Ecommerce has changed how we shop
today and created a revolution in the business landscape. Thanks to global connectivity, supply chains have become bigger than ever, yet more tightly knit than at any other time in history. Ecommerce merchants can communicate with product suppliers three time zones away and seamlessly provide real-time customer support to customers in the remotest parts of the earth. One key challenge remains, however, and that’s managing the ecommerce fulfillment spikes that happen more frequently due to all this connectivity.
The Growth Of Ecommerce
While it might seem that ecommerce is the defacto model for retail now, there is still plenty of growth ahead. Ecommerce is, in fact, still in its infant stage, and its rapid growth points to a future where more commerce will take place electronically.
What Causes Fulfilment Spikes?
While growth is great, many merchants have discovered that it comes with unique challenges, chief among them ecommerce fulfilment spikes. These may be caused by a variety of factors, including:
- Holiday shopping sprees - Major holidays such as Christmas, Thanksgiving, New Year’s Day, and others, are associated with sharp rises in order volume.
- Marketing and ad campaigns - If your store is running an ad in a local media such as a radio station or even on an internet site, you should have the systems in place to deal with a spike in orders.
- Getting featured in the news - Should your store get reviewed or covered in a newspaper such as the New York Times or a BBC program, for example, you may experience fulfilment spikes.
- Seasonal product interest - In the summer months, retailers of summer fashion, among others, typically see a rise in customer orders. The same applies to other products that have seasonal interest.
If left unmanaged, fulfilment spikes can lead to poor customer experiences. These include late or failed customer deliveries, wrong product shipments, or slow processing of returns. In an era in which there are often many competing merchants able to supply your customers, these problems can kill your store’s sales.
Identifying Fulfilment Problems
One of the approaches that can help address the challenges of ecommerce fulfillment spikes is the use of data analysis. This approach relies on collecting and analyzing ecommerce fulfillment data in order to improve performance during those challenging peak demand times.
Identifying Bottlenecks In Fulfilment
A good place to begin in any fulfilment analysis is to first identify key fulfilment bottlenecks. Often, a small subset of fulfilment steps can account for the biggest time expense for a retail business.
For example, if you have a restocking process that takes at least two weeks to get a particular product replenished, that will be a significant bottleneck during spikes such as holidays. Customers who order the product while you await stock shipments will experience significant delays.
The Problem Of Manual Processes
A second category that presents problems during spikes is the problem of manual processes. Some businesses have found, for example, that moving to robotic packing, especially for large product fulfilment centers, produced better results.
Having humans involved in the product sorting and packaging step can work, especially at smaller scale, but once your fulfilment warehouses get very large, you need to rethink processes.
A systems upgrade that eliminates slow, manual, processes can improve fulfillment speed.
Analyzing And Using Your Fulfilment Data
While some drawbacks of ecommerce fulfilment are easy to spot by analyzing the steps in your fulfilment system, some can only be spotted by looking at fine-grained fulfilment KPIs. These key performance indicators are statistical measures that allow you to comb the operation for potential problems.
Ecommerce KPIs To Track
Collecting data from your ecommerce business and comparing performance over time will help you optimize how you fulfil orders. These are some of the KPIs that you should track:
- Order picking accuracy - This metric measures the percentage of orders that are picked or packed accurately.
- On-time Shipments - A measure of the proportion of customer orders that arrive on time.
- Inventory turnover - Measures the number of times you completely sell out and restock inventory each year. Typically, the higher, the better.
- Inventory to Sales Ratio - Measures how much inventory you carry during a month as a ratio over the sales you make in the same month. The lower it is, the better for your finances, but keeping inventory too low can contribute to problems during fulfilment spikes.
- Rate of Return - Measures the percentage of orders that result in returns. During fulfilment spikes, managing to keep returns low is a sign of a well-functioning system in place.
- Back Order Rate - The back order rate is the number of outstanding orders for a product as a percentage of total orders for the product. You want to keep back order rates low to keep your customers as happy as possible with your order fulfilment.
Improving Performance During Fulfilment Spikes
With your KPI data in hand, you can now identify unacceptable fulfilment patterns. Analyze monthly averages for all the core KPIs over the course of the year to see how performance has varied from month to month.
If particular months have drastically bad fulfilment averages, drill down into weekly data to understand the source of the problems. You might notice, for example, that a deluge of orders during a holiday important to your industry overstretched your store’s fulfilment capabilities.
Once you have identified the most challenging fulfilment spikes and the causes, you can then design solutions for the future.
This might include, for example, hiring extra warehouse staff during the peak season, automating your warehouse, or adopting digital technology to make order fulfilment more accurate.
As you take these practical steps to improve fulfilment, your customers will experience much better outcomes when they purchase from your store. In the long run, this could be the most important step in improving your business performance.
Data Analysis To The Rescue
In sum, a combination of data and historical performance analysis can yield some of the best results for optimizing your retail business for fulfilment spikes. These spikes can have a variety of causes, including holidays and seasonal product demand. Analyzing key performance indicators and identifying fulfilment bottlenecks will help you discover ways to improve how your store performs. Armed with this data, you will be in a place to optimize fulfilment and make the experience even better for your store’s customers.