This a client case study of a direct-to-customer company moving from third-party to opening its own ecommerce fulfillment center. The business has another channel fulfilled internally which will stay at low order levels with non-direct systems and processes.
The direct portion of the business has much higher order levels and excellent growth plans. Once the initial business was proven, the owners felt they wanted to move to internal fulfillment.
The warehouse has good managers but they didn’t have any DTC order fulfillment process or system experience. The hourly workers are all new hires with no DTC experience.
This is a story of people working hard to meet management’s goals. It illustrates issues most DC transition teams will have to face and solve. We expect it will help you think about the planning and startup challenges for your ecommerce fulfillment center.
To expand capacity, the company needed to greatly increase the square footage. Even with few available facilities in its market, there was no thought of relocation which would have added capital costs, complications and time. Unfortunately, they will face space problems in about two years’ time. Under-sizing space needs is very common when companies are planning new facilities.
New Ramp-Up Period
As the facility opens and ramps up, the speed at which new employees can reach high productivity varies and may take up to six months or longer. This business underestimated the timeframe at two to three months. They had to work two shifts and weekends to get production to acceptable levels and error rates. During that period, both the new facility and the legacy 3PL shipped orders.
Managing Order Production
The company’s marketing team is very accurate at making daily projections, which allows manpower planning accuracy for ecommerce fulfillment center operations. Many of the products are kits which are assembled on site in advance.
From an order curve perspective, the busiest day is Monday, averaging more than 3,000 orders. The curve decreases each day so there may only be 200 orders on a Friday. The plan with the 3PL was to release increasing numbers of orders to the new ecommerce fulfillment center.
The biggest hurdle was having all the employees reaching acceptable productivity on a daily basis. This is common in new facility startups. Some days early in the week, the company processed only 600-700 orders per day. Realizing the tsunami they were facing, management regrouped and quickly decided to make the changes outlined below. One area that needs much more work is product projections by unit and kit inventory projections.
After two months the ecommerce fulfillment center is keeping up with incoming orders with minimal carryover. But they have not logged a week yet where they have achieved this every day. These are not stretch goals and will be easier once the hourly staff puts up some wins on the board.
New DTC system
As stated earlier, the other channel did not use DTC processes and systems. A separate order management system selection process is underway and will be implemented this year. The management adapted the processes of the old system to work in the interim.
The direct business is much faster so the standards had to change. They now, for instance, clear dock receipts within each shift, ship 100% of orders daily and plan replenishments so they don’t interfere with picking.
Early Temp Employee Evaluation
The labor market where the ecommerce fulfillment center is located has an unemployment rate of 3%, so the company relies almost completely on a hiring agency. They give hourly employees less than a day to prove themselves; those that don’t make the grade quickly go back to the agency.
In opening a new facility, plan for turnover of new hires and the occasional manager. There’s almost always turnover in new hires, maybe as much as 25%, because most employees will not have DTC experience. The pace is likely faster than they were used to at prior warehouse jobs. Retail store replenishment is totally different from small order pick, pack and shipping. All this adds uncertainty to the facility ramp-up.
Floor Management, Communication, Coaching
There are several key practices that have helped this company avoid serious issues. First, managers are out on the floor with associates, have very few meetings and don’t sit in an office. This allows them to be very nimble and catch things before they fall through the cracks.
Second, they are regularly communicating with hourly employees. This helps them correct startup problems, answer questions, catch errors and determine whether they will meet the day’s production goals. Third, they coach employees either on the floor or after hours.
While each ecommerce fulfillment center will have different startup challenges and processes, this management team is overcoming great obstacles. Congratulations! There are many lessons to draw on as you plan your new facility opening.
Brian Barry is president of F. Curtis Barry & Company
RELATED TAGS: Direct-to-customer, distribution center, Fulfillment Centers, order fulfillment
Customer Service Case Studies
Luxury Products Require World-Class Service
Known for elegant designs, high-quality products, and world-class workmanship, this California-based company has been selling distinctive mirrors in North America since the mid-1980s. The company’s products are featured in high-end hotels around the world, and available to consumers through catalog and on-line orders, as well as in retail and specialty stores.
With such a varied distribution network, maintaining excellent customer service has always been a hallmark for the company’s leadership. So much so, that all aspects of the business were handled in-house for years, “to make sure that everything was done to our standards,” the company president explained.
However, in December 2007, she conducted a Google Search to find out more about the fulfillment business. As a result of the findings, inquiries were sent to about 20 providers to learn about their specific service capabilities and to determine if any would be possible resources to support the company’s sales efforts. In spite of it being the busy holiday season, IFS President Keith Milburn quickly replied to the inquiry.
“Within minutes of beginning that initial conversation, I knew that Keith ‘got it’,” she said. “He clearly understood what concerns I would have and explained that IFS had the systems and processes in place to fill all our business needs.”
Not wanting to leave anything to chance, she decided to give IFS a try by sending them some of the company’s most challenging products as a trial. “I figured if they could handle orders for these SKUs, they could handle our other products just fine,” she explained. To her delight, IFS handled the orders, fulfillment and customer service issues beautifully.
The company started using IFS for all of its fulfillment services in 2008. Since then IFS has more than met expectations regarding customer service and accuracy in filling and shipping orders. “The transition to IFS was as seamless as I could have wanted,” she said. “Keith and his staff have maintained the same level of attention to detail and service that my staff had established. Outsourcing to IFS was one of the best decisions I have ever made.”
Designer Jewelry Company Requires Exceptional Customer Service and Order Accuracy
Founded in 2009, this designer jewelry website was created with a goal of catering to smart, savvy shoppers who care about style and product quality, as well as the integrity of the brand and the value they get for their money.
From the beginning, company founders were committed to offering exceptional customer service. In fact, they had invested in an inventory management software package so they could handle fulfillment in-house. But after working through a bigger than expected holiday season in 2010, they decided it was time to find a full-service fulfillment partner that could not only process their customers’ orders, but do so with the same commitment to exceptional customer service that they had established early-on.
After researching nearly 30 fulfillment providers across the country, Kansas City-based Innovative Fulfillment Solutions (IFS) topped their list of contenders for the following reasons:
- its central U.S. location made shipping to both coasts faster and more cost effective;
- its ‘high touch’ Call Center provided an elevated level of customer service; and
- its ability to provide secure credit card processing – something that was lacking with many other prospective firms.
A good partnership from day one
The company selected IFS as its fulfillment provider in March 2011. As they transitioned the inventory of nearly 2,000 SKUs, company principals worked closely with the IFS team to familiarize everyone with the characteristics of the individual products. “Many of the jewelry items are nearly identical, with the exception of, say, a particular charm,” explained IFS President Keith Milburn.
“From a quality customer service perspective, it was very important for our staff to be well-versed in product knowledge so we worked closely with company principals to learn everything we could about each of their products.” As a result, IFS streamlined its fulfillment process to ensure that each customer’s order would ship within 24 hours of receipt.
According to the client, the best part of working with IFS was their receptivity to various requests. “The IFS team was very interested in listening and learning about how we had refined our process,” she said. “They then took that process to the next level in terms of doing it even better.”
Gearing up for the holidays
IFS worked closely with the client to prepare for important shopping seasons. In the event that initial projections were low – IFS was able to quickly ramp up to handle increased product demand. This included responding to every phone call, every email, and every idea with timeliness and receptivity as to what the client thought needed to be done to accommodate its customers.
From the client’s perspective, being able to depend on IFS was a huge component of planning for successful holiday results. “We could place orders for inventory in much larger volumes, knowing IFS had the warehouse space to hold it and the team to check it in. If demand surpassed our projections, we knew that IFS had access to exceptional seasonal employees to handle the orders efficiently and accurately.”
After three years of a very successful relationship between the company and IFS, the owners of the jewelry business sold their operation to a larger entity. Looking back, the fulfillment partnership was valuable for both the client and IFS.
“We can’t say enough good things about IFS,” summarized the client. “It was so nice to have a partner that could grow with us. They were always very gracious about accommodating changes that we made to our process…then adapting their processes right along with us.”
Milburn concluded, “We always knew that the company would grow. We just didn’t know they would grow so quickly! But we were very happy to accommodate them and wish them continued success.”
Iconic Outdoor Apparel Company Finds Perfect Fit in Midwest Fulfillment Provider
When this Colorado-based apparel company began searching for a fulfillment provider in 2004, it was essential that any potential provider must possess the following:
- the ability to ship direct to consumers;
- a central U.S. location that would make shipping to both coasts faster and less costly;
- the ability to accommodate growth as the company grew and established brand awareness;
- the capability to turn customer orders within 24 hours;
- the ability to split wholesale packages to manage inventory levels for consumers; and
- a “high touch” Call Center to provide exceptional customer service.
After researching a number of fulfillment companies, the director of e-commerce was convinced that one company – Innovative Fulfillment Solutions (IFS) – stood out among the others in its ability to meet all of his selection criteria and more. “We operate at a very high velocity in the winter months, yet at a much, much calmer pace during the summer,” he explained. “We needed a fulfillment provider that could provide the flexibility to manage space and inventory levels in a way that allowed us to serve the needs of our customers at the highest level. After talking with IFS President Keith Milburn, I believed that IFS could fill that need.”
Service flexibility ensures excellent customer shopping experience year-round
As the company grew from 1,500 SKUs to more than 4,500, IFS grew its capacity to perform and continued to provide an order accuracy rate of 99.99 percent. One major accommodation IFS provided was to ramp up capacity during the holiday season each year when the number of product shipments would quadruple the typical volume of the warmer months. In spite of this increase, the IFS team always managed to adjust to those spikes in order activity and helped the client through the busy times without any major customer service issues.
As a growing business in the competitive apparel industry, outstanding customer service was essential. IFS consistently exceeded company expectations for both order accuracy and outstanding service. According to a company spokesman, “It was such a pleasure to work with the very capable IFS team. I would highly recommend IFS to other e-commerce companies that want to focus on growing their brands, and prefer to leave the logistics of fulfillment and quality customer service in the very capable hands of an expert.”
If your company would benefit from this level of commitment to excellent customer service and attention to detail, contact IFS for more information.