Practical Ecommerce

Better Order Fulfillment Starts with Receiving Department

Online shoppers expect to receive their orders quickly, with little-to-no added cost.

There are many ways for ecommerce merchants to decrease fulfillment and delivery times. One area of the supply chain that is often overlooked is the receiving department. Your dock-to-stock times can have a big impact on not only your ability to quickly turn orders, but also on the total cost to get an order to your customer.

Know What You’re Going to Receive, and When

The first step in achieving a well-optimized receiving department is knowing exactly what’s coming into your warehouse, and when.

This may seem obvious, but all too often a lack of communication results in surprise shipments, or with the warehouse failing to prepare for expected shipments. When either of these occurs, the result is often slower and more costly receiving.

Here are two examples.

  • Warehouse receives more than expected. Say your receiving department expects 5,000 units but it actually receives 10,000 units — 5,000 more than expected. It will take twice as long to receive that shipment, or you’ll have to put more staff on the receiving job. Either way, it disrupts your fulfillment process.

This can lead to delayed shipments, especially if any of that incoming stock was slated for pending orders. It may also lead to costly overtime, or tie up employees longer than expected, which can create problems within other areas of the operation, and result in a higher per-unit receiving cost.

  • Warehouse receives less than expected. If the receiving department receives less stock than it was told, costs could increase due to overstaffing. You may adjust for this by reassigning staff or even sending employees home early, although that may lead to inefficiency within other departments, or disgruntled personnel.

What your receiving department expects and what it actually receives (and when) will likely never sync, entirely. However, by communicating closely with suppliers, shipping carriers, and your receiving department, you can minimize receiving costs and turnaround times.

Standardize the Workflow

Standardization starts with the design of your receiving department to conform to the type, size, and frequency of the incoming stock. Standardization can lead to increased speed and efficiency, and ultimately reduced costs.

To standardize your workflow, consider these questions.

  • What is the optimal size for your staging area?
  • Does your flow make sense?
  • Does the design minimize the number of steps during the receiving process?
  • Do receiving stations have all required supplies within an arm’s reach and without any clutter?
  • Is the process the same for all shipments, or does it vary?

The concept of standardization also applies to the way shipments are organized when they hit your dock.

  • Are SKUs individually labeled with product numbers?
  • Are master cartons and inner cartons labeled?
  • Are SKUs separated, or are some mixed together within cartons?
  • Are all SKUs clearly labeled on a packing list that accompanies the inbound shipment?

Manufacturers will typically prepare shipments to conform to a retailer’s operation. There may be an added cost for a supplier to do this, although that extra cost could be much less than what the retailer has to pay to its fulfillment vendor, or to its own staff, to organize it all.

Monitor Processing Times

Ecommerce merchants often focus on pick, pack, and shipping costs. These are important, but so are receiving costs.

If you pay a receiving employee $12 per hour and that person can typically process 100 units per hour from dock to stock, your receiving cost per unit is $0.12. If a shipment arrives in a disorganized mess and, as a result, the employee’s productivity falls to 30 units per hour, your per-unit receiving cost is now $0.40. For a shipment of 1,000 units, direct receiving costs increase by $280. And that ignores the opportunity cost of spending more time on that receipt, as well as the potential for late shipments if the receiving units contains pending orders.

Maintaining consistent receiving times with consistent per unit costs is critical for efficiency and profitability. If an incoming shipment significantly deviates from the average, it’s important to dig in and determine the root cause.

It may be that your supplier failed to provide a packing slip, or products were mislabeled. It may be that your shipment arrived later than expected so you had to assign more people, with less experience. Whatever the cause, identify it and resolve it so that it does not occur again.

Stephen Bulger

Stephen Bulger

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Comment ( 1 )

  1. Phil June 8, 2017 Reply

    Helpful article. Would love to see an article on tools such as scanning devices to receive inventory and auto place into quickbooks.