Over the last few years, e-commerce has become an indispensable part of the global retail network. Increase in the demand for a convenient online shopping experience has made the role of warehouses and distribution centres highly critical and complex. Inefficient warehouse operations can lead to long waits and inconveniences for the customers, which can directly hit on the revenues. Currently, sellers face problems due to long storage fees charged at third party warehouses, seasonal factors and maintaining a good Amazon Inventory Management Index (IPI) score. A seller should focus on a customer-centric approach, technology while also focusing on cutting costs to achieve economies of scale. By reducing packaging costs, outsourcing non-strategic tasks to more efficient partners and using automated inventory management, sellers can bring more customers to the table and streamline their operations efficiently. This is likely to be a challenge for most of the sellers to emulate this.
Conduct an Audit
The most critical step in strategizing your costs and planning your inventories for the shipments is conducting an audit. This will not only help in reducing your costs but also will help you plan your shipments strategically for the peak sales months. The most important parts of the audit should centre on the fulfilment cost per order, to show how much every individual customer order costs to fulfil. A good starting point to figure this out is working out the total monthly cost then dividing by the total number of orders per month. It will give the total cost of each order. This will assist you in detecting where the company is spending most of the money and plan strategically its future shipments, thus reducing long storage fees.
Consider Third-Party Logistics
There are many benefits of third-party logistics; a seller can gain by outsourcing supply chain management and logistics to a value-added 3PL (third-party logistics provider). A 3PL provider has a vast resource network and relevant industry expertise which will avoid long term leasing costs and optimize warehouse storage. Outsourcing logistics will allow you to focus on the core competencies like marketing, sales, etc. and thus help you maximize profits, reduce wait times and improve customer service.
Inventory Management Software
Inventory management software is a sound investment to ensure optimal ROI in the fulfilment and overall business. It can automatically track the real-time product availability in stock, thus helping to meet the demands of the customers. It can also help monitor the turnover ratio and analyse buying patterns by customers. Creating automation and increasing speed during the fulfilment process can make the workflows swifter and more cost-effective.
Packaging and Shipping
The role of packing and shipping is critical and it’s primarily to protect the item that is being handled by the warehouse or shipped to the customer. After an item has left the production line, the primary task for packaging should be to limit the probability of the item getting damaged. Sellers can avail to order bulk packaging to save costs. Also, using recycled material or reusing packaging can help to save costs and can demonstrate an eco-friendlier brand image. Efficient packaging can also help to manage space in warehouses. Sellers can also avail to outsource their key warehouse management services such as packaging and shipping/handling which can help them to save significant time and financial savings for their operations.
Improve Warehouse Efficiency
Warehouse efficiency can be improved by optimizing space and arrangement of the warehouse, labelling areas of the warehouse properly, mapping optimal walking routes for pickers, choosing the best picking method for the operation. The easiest option is to use the Amazon supply chain with your own eCommerce business. By this, you will be already using a proven supply chain which can streamline your fulfilment services efficiently. There are certain limitations which can be faced by sellers during peak sales months like maintaining a high Amazon Inventory Performance Index score (IPI), which is basically used for management of gauge inventory and enforce stock limits for underperforming sellers. To maintain a high IPI score on amazon, sellers have to retain their performance on the amazon portal to avoid paying any overage fees on any excess FBA (fulfilled by amazon) inventory.
Compare Shipping Rates and Choose Warehouse Location Strategically
Fast delivery is one of the most important considerations in eCommerce where proximity to consumers has become crucial. Previously, warehouses were built according to zoning regulations, but as the eCommerce market has skyrocketed in the last 4-5 years, there has been a rise in demand for warehouses with urban areas and residential communities. While shipping, trust the supplier or a freight forwarder who can guide you strategically throughout the process to save costs and streamline your operations. Many 3PL logistics companies can help you with return management, warehouse services so that you replenish your inventory to meet the unpredictable buying patterns of the consumers.
Final Thoughts
To achieve economies of scale, sellers need to follow a customer-centric approach by streamlining their operations and managing their warehousing & fulfilment smartly. It is predicted that the eCommerce market will grow at a compound annual growth rate of 14.7% from 2020 to 2027, which means that the sellers need to focus on managing their warehousing and fulfilment effectively.