Special Report: 7 Operations and Fulfillment Tips to Boost Efficiency

The ability to quickly and accurately fulfill customers' online orders is a task that many retailers struggle with. The consequences of not doing so are severe, most notably frustrated customers who won't return to shop with your brand. Follow these seven tips to provide customers a better shopping experience, all the way through delivery:

1. Make your returns policy clearly visible on your site. According to a comScore survey of 3,100 U.S. online shoppers conducted in February, 63 percent of those surveyed said they look for a website's returns policy prior to making a purchase, and nearly two-thirds (62 percent) said they've returned a product they purchased online. Half of customers who plan to return a product visit that retailer's website to find its returns policy. As a result, having an easy-to-find returns policy will enhance the customer experience and reduce the number of inbound customer service calls.

What's more, a clear returns policy increases the probability of recommendations and repeat business from online shoppers, as almost half of the respondents said they'd be likely to shop more often with a retailer or recommend a retailer to a friend if the retailer has a lenient and easy-to-understand returns policy.

2. Give your customers deferred delivery choices. Consider adding deferred residential ground shipping alternatives to your website — e.g., UPS SurePost, FedEx SmartPost, Newgistics and EquaShip. What these delivery methods add in days in transit they make up for with significantly lower pricing than FedEx and UPS air and ground services. While the goods being purchased often dictate the shipping method, when presented with a choice many online shoppers choose the low cost or free delivery option, even if it means a longer wait.

3. Profile your products and adjust your target inventory levels by product to account for the timing differences of demand and return curves. If an item is only sold in one season, it's mathematically impossible to fulfill every customer order unless you purposely buy too much inventory and accept the resulting overstock. Profile your products into those that you aim to fulfill 100 percent of demand — essentially buying overstock to cover returns — and those where you're willing to purchase below demand forecast and accept a degree of lost sales to avoid the resulting overstock.

4. Provide your warehouse staff a daily tracking of their efforts. Warehouse employees want a scoreboard when they come to work each day. Staff can be measured on metrics such as number of items picked and accuracy of their picks. Then compare their numbers against pre-established benchmarks. Try instituting a program where employees whose production is at or above 100 percent qualifies them for incentive pay.

5. Determine your per order fulfillment cost. This will allow you to more effectively analyze various fulfillment options for your business — e.g., whether it makes sense to outsource fulfillment. How do you accurately calculate these costs?

Start by looking at your total orders for the previous year, which enables you to account for any seasonal spikes and/or lulls. Then take a look at your expense report for the same period of time and divide all fulfillment-related expenditures, including shipping, by your total number of orders.

For example, let's say your company currently handles order fulfillment in-house and last year it shipped 20,000 orders. Looking at expenses for the year, including shipping, labor (don't forget taxes and benefits), rent, utilities and depreciation, you find that total costs were $250,000. By dividing $250,000 by 20,000 orders, your per order fulfillment cost is $12.50.

6. Make employee training a continuous process. Evaluate the need for training in your warehouse every three months. Tenure with the company shouldn't be a factor. In fact, some of your more experienced staff might need a refresher course on how to use the new technology available to them to its full capacity. Regular systems training is a vital component to workers being as efficient and productive as possible.

7. Streamline functions wherever possible. Three areas — picking, packing and returns processing — account for up to 60 percent to 80 percent of the labor cost in most retailers' distribution centers. Look at each of these areas to determine how to reduce the work required.

In picking, 60 percent of pickers' time is spent walking. Slot fast-moving product (which is likely 20 percent to 30 percent of your inventory) in closer proximity to reduce pick time. Are there other picking methods like cart/bin, pick to light or voice pick that will increase production?

Design packing stations to be engineered ergonomically to increase production. Test using low-tech solutions such as box builders or envelope inserters to speed up production.