Fulfillment Strategies: Is Your 2021 E-Commerce Plan in Place?

Fulfillment Strategies: Is Your 2021 E-Commerce Plan in Place?

This is important for many reasons, not the least of which is the big uptick in e-commerce that’s occurring in 2020, and that will likely continue well into 2021. Already increasing year-over-year, U.S. e-commerce sales were up 43% in September 2020, having grown by 42% the prior month. This growth impacted manufacturers, distributors, and retailers, many of which were unprepared for the onslaught. 

If you spent most of 2020 just trying to get through the pandemic, it’s time to dust off your supply chain, logistics and transportation plans and make sure your fulfillment strategies align with your 2021 e-commerce goals.

Changing Business Models 

As a whole, the pandemic was a wakeup call for these companies that were forced to question some of their fundamental assumptions. 2021 could bring an entirely new set of supply chain, logistics, and transportation challenges with it. 

“As many executives heave a sigh of relief, they are also preparing for a dramatically different environment in 2021,” Industry Week points out. 

“Recent economic challenges have forced manufacturers to change their business models, seemingly overnight, to stay competitive and prepare for not just recovery, but unprecedented growth,” it continues. “However, it may be difficult for manufacturers to keep up with both a snap-back in demand and a huge appetite from customers for innovative products and solutions.”

Navigating the New Fulfillment Normal

Under normal circumstances, companies can add labor and shifts to make up for throughput problems in their warehouses and DCs. With social distancing guidelines in place and the need to keep employees healthy a huge issue for companies right now, simply throwing labor at the problem doesn’t work anymore. 

These realities directly impact customer service which, in turn, affects margins and revenues. When customers feel like they’re being kept in the dark or that they’re not in control of the ordering and shipping process, they’ll take their business elsewhere. 

Here are six more strategies that all companies should include in their 2021 plans: 

  • Get your parcel shipping act together. In a world where nearly all customers expect their goods in three days or less, and where 30 percent of them expect them next day, you can’t reduce shipping costs at your customers’ expense. With this emphasis on delivery expectations, companies have to create parcel strategies that acknowledge the fact that shipping is the highest cost component of any e-commerce order.   
  • Watch your accessorials and peak surcharges. With the parcel carriers continuing to roll out increasingly-complex pricing strategies and inflating rates due to the lack of competition, shippers also have to keep a close eye on accessorials and peak surcharges at the package level. Understand how it’s impacting your costs and how to adjust and adapt moving forward into 2021. If SKU-level profitability is an important KPI, for example, then add that to list of metrics to measure. 
  • Consider a multi-carrier solution. There’s a lot of good value to be had by working with regional carriers and freight consolidators. Varying your approach also helps support customers’ delivery expectations. Amazon, for example, has worked hard to ensure high levels of visibility that starts when an order is placed and that doesn’t end until the package is on the buyer’s doorstep. With more of these customers having same-day and next-day delivery expectations, the multi-carrier approach can help support your overall fulfillment strategy and even make it more affordable. 

  • Rethink your fulfillment approach. To meet your customers’ fulfillment needs, you can either offer a higher shipper service level or you can change how your product is fulfilled and positioned (i.e., either with a bicoastal or multiple fulfillment level location plan). Whether you’re fulfilling it yourself, using a third-party logistics provider (3PL), or a hybrid approach, the key is to look to 2021 and beyond when setting up these networks. 
  • Use advanced technology tools. To get a head start on 2021, companies can tap into the tools that help automate, personalize, and engage virtual transactions, and that fuel their e-fulfillment engines. Cart integration, for example, automatically answers buyer questions like: How much is it going to cost? What are my shipping options? And, is there an opportunity for me to pick it up in-store? Through that integration and automation, the customer gets the choice and the control that they’re looking for today.
  • Focus on more than just the sales process. Companies should also consider post-purchase experience and post-purchase engagement tools, both of which automate the customer buying journey. These data-centric tools also lighten the workload for your customer service team. Finally, having shipping analytics right down to the individual order level puts the power of business intelligence (BI) into the shipper’s hands, and allows it to make good decisions based on accurate, relevant information (versus just guesswork).  

While it’s easy to get mired in the complications of 2020 right now, you’ll be much better prepared if you break the mold and start planning for the future today. That way, you’ll be in the right position and ready to pivot—in whichever direction is necessary—when 2021 comes. 

Indirect Spend Cost Increases Continue

Many of the elements driving these indirect spend cost increases cannot be controlled. 

That does not mean your organization is limited in its ability to manage and mitigate some of these rising expenses. A strong relationship with your support partners helps. So, too, does an expert partner with awareness of industry trends and spend management tactics that realize efficiencies, even during volatile times. 

To support your indirect spend management efforts in Q4 and heading into 2021, let’s explore some of the factors driving cost increases in your operation.

Resin Increases, E-Commerce Demand Drives Indirect Spend Cost Spike

Demand is driving up indirect spend costs on mailing envelopes, poly bags and other packaging materials used in e-commerce shipping.

Resin costs continue to fuel increases for companies that utilize stretch film, bubble wrap, flexible mailers and other polyethylene products. Each resin increase usually translates to a product cost increase of 6-7 percent.

Five consecutive months of resin cost increases have inflated prices 44 percent. That has translated to a 20-25 percent uptick on flexible packaging-related products costs, such as the Oct. 1 increase announced by all major manufacturers of stretch film. That is the second stretch film increase this year – and we anticipate there will be additional increases on other produces that rely on polyethylene. 

At the same time, demand is up in the plastic market compared to 2019. A growing e-commerce marketplace began booming when COVID-19 accelerated consumers’ online buying behaviors for a broader range of products, from groceries to home office products. 

More e-commerce businesses are utilizing plastic packaging, bubble bags and poly bags to ship their products, whereas a few years ago they put those items in small boxes. In the 2020 parcel shipping environment, it is more cost effective to use poly mailers, and that is impacting demand.

While demand is up, some of the major manufacturers implemented maintenance related shutdowns in Q2 and Q3, reducing supply in the process. Increased hurricane activity along the Gulf Coast is also forcing shutdowns for many resin operations and nearby poly-product manufacturing plants situated close to petroleum refineries in the region. Additional shutdowns will only create a tighter market.

Cardboard and Other Commodity Costs Require Awareness

Market conditions may not support a fourth quarter cost increase on corrugated and linerboard. Often the top producers of these materials float the prospect of a rate increase to gauge pushback. Expect talk of a 6-8 percent increase to emerge toward the middle or late part of the quarter. 

Due to activity that scaled back for many operations during the pandemic, the demand and inventory levers may not support that increase. Expect that increase to emerge in 2021.

As businesses continue to ramp up coming out of COVID-19, demand may increase on those cardboard products, as well as others that are already in short supply. Costs for Personal Protective Equipment (PPE), safety supplies and cleaning products will continue to escalate into 2021. That will cause pain for businesses from a pricing and availability standpoint. 

Cost increases on steel and related products will have a similar effect on MRO supplies. Expect price movement on nuts, bolts, fasteners, and other maintenance products in the early part of next year.

Lessons Learned for Future Performance

The challenges emerging in 2020 really validated the importance of strong relationships with your support partners. 

Do you always beat up your suppliers to get the best price?

If you do, the pandemic has taught us, you might suddenly find that you do not have a reliable supply base because you have not been loyal to a supplier. If you focus on buying what you need at the lowest cost and jump from vendor to vendor, when trouble arises you may not have a partner you can count on. 

Thanks to partnerships forged through Transportation Insight’s Group Purchasing Organization, we have the leverage to secure both the best product prices and the supplies you need to continue operating.

The pandemic has taught us that when businesses align with national supply partners, they have access to competitive prices and products delivered on a timely, reliable basis. 

This is especially important in the poly-packaging space. When times get tough and supply gets tight, suppliers will take care of the customers that have been good to them. They will have a difficult time supplying customers that are here today and gone tomorrow. 

Relying on long-term partnerships established in Transportation Insight’s Group Purchasing Organization, we are able to secure both good pricing and consistent supplies of products necessary to your operation. At the same time, we help you manage indirect spend areas that is driving up your overall operational costs that could be jeopardizing your profit. 

To learn more about how we help organizations manage their indirect spend and achieve double-digit savings watch our recent webinar.

4 Tips: Improve Profitability Despite Rising Transportation Costs

Profitable shipping is a very attainable goal, even in today’s uncertain environment, where FedEx and UPS peak carrier surcharges have become a moving target for all parcel shippers. Despite these rising costs, there are ways all companies can improve shipping profitability in 2020. 

Try using these four tried-and-true tactics for improving shipping profitability in any market conditions. 

  1. Think at a Package Level
    If you’re handling multiple pick-and-pack orders, you need to know what you’re putting into different sized packages. Align that information with the actual transportation costs, and then figure out the profitability level on each. 

    This can be a complex process, but ultimately it is important to understand that the dollar amount on your transportation invoice does not tie into your product profitability. Once you determine what it costs to ship each SKU, it becomes clear that offering free shipping at a $50 order threshold, for instance, may not yield a profitable order for your company. 
  2. Use Good Margin Management
    When your marketing department launches a promotion – “Buy $50 worth of stuff and get free shipping” – make sure the “losers” do not fill-up e-commerce shopping cart and drive your cost above profit. To avoid these problems, share relevant information across your organization to keep everyone marching in the same direction. 

  1. Leverage Data 
    Look not only at carrier data, but also sales data, product costs, fulfillment costs, and other metrics that go into a single order. Transportation Insight helps shippers accumulate all of that information and consolidate it into a unified dashboard that is used to track trends, pinpoint winning/losing SKUs, and single out other areas where the company may be losing money.

  1. Partner with a Transportation Expert
    Work with a reliable logistics provider that has built out the necessary systems and that spreads the value of those systems across numerous different users. The latter allows providers to leverage economies of scale and offer their services at an affordable cost. This translates into high value for shippers in any business or economic condition. 

Protect Profit for Every Customer and Every Order

Our latest strategy guide “You Shipped It, But … Did it Make Money?” raises a question that is on the minds of many business leaders. 

Your business has responded to significant shifts in consumer buying behaviors and your customers expectations are being met. But did the transaction yield profit for the business? Or did transportation cost complexity eclipse your margin in the rush to serve?

Open our guide on margin management for more strategies that will help you master your supply chain to protect profit for every order.

Margin Management: Why Are You Selling Money-Losing SKUs?

In July, Coca-Cola announced that it was cutting some “zombie brands” and focusing its resources on more profitable lines by introducing margin management. The company has about 400 master brands, half of which are brands of little or no scale and that account for about 2% of the firm’s total revenues. 

These brands (Odwalla juice and smoothie brand was among the first to get the axe) consume resources and divert money and time away from Coca-Cola’s more profitable businesses. 

Do you know the products that are consuming your resources without delivering the profitable benefits of sale?

Following Suit

Shippers of all sizes can borrow a page from Coca-Cola’s playbook which takes the examination of SKU viability to new levels by assessing (and in some cases, eliminating) entire brand portfolios in order to determine which products are making money, and which ones aren’t. 

When you understand SKU viability, you can refine your marketing messages, pricing, pass-through costs, and other elements that determine whether you make money on an order (or not). The key is to determine which products are “winners” and which are “losers,” and then focus on the former. Weed out the products that are not making money and focus on the ones that are profitable.

Use the 80/20 Rule

The Pareto Principle (80/20 Rule) comes into play here, and asserts that roughly 80% of the effects come from 20% of the causes. Recognizing that 20% of your SKUs typically represent 80% of your sales volume, determine a baseline. Focus on what it costs to pick, pack and ship each of those different SKUs. 

There aren’t many companies that have a good handle on profitability at the individual SKU level, particularly when factoring in fulfillment costs, inbound costs and shipping costs. Combined, these drivers can make a major difference in an order’s profitability.

Consider the manufacturer of outdoor goods that typically sells to big box retailers. During COVID, this company began shipping directly to consumers when more people started placing orders online. Shipping a pallet of 25 outdoor umbrellas to a large retailer at no charge was a profitable venture. On the other hand, free shipping for those 9-foot, 75-pound umbrellas bound for 25 different households via Parcel takes a huge chunk out of the bottom line.

This is a situation where evaluating SKUs based on the price that customers pay doesn’t work. Offers like “Buy $50 in merchandise and get free shipping” can further complicate the circumstances. Complexity increases when orders must be shipped in multiple boxes—a reality that quickly consumes the profitability on any order. 

Find a Margin Management Partner to do the Heavy Lifting

Resource Guide called "You Shipped it, but Did it Make Money" offers strategies to support margin management.

Without good transportation analytics, SKU profitability becomes an expensive guessing game. And the more SKUs you’re selling, the more complex your margin management profile will be. 

Avoiding these problems requires a pick-and-axe approach similar to what Coca-Cola is using to whittle down its brand portfolio. If you don’t have the time, staff, or technology in-house to manage it on your own, Transportation Insight is here to do the heavy lifting for you.

To help you better understand all that’s required in determining SKU profitability, we created “You Shipped it, but … Did it Make Any Money?” Download it today for strategies that will help you protect profitability on every order.

Don’t Let Peak Surcharges Kill Your E-Commerce Profit

Shippers often don’t expect accessorial changes and peak season surcharges that carriers introduce at different times throughout the year. In most cases, seasonal demand swings and business peaks drive these cost changes. 

This year a global pandemic prompted peak season surcharges. Because these new costs coincided with skyrocketing demand for online shopping, many shippers lacked the visibility required to protect e-commerce profit on every shipment.

An Aug. 7 communication from UPS confirmed that more peak surcharges are coming for the holiday season. 

Here are three ways to keep these surcharges from killing your company’s profitability. They’ll become increasingly important as peak season surcharges could become a new year-round norm.

  1. Carefully Audit Every Carrier Invoice
    Go beyond examining the invoice number and dollar amount. Taking the position, “Okay, last week I shipped $75,000 worth of merchandise. That sounds about right,” isn’t a deep enough dive into your parcel invoices. 

    This high-level analysis doesn’t give you the insights you need to pivot effectively when surcharges are imposed. Get down to the actual package and charge level. This is one of the most important practices in managing peak season surcharges and protecting e-commerce profit.
  2. Share the Cost – Pass It or Promote It
    Don’t assume that these surcharges have to get tacked onto your “costs of doing business.”

    As long as it doesn’t affect your competitive position, pass the surcharge costs along to your customers. By strategically aligning products with marketing promotions, you can also increase order value, optimize shipment density and, ultimately, mitigate bottom-line impact of peak-season costs.

    If you do have to absorb the additional cost, be sure to factor that into the sale, versus waiting for your parcel carrier’s invoice to arrive and taking it right out of your profit for a specific order.   

  1. Team-up with E-Commerce Partners 
    Burdened by carrier surcharges and operating in a challenging business environment, shippers may be tempted to only deal with carriers when they have a gripe, a fee that needs to be refunded, or a surcharge that doesn’t apply (but was charged anyway). 

    These situations generally reach a positive resolution when shippers have win-win relationships with their carriers. This has been a practice for years in the truckload/less-than-truckload sector, where being a “shipper of choice” has become a popular stance for companies that are assessing their total costs of transportation.   

    The same applies in the parcel space, where we rely on accurate, up-to-date, supporting data when working with carriers on behalf of our customers (versus just managing issues in a one-off manner). 

    By serving as a link between shippers and carriers (who would otherwise be forced to work with thousands of different customers on an individual level), we are an extension of your parcel team. 

Master Your Parcel Program

To help you control costs in an ongoing peak season surcharge environment, we created “Manage the Surge: Avoid Surcharge Shocks, Power Performance.” It explores the how and why behind parcel carriers’ cost-recovery tactics. Read it today for the strategies you need to power a parcel program response that offsets these costs and protects your e-commerce profit.

Shipping Surcharges: 3 Ways to Manage During Peak

Here are three ways to manage parcel carriers’ shipping surcharges during peak season.

  1. Manage Shipping Surcharges: Face Peak Season Head-on.
    Review the terms and conditions of the agreements you have with your carriers. Work with your logistics partner to stay on top of these new charges, and to come up with ways to offset, absorb, or pass them along to your customers. We help customers understand those charges, why they were implemented and how they affect profitability (via good reporting and data analytics). Analysis comes with a roadmap for minimizing the impacts. 
  1. Dissect Charges on Your Carrier Invoices
    Many times, carrier invoices are so lengthy that the charges are lumped together. It’s not unusual to see duplicate charges, for instance, or duplicate tracking numbers being charged multiple times. And with the COVID-19 peak surcharges, the carriers are billing in multiple different ways, including paper invoices, follow-up emails and averages over multiple transactions. 

    Dissecting those charges and ensuring that everything was charged correctly can be time-consuming and onerous. Our audit team constantly reviews the applicability of the charges and the actual rates that were charged to ensure accuracy. 
  1. Use best shipping practices. It can be tempting to take orders and push them out the door without giving much thought to how much it costs to ship those packages. 

    Most companies understand that transportation costs take up a big chunk of their operating budgets. Few take the time to examine the true cost of shipping those goods

    Factor both predictable/annual rate increases and unpredictable carrier surcharges into the equation, and you get a recipe for poor profitability. To avoid this problem, always use best practices centered on the cost of shipping each and every package. 

Master Your Small Parcel Program

With regular invoice auditing and business intelligence reporting, you can remove most of the uncertainty from the current surcharge environment while also preparing for any new fees that may be coming. 

Deploying additional best practices in your parcel program can supplement your ability to proactively plan for mitigating the cost impact of peak season surcharges. See our infographic for more tips that will help you monitor and manage surcharges.

To help you control costs in an ongoing peak season shipping surcharge environment, we created Manage the Surge: Avoid Surcharge Shocks, Power Performance. It explores the how and why behind parcel carriers’ cost-recovery tactics. Read it today for the strategies you need to power a parcel program response that offsets these costs and protects your profit.

Manage Surcharges: 4 Things to Know for Holiday Season

Less predictable, peak surcharges are creating additional complexity for parcel pricing, especially as UPS announces its holiday peak season surcharges. These new charges come in addition to similar costs in place the past few months. Combined, it is a difficult environment to manage surcharges.

For example, a parcel carrier may announce a general rate increase of 4.9%, but this is an average taken across all services, weight breaks, and zones. In reality, many rate increases are above 6% when applied to a shipper’s actual volume. 

Predictable by nature, these annual increases are usually baked into the “cost of doing business” for shippers, many of which understand that the GRI impact on their transportation rates is at least an increase of about 5% annually. 

Now, carriers are introducing accessorial surcharges at different times throughout the year in response to seasonal demand swings and business peaks. These unexpected peak season surcharges can be difficult to manage, especially during a global pandemic when dynamic shifts are occurring across the marketplace. 

Here are four things all shippers should know about peak season surcharges in 2020.

  1. Peak Season Surcharges Becoming Routine It pays to stay on top of these variations and respond accordingly. Companies that take proactive measures to offset pending surcharges are often best positioned to maintain profitability, protect their bottom lines, and keep their customers happy (and coming back for more).

    Alongside existing peak surcharges implemented earlier in 2020, UPS announced it will increase surcharges for the holiday season. Starting Nov. 15, surcharges on Ground, SurePost and domestic Air services will increase to between $1 and $4 per package, depending on the shippers’ parcel volume. At a minimum, that triples the increases implemented May 31.
  2. Parcel Carriers Felt the COVID-19 Impact During the traditional holiday season, UPS and FedEx often start hiring up to six months ahead of time. They also require larger shippers to provide volume estimates to support capacity planning. Staffed and trained, the carriers position everyone for success during the busiest time of the year. 

    These proactive moves weren’t possible during the global pandemic, and that’s precisely why the surcharges surfaced quickly in 2020.
  3. Residential Deliveries Bear the Brunt of COVID Surcharges Surcharges surfaced quickly in 2020, with higher costs on residential deliveries and large package shipments to homes and businesses quickly consuming the carriers’ margins. In response, UPS and FedEx implemented peak surcharges for U.S. domestic residential shipments and large/oversize packages due to the increased demand. UPS implemented the new charges on May 31, and FedEx quickly followed on June 8. 

    Not all shippers were caught in this particular surcharge web. Some charges solely affected large shippers with significant increases in residential deliveries compared to their average pre-pandemic weekly volume from Feb. 2 and Feb. 29, 2020.
  4. Advance Peak Season Surcharge Planning Isn’t Easy Budget planning to manage surcharges isn’t easy in an environment where these increases can arise unexpectedly. No one was prepared for the massive impacts of COVID-19, for example, so shippers had little (or no) time to prepare in advance for the surcharges. 

    The good news is that even though individual companies can’t control parcel carriers’ surcharges, they can minimize the budgetary impact with accurate shipping data, experienced logistics partners, and quick responses to carrier announcements. 

Avoid Peak Season Surcharge Shock

As you plan your transportation spend for the remainder of 2020 and into 2021, be sure to factor in the reality of “unexpected” carrier surcharges. It doesn’t take a global pandemic to create peak season pressure on carriers’ profitability and spur added fees on your parcel shipments. At the same time, in the wake of COVID-19, expect significant changes in the last-mile delivery environment, especially in terms of pricing complexity.

Individually, a 30-cent surcharge on a residential parcel shipment may seem innocuous. Multiply that fee across thousands of packages, and it’s clear just how burdensome this unexpected fee can be to a company’s bottom line. 

Remember the proverb: forewarned is forearmed. Prior knowledge of a potential issue will always give you a tactical advantage.

To help you avoid surcharge surprises, we created “Manage the Surge: Avoid Surcharge Shocks, Power Performance.” It explores the how and why behind parcel carriers’ cost-recovery tactics. Read it today for the strategies you need to power a parcel program response that offsets these costs and protects your profit.

Cost Changes Hide in Shift to Online Fulfillment

By expediting moves toward ship-from-store, buy-online-pickup-in-store (BOPIS) and other alternative fulfillment options, those retailers seized a growth opportunity in a slow economy. At the same time, they continued to move inventory, employ associates, and effectively utilize brick-and-mortar assets all while delighting customers.

However, in the rush to make those changes and meet consumer demand, it is not enough to have resources capable of adapting and executing your supply chain network strategy. It is essential that those resources provide a clear understanding of how alternative services affect costs across your transportation network.

While offering service alternatives to a demanding consumer base can drive revenue growth, profit margins can quickly disappear without awareness to how those new delivery options can affect freight cost, time-in-transit and carrier utilization, among other key transportation performance metrics.

We help our retail clients recognize the financial implications of their service changes with a transportation alignment study that helps them quickly redesign their network strategy, execute on transportation procurement and access the evidence required for decision-making that protects profitable performance.

Evolving Fulfillment Strategy to Meet Online Demand

When the pandemic began affecting U.S. retailers, many of our clients with distribution centers faced the risk of closure due to “Stay at Home, Work Safe” guidelines issued by federal and local agencies. At the same time, revenue was stagnant for retailers with brick-and-mortar storefronts that were required to close due to social distancing expectations.

With online sales booming, some of our retail clients took brave action to convert darkened stores into mini-fulfillment centers. Deploying staff from distribution centers and stores to complete fulfillment activity at the retail locations, these clients are not only able to keep staff gainfully employed, they are also utilizing store inventory that might have otherwise gone unsold.

Making this type of move with your fulfillment strategy can happen quickly – scenarios within 10 days have been reported for some retailers. Adding BOPIS with curbside capabilities can happen in 60 days. These types of changes have become a necessity for retailers across the country, but by changing fulfillment models, these organizations also completely changed their supply chain and distribution network. Unfortunately, because this adaptation occurred so quickly and with such a need to continue business, it is not always supported by the essential transportation study and analysis that determines the cost implications of the network changes.

Do you have the systems in place to determine how these changes affect freight cost, profit margin and customer experience?

Leveraging Data, Analysis to Manage Cost of Online Fulfillment

As our retail clients are rapidly responding to the changes the pandemic is driving in consumer behaviors, we use technology tools and industry expertise to support network alignment studies that clarify cost implications of service changes.

Using historical shipping data, analysis and multi-modal expertise, we help clients manage cost/identify opportunity by providing greater visibility to:

  • Impact of network changes to overall transportation cost
  • Time in transit through predictive modeling based on carrier zone information
  • Freight expense as percentage of cost to serve
  • Margin impact by product level
  • Consumer geography and accessorial changes
  • Overlapping shipment details
  • Store-level profitability
  • Split-order percentage trends
  • “True” customer experience metrics
  • Consumer behavior analysis

With the results of our network alignment/margin management study, we help our retail clients make changes to their carrier contracts, their carrier utilization or their market response. In doing so, we’re able to help make sure they are fulfilling orders in a profitable way, while protecting customer experience.

Master Online Fulfillment

Organizations that create a supply chain personalized to the expectations and behaviors of their customers can achieve greater brand loyalty and improve customer retention. At the same time, the shippers that establish a nimble network can rapidly respond to fluctuations in supply and demand and capitalize on opportunities for growth.

If your business is pursuing rapid deployment of alternative fulfillment practices, make sure you understand fulfillment costs at the retail store location. Retailers that can manage network costs associated with a strategy adjustment in order fulfillment can realize competitive advantage. That’s especially meaningful in a tumultuous environment where rapid supply chain pivots are required to capitalize on changes in consumer behavior.

As a supply chain master, we’ve worked with hundreds of organizations mapping thousands of supply chains. Applying expertise across diverse retail categories and industry segments, multi-modal transportation management capabilities and technology-enabled data management and analysis, we help clients align their transportation practices with their business goals.

To master your online order fulfillment and deploy a variety of final delivery options talk to one of our experts today.

Delivery Speed Drives E-Commerce Fulfillment Success

Today’s online shoppers certainly agree with the sentiment of Tom Cruise’s character in the 1986 movie “Top Gun.”

Thanks to the “Amazon effect,” consumers have a nearly insatiable appetite for speedy delivery. In fact, according to Elastic Path’s recent survey, 75 percent of consumers expect to enjoy same day delivery by early this year. 

Other than Amazon, Target, and Walmart – and even then, only in certain markets – most online retailers aren’t there yet. And consumer expectations probably won’t slow down any time either. That means Consumer Packaged Goods manufacturers venturing into e-commerce have no choice but accelerate their delivery performance. 

Overcoming the Transportation Cost Challenge

Consumer products manufacturers that aren’t yet immersed in e-commerce face numerous obstacles when striving to meet expectations for prompt delivery. The most obvious: companies that aren’t drop shipping online orders for retail clients already don’t have the systems, processes and procedures in place for piece order processing and fulfillment. 

Still, even the digitally native vertical brands built on an e-commerce model must address one of the biggest issues affecting online order fulfillment: high transportation costs. The “State of Logistics in 2019” report from Logistics Management notes that freight transportation costs comprise the biggest share of U.S. business logistics expenses. 

Companies struggle to reduce that expense. In fact, Inbound Logistics magazine’s 2019 “3PL Perspectives” report reveals that nearly two-thirds of shippers surveyed said that cutting transportation costs is their top challenge.

Location, location, location

For many, strategic location of the fulfillment center is a dual-purpose solution: It helps manage shipping costs while meeting consumer “need for speed.”  

E-commerce brands are seeking fulfillment options in carefully selected locations that can provide same- or next-day delivery where needed. Solutions include: 

  • Opening new fulfillment centers 
  • Acquiring businesses that are already doing it successfully
  • Contracting with experienced third-party or enterprise logistics providers 
  • Filling orders from brand-owned brick-and-mortar retail outlets

The latter option was just one solution a global, omni-channel retailer used when it partnered with our team to reduce its transportation budget. Leveraging brick-and-mortar stores as e-commerce fulfillment centers was one element of a multi-faceted strategy that cut transportation spending by 18 percent – $10 million – in just six months. 

Fulfillment Center Checklist

With each solution, consumer packaged goods manufacturers need to ask questions regarding each fulfillment center’s capabilities. The list of questions breaks down into three areas – location, facility suitability, and access to talent. 

Location

Key questions include:

  • Does the facility have adequate access to transportation and logistics partners? 
  • What market(s) can you serve from there? 
  • Most importantly, will you be able to meet customer delivery expectations from there affordably? 

Transportation Insight has a comprehensive network of warehousing and distribution partners with facilities throughout North America. We serve clients across the continent and overseas from our headquarters in Hickory, NC, and operating centers strategically located throughout the United States.

Talent

Access to the right workers can be as important as physical location. Among other things, you want to know:

  • Is there an available, trained workforce?
  • In markets where competition is tight for skilled workers, what processes do your partners have in place to attract and retain the right people?
  • In less-competitive markets, what training opportunities are available?

Facility suitability

How prepared the facility or partner is to being able to serve your customers has an impact on how quickly you’ll be able to start filling orders from there. Asking the right questions helps determine the best fit. They include:

  • If you need special handling such as cold storage, is it available or will you need to add it? 
  • Are there enough loading docks to handle bulk deliveries and parcel shipments? 
  • Do racking and materials handling processes in place already meet your direct-to-consumer order needs? 
  • Is the building wired for the technology you’ll use?

Success Formula

The final step is using data analytics and other resources to determine the right inventory mix in each location. 

With the right combination of resources, fulfillment center locations, and inventory management, consumer packaged goods manufacturers can serve shoppers in population-dense markets just as quickly as the big box retailers can. 

Ready to learn how manufacturers can evolve an effective e-commerce program? Download Transportation Insight’s guide, “Start the Cart: A Manufacturer’s Guide to Achieving E-Commerce Fulfillment Excellence.”

Reduce Parcel Shipping Costs: 3 Alternative Strategies

In practice, organizations have developed tried-and-true solutions to help control parcel shipping costs. For example, one common tactic is to eliminate late deliveries, which limits the need to rush-ship as many items and reduces the total cost of parcel shipping. This low-hanging fruit does not have to be where the savings stop. Here are three alternative parcel management strategies you can employ to reduce expenses and get more value from your carrier relationships.

1. Deal With Address Corrections

Any lost or delayed shipment represents sunk cost. You will either have to send another product to the customer or deal with customer support calls from a frustrated client seeking answers about why their parcel did not arrive on time. Sometimes losses and delays are unavoidable. They also happen for some surprisingly simple reasons. One of the more common issues that affects delivery is an improper address. You could run into a situation in which:

  • An address is listed in an unconventional format, causing an automated scanner to flag it as incorrect and send a correction request back to you. This leads to delays in getting the package out for delivery.
  • A listing does not comply with the carrier’s regulations for address listing and coding, causing the carrier to hold the package until you correct the situation.
  • A consistently incorrect address sends packages to the wrong units within a business park or multi-unit dwelling, creating confusion for customers, potential for theft and delays in delivery.
  • A failure to update addresses for customers who move or request an alternative shipment destination leads to packages being sent to the wrong location.

In any of these cases, you could be required to recover and/or resend packages. You may need to replace a shipment entirely. Setting address compliance standards and analyzing your database for data quality and policy compliance is vital to eliminating unnecessary costs.

2. Prevent Shipper Error

Vendor compliance is not always cut and dry. You may encounter situations of improper account number usage, leading to costs for something you did not ship. For example, a retailer may use a distributor for one of its jacket brands. When the distributor gets an order, it knows to use the account number for that retailer. However, if one of the distributor’s dock workers or order entry employees applies the account number to the wrong shipment, the retailer could be left paying to deliver somebody else’s product.

On an isolated basis, these errors may not be particularly expensive. Over time, the costs can add up quickly, leaving you paying a hefty bill to ship another company’s goods. If you attach a P.O. number or order number to each shipment, you can analyze each shipment in your account, verify that rules have been followed and prevent errors.

3. Protect Against Fraud

Imagine an employee knows your account number and is authorized to make shipments. How can you prevent that employee from using those details to send gifts to friends or using your company’s assets for personal purchases? If you cannot track every shipment easily, this small fraud can go undetected. When you track order numbers or P.O. numbers, you can eliminate this type of fraud entirely.

Internal compliance rules can also let you attach account numbers to locations. If an account number is designed for goods that will ship from a specific location, any item under that account number shipping from an alternative location would raise a red flag. There may not be a problem in some cases, such as a vendor shipping from a backup warehouse due to unexpected supply limitations. But it can also be a sign that vendors are creating additional expense because they are not complying with service level agreements.

Maximizing Value Potential

Taken in isolation, these errors or fraud instances may not cause significant damage. Over time, at volume, the costs add up quickly. If you do not have strong rules in place and software to monitor compliance in real time, the unexpected expenses can be significant. A typical 3PL may be able to help you tackle low-hanging fruit to reduce parcel shipping costs. An enterprise logistics partner like Transportation Insight can work closely with you to create the best rules for your business and implement technology to monitor compliance. Identifying errors and fraud efficiently creates significant value as you are able to reduce parcel shipping expense to protect profitability.

To learn more about the Transportation Insight’s expertise can help your business, contact us today.