receipt of products that fall below acceptable quality standards. There is really no alternative but to keep â€œsafety stockâ€ in the warehouse to protect against these eventualities.
Moreover, the effectiveness of your warehouse operations is a way to distinguish and differentiate yourself from your competition. You simply can’t ship it today, if you don’t have it in stock. By shipping correct and complete orders, as fast as possible, you will increase customer satisfaction and take a positive step in the direction of establishing yourself as the preferred supplier of whatever you sell.
Additionally, your warehouse can help you create unique products, exclusive to your brand by allowing you to repackage and assemble.
Finally, if you are selling effectively, you are probably selling kits, or bundles, and it is imperative to put everything that is being shipped to a single customer in the same package. The customer is much happier when they receive everything together and the per-item shipment cost can be minimized.
But, everything you do in your warehouse is made more difficult if you are an e-merchant retailer.
Why? Because e-commerce merchants typically have:
More items – because they are not limited by the space restrictions faced by brick-and-mortar merchants, e-merchants tend to carry more SKUs.
More transactions – because they are not limited by the number of customers who walk into their store, e-merchants tend to have many more transactions.
More seasonal or promotional items – because e-merchants can bring in inventory as required to support seasonal sales, they can offer more seasonal and promotional items than traditional brick-and-mortar retailers.
More single-item orders – e-merchants often sell single items, because the customer clicks and leaves. We’ve got ways to help you sell more multiple items (bundles and kits), but that’ discussed later.
More order lines to pick – the ratio of orders to picking activity is very high when single items are ordered by ecommerce customers.
More pick locations – because there are more items in an e-merchant retailer’s catalog, there are more inventory locations from which to pick, resulting in more confusion and the likelihood that inventory will be overlooked, or damaged.
More pick requirements – because there are more items and more shipments (since most ecommerce customers are buying single items) the picking / packaging requirements get a lot more complicated because consideration must be given to item size (and therefore picking equipment requirements) and packaging configuration (to optimize the shipment costs).
More returns – ecommerce sales generate a much higher percentage of returns as compared to brick-and-mortar sales, resulting in greater demands on the return processes, including repackaging, putaway, credit activities, quality control, etc.
Different material handling requirements – a B-to-B seller often ships full cases, or pallets and forklifts are an efficient and effective way to handle material. Whereas, B-to-C e-merchant retailers tend to ship â€œeachesâ€ and a great deal of hand picking is unavoidable.
Greater pressure to optimize productivity of personnel and material handling equipment – a B-to-B seller can afford to be a little sloppy when handling and shipping orders, because the ratio of order-dollar-size to material-handling-and-shipment-cost is more advantageous than that ratio in B-to-C sales of single, less valuable, single-item-shipments. E-merchant retailers must be ultra-efficient, because the cost of material handling and shipment often represents a huge percentage of the total selling price.
Greater need for first-class housekeeping and discipline – an e-merchant retailer must have excellent housekeeping and extraordinary discipline in maintaining accurate inventory records. With hundreds, or thousands, of individual SKUs, there is always a great risk that inventory will not be sufficiently transparent, resulting in either maintaining inadequate (or worse, excess) inventory. This cannot be accomplished with Excel spreadsheets, but requires a sophisticated and easy-to-use WMS.
Automated and properly configured packaging is extremely important to keep shipment cost in line with product value – if a B-to-C e-merchant retailer is shipping boxes filled with air, the shipment costs will be too high, making the retailer less competitive.
So, what is the conclusion to these observations?
First, you’re going to need a warehouse if you are an e-merchant retailer.
Second, you’re going to need excellent processes to fulfill orders so that you can distinguish yourself from your competition, limit your inventory investment, manage your costs and grow your business.
Where do you find the tools that will allow you to grow and prosper?
Avectous Integrated Software.
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