Blog Posts What Can You Do About Rising Fulfillment Costs?
- Rising costs are impacting order fulfillment operations.
- To control costs, retailers and brands should start by optimizing available resources and taking a strategic approach to parcel management.
- Advanced technologies and strategic distribution network configuration can also play a key role.
As you’ve probably noticed, it’s not just gas and groceries that have gotten more expensive lately. Order fulfillment costs are also on the rise.
Brian Mattingly, vice president of operations at Saddle Creek, recently discussed this trend with Digital Commerce 360 and shared several strategies to help retailers and brands keep costs under control.
Following is an excerpt…
Smart Strategies for Controlling Fulfillment Costs
What are the biggest factors impacting order fulfillment costs?
Labor costs, warehouse space and equipment, and parcel shipping typically comprise the lion’s share of fulfillment costs. Unfortunately, ecommerce growth has exacerbated all these factors.
Increased demand — and limited availability — are driving up labor and warehouse space costs, and ecommerce operations typically require three times more staff than traditional warehousing due to the high volume of individual orders. Greater operational complexity often necessitates an investment in mechanization, automation or robotics. And thanks to minimal competition in the market and increased fuel costs, parcel rates and surcharges continue to rise.
Where should retailers and brands focus first to control costs?
Optimization is a good place to start. Make the most of available resources. Since warehouse space is at a premium, maximize the space you have. Narrow aisles, mezzanines, and customized racking and storage solutions can optimize storage density and picking capacity.
Make sure your workforce is able to achieve peak productivity. Carefully design order fulfillment processes to speed throughput. Consider waving or batching strategies, depending on your specific objectives. Leverage Lean practices to identify opportunities for additional efficiencies.
If you regularly ship large, lightweight items, consider the dimensional (DIM) weight of your packages. Use the smallest possible package and pack the contents efficiently to optimize package density.
It is also wise to approach parcel management strategically. Establish relationships with multiple carriers and utilize rate-shopping software to identify the most economical transit solution. Parcel analytics can help identify opportunities to increase efficiency.
To learn how automation, robotics and distribution location can impact fulfillment costs, read the full Q&A (free registration required).
Related to: Controlling Costs, Parcel Shipping, Selling Online