For operations professionals in the cross-channel retail industry, the risks and rewards of the holiday shopping season are well known. Order peaks can be five times to 15 times higher than the average week. If you get behind processing orders, you may not recover until Christmas is over. For many companies, the entire year's profit results from fourth-quarter sales.
Curt Barry
Holiday plans, merchandise assortments and inventory purchases are pretty well in place by now for most cross-channel retailers. But since many businesses gain such a high percentage of their sales and profits in the fourth quarter — as much as 60 percent — it's never too late to see what additional things can be done to increase sales and customer satisfaction.
Fulfillment labor costs have increased 10 percent to 15 percent over the past five years, even greater for many companies. List prices for small parcel shipments have increased 3 percent to 5 percent per year every year for the past 12 years. How you think about the cost of fulfillment and its effect on your merchandise assortment that may need to change? If products don't make money when fully loaded with costs, shouldn’t you take a serious look at your merchandising assortment and strategy?
Of all the strategies for reducing costs in your catalog business, vendor compliance programs may be the most underdeveloped. A well thought out, formal vendor compliance policy can reduce warehousing and freight costs, speed up order processing, and lead directly to increased customer satisfaction. To achieve this, you must spell out your requirements and chargebacks for vendor noncompliance. Without a formal vendor compliance policy, the warehouse has no recourse but to absorb both direct and hidden costs for noncompliance. Without compliance, it’s impossible for multichannel merchants to implement advanced supply chain systems (ASNs), just-in-time inventory, source marking and ticketing, or radio frequency identification programs.
Below is a list of typical policies, requirements and chargeback schedules included in fully developed manuals used by larger companies. But don’t let this list intimidate you. Start with policies that give you the greatest benefits, cost savings and efficiencies. If you develop those requirements first, you can expand the manual in later seasons: • company history, vision and expectations for customers; • what back orders cost the business; • service standards; • on-time delivery to committed delivery date; • products delivered in proper condition and agreed-upon manner; • product quality specs; • product packaging and polybag specs; • label marking for retail
Management often bemoans the fact that IT projects fail to be delivered on time and within budget. And the truth is, the IT spending waste that occurs in our industry is at times mind-boggling. My firm has four clients — ranging in size from $7 million to $650 million in sales — all struggling with the same schedule and budget problems as they attempt to implement new order management and warehouse management systems. Another client invested $350,000 with one of the industry’s leading order management system companies. But after a failed implementation, the client backed off the project. What’s at the root of this
In consulting with a client recently on improving customer service, the client was concerned that the company’s service didn’t meet its expectations and goals. As we performed the assignment, the most serious problem to surface was that the supervisors were relatively inexperienced and hadn’t managed people very long. The supervisory team included anyone from a first-time supervisor to someone with one year’s experience. Adding to the problem, this call center flexes from 100 seats to 190 seats for six months of the year. You can ask the obvious question: Why doesn’t this company hire and retain experienced supervisors? But there’s a deeper
In today’s soft economy, many multichannel marketers are trying to significantly reduce returns in order to boost profits. Some companies are putting more restrictions and conditions on returns, which I think will cause further erosion of sales. After all, who really wants to buy a product that can’t be returned, or that carries so many conditions for return? Others, however, are doing what I call “save the sale.” They’re working with customers to help them understand the product and how to install or use it. Electronics, software and technical products are far and away the biggest problem areas that could benefit from
Most fulfillment processes are largely manual in nature, as only the very largest companies can justify advanced automation. Looking at the total cost of back-end order fulfillment — including direct and indirect labor, occupancy, and shipping supplies — total labor generally makes up 60 percent to 65 percent. That excludes any shipping costs because they distort the comparisons. Benchmarking ShareGroups, a proprietary program in which participants share benchmarking data, reveals that labor rates were typically around $7 an hour five years ago. Today, they’ve reached $12 to $13 an hour for many direct marketing businesses, plus a 20 percent benefit rate. But overall productivity
In the second part of this two-part series on IT departments and the role they occupy within companies, I’ll provide some tips on how your IT department can peacefully coexist and prosper within your organization. (For part 1, click here.) Tear Down That Wall In order to begin to bridge the gap between IT and the rest of your company, adjust your mind-set a bit. Ask yourself the following questions when evaluating the IT department’s role within your company. * Is there failure to recognize problems with IT? This amounts to costly neglect. Is IT an expensive utility or a necessity? Your
In the first part of this two-part series on IT departments and the role they occupy within companies, this month I’ll take a look at the divide that often exists between IT and the rest of a company. I’ll examine some of the root causes for these conflicts. Here’s the picture: A multichannel catalog company with sales of $20 million has an aging order management system that’s been in place for more than 20 years. While there are some things the users like about it, the company has basically outgrown the system. It needs far better marketing information, e-commerce site-to-business systems interfaces,
In part one of this two-part series, which appeared in the Dec. 18 edition (click here to review part 1), I presented a step-by-step guide to conducting a postseason analysis of your contact center as a baseline for process improvement and cost reduction. In this second and final installment, I’ll examine potential opportunities for major cost savings within your contact center. Once you’ve decided on a postseason review, assemble a team from across the organization. This team should comprise representatives from fulfillment, merchandising, HR and the contact center. Include as many areas of the contact center as possible, from the director to managers, supervisors,
As 2007 comes to a close, many of our clients are turning their thoughts to how they can save money — both in their contact centers and throughout their operations — as well as starting to prepare for holiday season 2008. One of the best ways to plan for future success is to conduct a postseason analysis. In this first of a two-part series, I’ll explain how to perform a postseason analysis of your center as a baseline for customer service, process improvement and cost reduction. Here’s a step-by-step guide to the postseason analysis. 1. Form a postseason review team. Because your efforts
Many multichannel merchants focus on how they can lower operating costs when they consider outsourcing certain tasks. But when you outsource operations, you also outsource the investment. Sounds obvious, but maybe the magnitude isn’t all that clear until you’re faced with replacing an order-management system, moving into a new fulfillment space or upgrading your Web site. When outsourcing your investment, you don’t have to invest in those upgrades as your business grows and changes. Let’s look at some examples that show the size of these investments. * Order-management systems. Software as a service (SaaS) can free up a potential investment of $25,000 for an
How to use a warehouse assessment to improve customer service and decrease costs. Your warehouse this past holiday season was near capacity; you made it through the season, but it wasn’t pretty. The marketing plans for the new year and next holiday are up considerably. The executive committee of your multichannel company has made a decision that the company must meet the aggressive sales plan, and you have to find ways to stay in this facility for at least one more year. You have two months to come up with a new operational plan. What are you going to do? A key starting point
