Retailer's Guide: How to Achieve Customized Omni-channel Fulfillment

You may not give much thought to how a package arrives at your doorstep, but order fulfillment is a complex set of processes that includes managing inventory, packing and shipping orders, and processing returns. There’s plenty of margin for error at any given step, but there is also a huge opportunity for retailer gains if fulfillment is optimized.

For omni-channel retailers, the fulfillment process is the lifeblood of the operation, and inefficiencies result in higher costs while adding the risk of negative experiences for customers. Fulfillment is also tied to growth, especially for smaller retailers.

According to Donny Salazar, founder and CEO of MasonHub, “Fast shipping and fast delivery are table stakes, and if you’re not focused on that, then there are several opportunities out there for customers to spend their dollars at other retailers."

“You have to be wherever the customer is,” Salazar continued, “and in order to accomplish that, you have to have the supply chain and fulfillment that allows you to place your products across multiple retailers, across multiple sites, across multiple marketplaces.”

Logistics is complex, but the way fulfillment works is fairly straightforward. However, legacy companies built before the dawn of e-commerce have been slow to adapt, resulting in fulfillment providers that often are ill-equipped to handle today’s retail landscape, which includes e-commerce, a brand’s own brick-and-mortar stores and wholesale partners across all channels. That leads to a myriad of pain points for retailers, in an already competitive market.

In this guide, we’ll explore ways to achieve optimization, satisfying customers and driving revenue growth for retailers — we’ll examine the typical challenges retailers face, diving into tactics to overcome them.

1. Inventory Management

Ensuring the proper amount of product is available at any given time is a challenge. Brands often lack clear visibility into their inventory position, which can lead to items becoming short-stocked, or sold when they’re not actually available, both of which lead to negative customer experiences.

As Ovadia Labaton, co-founder of The Perfect Jean, a MasonHub client, explained, ensuring that inventory is correct and reflected correctly on the brand’s website is a hurdle that many retailers face: “It creates this whole downstream stew of customer-facing issues. They get back-ordered. They order a product and they’re excited for it, but you can’t ship it,” he said.

“You’ve spent all this money, time, effort, and content on marketing your product to a customer, and they get excited. They actually click ‘buy,’ which is so hard to get someone to do,” Labaton said. “And then, bam, you don’t have the product, because your inventory is off by one or two units. It shatters customer trust.”

Technology that allows retailers to see where all their inventory is across multiple channels, in real-time, is critical to maintaining operations. The ideal back-end order management system should allow retailers to continue selling virtual inventory when they are out of stock, provided new inventory is on the way — letting clients choose whether to accept new tickets on back-ordered products indefinitely or select the number of units to sell and set timeframes. The latter tactic is also useful for pre-selling new products, so that retailers can get orders in even before the new inventory is received.

Another tactic to help retailers avoid ending up with unnecessary inventory while also achieving higher average order volumes is dynamic kitting or bundling. This strategy is especially relevant to subscription box brands or beauty companies that give customers the option to select multiple items as a single SKU.

In this approach, rather than tie up lots of inventory to make complete sets only, inventory is available for individual purchase as well. Additionally, offering multiple items as sets – even with a small discount – encourages customers to buy more. A robust back-end order management system simplifies this process by automatically calculating and updating available inventory for bundles and individual components as each is purchased.

‍

Tactics and tips

Choose a back-end order management system that allows virtual inventory to be sold when new inventory is expected to avoid missing demand and track inventory across all channels.

Utilize dynamic kitting to free up inventory to be available individually and as part of a kit, which can also increase average order volume.

2. Packing

There are many factors to consider when making packing choices; ultimately it boils down to balancing function and cost with brand identity and customer experience. The durability of packaging is of course important; transit testing is a must, as is identifying the least costly choices from a size and weight perspective.

Retailers must also consider how their pack-outs convey their brand identity. After all, the unboxing experience is the first physical touchpoint an e-commerce shopper has with a brand. For example, when it comes to eco- focused brands, environmentally-friendly options that aren’t excessive in size — carrying carbon-footprint implications — can create a positive experience.

And when it comes to scaling such decisions, some back-end systems can automate custom fulfillment experiences based on customer data such as first-time shopper or VIP status. While these options can cost more, they enable a brand to demonstrate values in action, and their customers often accept the extra cost if this matters to them.

Tactics and tips

Transit-test customer and wholesale packaging and know how much it is to ship to strike a balance between durability and cost.

Consider how the customer-facing packaging conveys the retailer’s brand and makes for a memorable unboxing experience. Consider back- end systems that can automate certain packing actions based on customer data.

3. Rate Shopping

Rate shopping for shipping options is key. Larger retailers with more resources and greater outbound shipping volumes are likely to have strong relationships with multiple carriers, and therefore the best rates.

For small and medium retailers, finding the best rates on their own can be challenging with limited resources and smaller shipping volumes. In these cases, outsourced fulfillment can be helpful due to their relationships with multiple carriers and access to discounted rates.

Fulfillment partners may also have advanced systems with dynamic ship-rate logic and multiple warehouse locations so that orders can be shipped from the location that is closest to the customer, which is faster and cheaper.

‍

Tactics and tips

Rate-shop to ensure the best balance of cost and speed of shipping.

Partner with a fulfillment provider to take advantage of their multiple carrier relationships and negotiated rates resulting from larger shipping volumes, as well as ship-logic software.

4. Returns

Returns are a challenge because they are costly to process. Apparel companies, for example, experience a 35%–40% return rate, representing a massive amount of merchandise.

Returns-focused partners offer technology solutions to facilitate this optimization, often via automation. Within these solutions, return records are created as soon as customers complete the request on the retailer’s website, and exchanges can be put into motion immediately, if required.

Moreover, tech-enabled fulfillment providers can connect to these systems, allowing for even more efficient processing. Fulfillment centers can be prepared to receive each return and handle the logistics of matching received items to the return records, cleaning and refurbishing the item if needed and returning it to inventory if it’s determined to be resellable. Customers are automatically notified when their return is received, and the loop is closed with the customer by issuing an automatic refund. Notifications of each of these events are triggered by the returns-technology provider and sent through the front-end order management system.

Integrating systems in this way not only improves the customer experience, but also saves retailers time and money. For apparel companies, it can mean the difference between dealing with the full 35%–40% return rate, compared to about 5%.

Tactics and tips

Automation and communication between front-end and back-end systems are the keys to efficient returns.

Partnerships with returns-focused service providers and integratable systems from providers are critical to optimizing the labor involved in returns, and also the customer experience.

Summary

The challenges retailers face in achieving optimization are often a result of trying to minimize their own costs and required resources while still meeting — and exceeding — customer expectations, and being prepared to withstand outside challenges.

It’s a tall order, and having fulfillment partners with the technology and expertise to help achieve this balance is critical. For a fulfillment partner to truly support omni-channel, they should be able do things such as:

Be able to handle orders that drop ship, i.e. those shipped directly from a manufacturer or supplier.

Similarly be able to handle orders that are fulfilled by Amazon and orders from wholesale partners.

Abide by big-box stores’ or retail chains’ compliance rules (many fulfillment co’s either aren’t familiar with the rules or lack the capacity for compliance).

Integrate their system with department stores’ EDI (electronic data interface.)

In an increasingly complex retail world, automating and streamlining this communication simplifies the entire fulfillment process for all stakeholders — the retailer, the fulfillment partner and the consumer. Labaton at The Perfect Jean summed up the importance of this integration for his company.

“All the stuff that’s happening behind the scenes is visible in the user dashboard,” he said. “It gives you the information that you need at your fingertips without having to talk constantly to get basic information, and that really helps you make decisions faster and solve problems so much more easily.”

The results are quantifiable. Within the first year of its provider partnership, The Perfect Jean  was able to scale 8X while saving 20% on operational costs. As such, the role of fulfillment as a growth vehicle is clear for Labaton: “Every dollar you save on logistics is a dollar you can either put in your pocket as profit, or that you can spend on marketing to grow your business.”