Ecommerce companies typically focus on acquiring traffic and selling a wide range of products that shoppers will actually buy. Many ecommerce firms track key performance indicators like new visitors, conversion rates, and average order values.
But for many ecommerce companies, especially smaller ones, fulfillment is an afterthought. That is a mistake. There are key fulfillment metrics that all merchants should track, including:
- Error rates on orders pulled;
- Error rates on products shipped;
- Turnaround time for orders from the time of receipt to shipment;
- Actual cost of shipping versus the rate charged;
- Time to fill an average order.
Frequently there is little or no formal training to fulfillment staff, and the pay is low. As a result, there may be excessive employee turnover. That may lead to even more errors in the process.
Most companies follow some version of the following workflow — assuming they print pick lists and do not have barcode scanners.
- Order is received in the shopping cart or order management system.
- Order is verified in some manner, such as a fraud check and inventory in stock.
- Picking slip is printed. A packing slip may be printed at the same time. If you have multiple warehouses, there may be other processes involved as well.
- Picking slip is placed into some type of container, to retrieve inventory.
- Container is assigned to an order clerk, who then travels through the warehouse adding the items to the container. Items are checked off as they are picked.
- Quality check. Once all items are added, they may go to a checking or inspection station for a quality check.
- Checked orders are then moved to the shipping department.
- Shipping packs the orders in the appropriate packing materials for the carrier. In some cases, shipping may need to select the carrier based on weight, destination, or cost.
- Attach labels. Shipping labels are printed and attached to the boxes.
- Boxes are organized for pickup by carrier.
- Customers notified. Ideally, the carriers’ systems are integrated with the order management system, so tracking information can be emailed to the customer.
- Shipping costs tracked. Post actual shipping costs to an order management or financial system to compare actual versus estimated costs.
This is a lengthy workflow. In my experience as an ecommerce owner, errors typically occur in the initial picking of inventory. If you have a 90 percent accuracy rate, a 9 percent error will likely be from the initial pass of physically pulling the order out of stock. A much lower error percentage, perhaps 1 percent, will likely get through the order checking process. But errors will occur no matter how thorough you are.
Packing and Shipping
The actual packing and shipping part can produce errors, too. I’ve seen everything from single orders being divided into two packages, to an entire batch of orders having jumbled shipping labels. I’ve delivered packages to the post office only to find UPS boxes mixed in the bin.
As a manager, unless you’ve actually done the complete process yourself, you will likely wonder how errors can occur. But I found the entire process tedious and repetitive. If your employees are not paying attention at every step, they could easily make a mistake.
Importance of Fulfillment Structure
This brings me to the importance of having structured fulfillment processes. Everyone in the warehouse should follow exactly the same steps. This will allow you to move staff and train new employees much more easily. It also helps identify the source of errors, for correction.
This all starts with having a baseline for measurement and improvement. Establish quality goals and standards and measure them on an ongoing basis. Measure your overall quality and performance for the entire workflow.
There is a lot of expense in this area. It may not be employee wages. It may be from lost business if your customers receive incomplete or inaccurate orders, which also generate return charges and reshipping charges.
Review your fulfillment process at least every six months. Evaluate performance. Ask your employees about areas they find challenging and ask them how to improve. Constantly monitor shipping charges. Companies like UPS and FedEx may seem like the best choices. But when you factor in fuel surcharges, home delivery add-ons, and so forth, you may be better off with the U.S. Postal Service for some types of packages.
In short, invest time and money into optimizing your fulfillment operations. It will help increase profits.