RUNNING a business means dealing with a lot of moving parts, which come at a huge cost. Being able to manage order fulfilment expenses can make all the difference in a supply chain ecosystem.
Order fulfilment costs directly compete with your net sales. High fulfilment costs can significantly chip away at your profit margins. Supply chains will be left with narrow margins for investments.
The current business environment has placed spotlight on the importance of efficient order fulfilment as a critical component of supply chain management.
The business environment demands more than any of us can give. Fast and reliable fulfilment processes are no longer regarded as a nice to have. They are now regarded as part of the user experience. They are regarded as table stakes.
Every element of order fulfilment is a numbers game that benefits many supply chains. Those who are responsible for order fulfilment work behind the scenes and they are required to ensure that every order is handled with near perfect due diligence.
The landscape of supply chain management and order fulfilment are constantly changing.
Order fulfilment will always come at a huge cost. It is not just about picking and packing boxes.
Supply chain professionals must know everything there is to be known about the components of order fulfilment costs. The fulfilment process encompasses all the steps involved in receiving, processing and delivering products to end customers. This will involve the managing of inventory, processing of orders, picking and packing products for onward shipping to end customers.
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Order fulfilment, therefore, encompasses the entire process undertaken by an organisation from the moment a new order is received to the point of successfully delivering that product into the customer’s grateful hands.
Understanding the complexities of order fulfilment costs requires examining each contributing factor. It includes all the donkey work that is put in the background with a view to ensure that each of the orders gets properly delivered to the receiving hands of enthusiastic customers.
When supply chain professionals take time to future-proof the order fulfilment process flows, they will certainly level up the organisational efficiencies in equal measure. Order fulfilment fees significantly affect the profitability of supply chain organisations since they compete with net sales.
Various key components of order fulfilment costs, which require analytical examination encompass warehousing costs, inventory costs, fulfilment fees, cost of shipping, labour costs, technology costs, return costs, administrative costs, logistics costs and opportunity costs.
Warehousing, warehousing, warehousing. It often matters enormously to order fulfilment. The cornerstone of the order fulfilment cost structure is undeniably warehousing costs.
Supply chain professionals can reduce order fulfilment costs through the optimal use of warehouse space.
Effective warehouse layout ensures that frequently used items are easily accessible, reducing picking time and effort.
Efficient warehouse best practices position high-velocity products in prime picking zones to minimise travel time.
Warehouse products that are regularly used must always remain at eye level in the warehouse.
Logistics personnel can also reduce order fulfilment costs through the effective management of reverse logistics. Returns processing can be a serious logistics challenge. Each reverse logistics activity involves product returns, which requires product inspection, product restocking and often customer service interaction.
High reverse logistics returns can, therefore, silently eat away profits through hidden labour and processing costs.
Warehouse training is also critical for the reduction of order fulfilment costs. When team members lack standardised process knowledge, order fulfilment processes will suffer a serious hold back.
Training gaps and unclear order fulfilment procedures can lead to errors and rework. And repetition becomes the enemy of efficiency.
Well-trained employees are more capable of performing their assigned activities quickly and correctly, reducing waste and lowering the cost of repeat work.
For every manual task that warehouse personnel perform, organisations will be paying in time and labour costs. Automation can, therefore, significantly diminish human errors in order fulfilment. Automation can make a huge difference in order fulfilment costs.
Robots and automation systems can take over the tedious and time-consuming tasks of order picking.
Barcode scanning and RFID systems can also provide real-time visibility into stock levels, empowering businesses to make data driven decisions.
Automation is a worthy investment that accounts for speed and accuracy in the order fulfilment experience.
Optimising picking processes and utilising automation can effectively contribute to a smooth, cost effective and cost-efficient order processing flow.
Packaging often gets overlooked, but it is a major contributor to fulfilment costs. Compact light weight packaging not only minimises shipping costs but also maximises storage efficiencies in fulfilment centres.
Supply chain professionals must perfect the designing of custom packaging that fits products perfectly, reducing damage rates and product return costs. Products that are sustainably packaged can appeal to environmentally conscious consumers, adding an extra layer of value to the business’s offerings.
Packaging is often a customer’s first-in person impression of the organisation’s brand.
In a world of instant gratification and short attention spans, efficiencies in order fulfilment will profoundly improve customer experience.
In a customer-centric supply chain, fulfilment is where the magic happens. Today’s consumers expect Amazon-like service everywhere and all the time. This will result in delivery experience that wins repeat business. In today’s landscape, brands win by delivering on promises.
Keeping customers happy with fast-mistake free deliveries is the need of the hour. Supply chain professionals will always keep in mind that happy customers are the key to long-term growth.
Remember, behind every happy customer lies the invisible engine of order fulfilment process flows working diligently to turn customer order clicks into fulfilled dreams. Order fulfilment acts as a bridge between customer demand and product delivery.
A well-organised order fulfilment process is a critical component of ensuring that products reach customers on time and within budget. It must be remembered that from the warehouse to the customer’s doorstep, each parcel’s voyage involves a host of processes and expenses.
In a business environment where customer expectations are continually rising, maintaining control over order fulfilment costs becomes crucial. Effective order processing is about speed and accuracy, leading to satisfied customers and minimised costs.
Generally, order fulfilment costs are the final hurdle before your product reaches the customer’s eager hands.
The process holds the promise of customer satisfaction. The process of order fulfilment has therefore provided a convenient shopping experience of buying anything and everything from anywhere at any time.
Supply chain professionals will rely on effective inventory management system to avoid unnecessary purchases and identify slow moving items, transforming inventory from a burden into a profit engine.
Automation of the inventory management system will give a real-time picture of inventory levels at any given time.
It will give supply chain professionals the opportunity to react more quickly to changing customer demands.
Failure to maintain precise inventory levels can often result in order cancellations, customer discontentment and missed sales opportunities.
Inventory holding costs can also often lurk in the shadows of the organisation’s balance sheet, sinking working capital into the wrong places.
It is a known fact that slow-moving inventory not only ties up working capital but also triggers higher storage costs. Saying goodbye to excess inventory is literally saying hello to streamlined operations.
Outsourcing of order fulfilment costs can be a game changer. It could become handy through mcost savings arising from factors such as reduced infrastructure expenses, optimised inventory management and economies of scale achieved through consolidation of shipping processes.
Outsourcing fulfilment provides organisations with the agility to scale operations rapidly and adapt to changing market demands. Outsourcing fulfilment processes will also assist in the minimisation of risk by giving supply chain professionals the flexibility to increase or decrease order volume as needed.
This will give organisations the opportunity to respond decisively to seasonal peaks, promotions and market fluctuations.
Outsourcing the fulfilment process enables organisations to leverage the specialised expertise and advanced technology from the best-in-class, driving operational efficiency and customer satisfaction.
Businesses will be best placed to leverage the expertise and cutting-edge tools from the experts with a singular view to optimise order fulfilment processes, enhancing order accuracy and improving the overall efficiency of the supply chain. Outsourcing will enable organisations to leave the logistics intricacies to the experts.
In conclusion, supply chain experts will often times say that order fulfilment is not just about cost reduction. It is about making your supply chain more efficient and quicker. The mantra in order fulfilment today is - use what you have more productively.
Just having the best product in the market is no longer enough. It is only one piece of the total fulfilment value proposition. Order fulfilment is more than just shipping of products to customers.
It is actually the cornerstone of customer experience. It can easily curve out a unique brand identity in people’s minds. Order fulfilment must be equally adept at ensuring complete customer satisfaction.
It is often said that how your company delivers a product is just as important as what is delivered. A satisfied customer is a repeat buyer. It may be important for supply chain professionals to zoom out on this reality to get a bigger picture.
- Nyika is a supply chain practitioner based in Harare. — [email protected].
