When you look at all of the metrics multichannel companies can use to measure customer service, Initial Order Fill Rate, or the percentage of orders that shipped complete, is the one that we think is best. But it’s also not often used.
Many consider IOFR to be just an inventory measure. But, its usefulness goes far beyond that. Here are four fill rate metrics and their formulae that companies use:
Fulfillment cost per order is the sum of all the warehousing expenses involved with shipping orders, including:- Receiving, inventory putaway, and storing the product.
- Fulfilling orders through picking, packing, shipping.
- Reverse logistics or returns processing from customers.
Historically, many managers only look at the labor portion of the fulfillment cost per order. However, labor only represents 50-60% of the total costs. A fully loaded fulfillment cost per order is a better metric and includes facilities and occupancy costs and packing material costs.
This article discusses how to calculate the fulfillment cost per order, cost per line, and cost per box shipped.
It is not uncommon for warehouse operations and order fulfillment to lose efficiency in the picking process over time. Pick footprints tend to become larger and order picking becomes slower, driving up the cost per pick.
As picking and packing grows, the available storage locations decrease, and new SKUs are slotted wherever space is available.
In addition, products tend to end up in less optimal locations. SKUs with higher velocity are located farther away from packing and shipping. Another problem is having a heavy item being stocked up high. By not having SKUs in optimal locations, travel times increase.
At the heart of process improvement is benchmarking and Key Performance Indicators (KPIs). Lord Kelvin, the British scientist said, “You can’t improve something you haven’t measured”. Here are 5 things to consider in using benchmarking in your business to improve productivity, reduce cost and increase customer service.
Read More >I was in a client facility last week working on a plan for a new warehouse. As we were discussing the outbound shipping history and its projected growth, we noted that it was erratic. The senior director commented that absenteeism and turnover were major problems for his center. Absenteeism caused as much as a 30% variation in units scheduled for shipment and employee turnover is 44%. This center has 105 hourly workers and seven managers. The turnover is 49 employees annually.
Read More >As we shop this Christmas season, we have had three examples that stand out from all the rest:
- We had our first same day order and same day delivery from Amazon.com. It wasn’t something we requested but we pleasantly surprised to get. Amazon has two distribution centers in Richmond, VA where we live. The order was placed on a Saturday in the late morning and delivered within four hours to our home. Frankly, I know that this isn’t an economical option for most businesses (maybe including Amazon). But I’ll tell you it is a formidable marketing weapon. It was extremely fulfilling to receive the item so quickly without leaving home.
You have just spent many months doing your due diligence to replace your aging order management 
system: gathering user requirements, writing an RFP, getting capable system vendors to bid on it, conducting demos and selecting the finalist. Yet there is one more activity that, if not done superbly, will shake management’s confidence that implementation of the new system will go smoothly.
If you haven’t adequately studied and documented how management, at every level from CEO to department managers, will get the needed information they’re used to having - your credibility could be in trouble. We are talking about the necessary reporting and key performance indicators needed in order to run the business on a daily, weekly, monthly and year-end basis. Even when business analysts feel they have done an adequate job of determining user requirements, the reporting functionality frequently gets cut short. There are a variety of reasons for this:
Read More >We have worked with hundreds of clients over the years to help them calculate and compare their total cost per order (call center and fulfillment functions). We are offering you the opportunity to take advantage of a free offer - if you collect and report what your major costs are for order taking and fulfillment, we will compare your total cost per order against other multichannel businesses that we within our benchmarking database. All companies will remain anonymous and blind to any others that participate. Click to download data collection spreadsheet.
Labor generally makes up 60–65% of the total cost of warehouse fulfillment (not including shipping). While hourly labor rates have increased 10% to 15% in the past five years, overall DC productivity has remained flat—so the cost per unit worked has increased. High turnover (15–25% or more in many distribution centers) adds even more costs. With most businesses struggling in the current economy, it’s imperative to get more from the resources you have. Selecting, training, and retaining good employees is one key to controlling rising costs in the warehouse.
I was sitting in a client meeting for business intelligence tools (BI) and dashboard planning this past week, and the Merchandising, Marketing and Inventory Management people were squaring off over why Merchandising’s results never tie back to Marketing and Inventory Management. Some of it was argumentative, but when you step back and look at it objectively, it shows why business intelligence tools and executive analytics have such great promise for the retail and direct industries.
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