Fulfillment Planning for Your eCommerce Business

In 2012, eCommerce sales account for five percent of retail sales or about $224 billion dollars and is expected to double in the next four to five years, according to Debbie Castrodale of Tompkins International. The increase means more revenue for businesses but the other side of the coin means that now they have to deal with more complex requirements in order to the increase. Some eCommerce business owners are able to adjust and try to catch up but many are falling behind. The problem is that there is the realization that the distribution center supply chain model no longer applies to eCommerce.

When your online business is just starting, you do your own fulfillment and that’s the most cost effective way to do things. As you hopefully grow, you realize that you need more space and perhaps a staff to handle your increasing volume of orders. That’s when you need to understand why you need to design a flexible and scalable eCommerce fulfillment system.

Issues with Distribution Centers

If you’re currently running a medium or high volume online retail store or you’re on the path, you need to realize the differences between a distribution center and a fulfillment center. A distribution center operates on a case basis. This means that a case of multiple items is considered a unit. When an online customer picks one item, there need to be two different picks, which will take time. If you’re operating both retail and an online store, this is an inventory inaccuracy waiting to happen. If you’re dealing with international shipping Australia and Asia, for example, and have an inventory discrepancy that prevents you from fulfilling either one or both orders, you’re not just losing two customers, but possibly tens or possibly hundreds.

Redefining Peak

Between November 1st and December 20th is the most important and intense part of the year. Between Black Friday, Cyber Monday and Christmas, your shipping volume probably won’t just double, it may quadruple in comparison to the volume between January 1 and November 1. You need to have an efficient pick-n-pack operation that handles that it all.

Improving Fulfillment

Retailers need to develop flexible solution with two to three year planning, which is shorter than the traditional five to 10 years because you’ll need to be scalable for future demands. Second, customers are more demanding and expect instant gratification. That means orders need to be picked and packed on the same day, if not within hours. That means that your fulfillment center design has to eliminate any and all constraints if you want to achieve customer satisfaction.

Relying on automation won’t necessarily solve all the problems; it could become one of those constraints you will need to do away with. When you’re dealing with peak times, some automation may be necessary but during the rest of the year, it may be more idle than useful. You may not be able to justify the expense of having it year round. You’ll need a system that will allow single, multiple, and discrete orders throughout the year and that will enable staff to be added when you need them during peak times. You need to right size your fulfillment operation so that it provides convenience and great customer experience.

Planning for outgoing orders is one part of the equation. A good fulfillment system also integrates returns in a way that quickly assesses whether the merchandise can be resold. Competition in eCommerce is fierce. Having a seamless fulfillment system that’s flexible enough to handle more personalized services, such as gift wrapping, especially during peak times will stand out and reap the benefits of returning customer sales.

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