Third-party fulfillment companies free up a lot of time for e-retailers to put back into their businesses. These fulfillment partners can be incredibly helpful, especially for new e-retailers, but how can you tell if your partner is performing or will continue to perform in the future?
Without digging any deeper than surface level, you may not realize your fulfillment partner is actually hurting your e-business, or if working with them would endanger your company.
With this in mind, here are some tips for how to evaluate fulfillment warehouses.
Observing Your Fulfillment Company at Work
Online proprietors hear endless sales pitches about how outsourcing fulfillment will improve their e-commerce businesses. While this isn’t untrue, given the importance the supply chain plays in e-commerce, don’t let them off the hook so quickly. Check them out in person.
Inspect their facilities, get a walkthrough of their picking and packing processes and ask on-site employees questions. Once you fully understand how the fulfillment warehouse operates, you’ll have a better idea whether this company is right for your business or not, in addition to a better basis from which to evaluate other warehouses.
It is quite easy to see if the workers are careless packaging products and if bottlenecks are occurring in the supply chain. These two issues would lead to more returns via product damages and slower shipping times. On the flip side of the coin, it would be relatively straightforward to observe an efficient and effective supply chain in action. If workers are using cutting-edge technology like Radio Frequency Identification or barcode scanners to speed up their accuracy and process time, things will be running at a healthier cadence.
Implement Service Metrics and Performance Requirements
If you’re already using a fulfillment company and haven’t set any performance goals, you should do so ASAP. Establishing service metrics and key performance indicators
(KPIs) will hold the organization accountable for its performance. You’ll also see if they are up to the challenge of handling your business’ operations.
You and your fulfillment partner should agree on acceptable performance requirements. To ensure they’re met, institute incentives for them to strive toward. Areas should include order picking accuracy, cycle times, shipping performance and inventory accuracy. If your business has seasonal spikes in volume, be certain your they can scale services to accommodate your periods of increased volume.
The metrics and performance requirements you’ll want to focus upon will be dictated by your product lines. If you’re looking to start a furniture business, your performance metrics may focus more on delivery than packaging. If you’re shipping high-volume cosmetics, you might favor warehouse packaging times.
Use Data to Find Current and Optimal Performance Levels
Once the two of you have established performance and service metrics, analyze monthly performances. The goal should be to align production with the desired company trajectory. That’s why it’s so important to set meaningful metrics with a long-term narrative of operational development. Without it, you won’t know if your supply chain is moving your business forward, or holding it back.
Once you’ve set forth your performance requirements and have collected a few months of data, you can begin to determine whether your fulfillment company is operating at an optimal level and create an action plan to improve upon it. Focus on areas that will yield the greatest benefit with the fewest changes. Small, practical adjustments can make a tremendous difference in performance and efficiency.
For new e-retailers who are just happy to have someone else handling their fulfillment, it’s time to take a look and see if you’re getting the best value possible. Personally viewing your fulfillment provider’s processes and establishing performance goals will provide a much clearer picture of how your fulfillment partner is helping or hurting your e-business.