Order Fulfillment

Like many entrepreneurs who launched catalog businesses in bygone eras, the late Eddie Smith, whom I had the pleasure of knowing during the ’90s and early 2000s, stuck firmly to a number of ironclad principles during his 50-plus years at the helm of the National Wholesale catalog.

If inventory value is rising and back order rates are holding steady or increasing, this is a sign that your inventory is out of control. Before you confront your inventory management team, however, consider this: It might not be the team’s fault. Effective inventory management is a combination of art and science. The process seems simple: Review historical sales, project future sales, place orders and receive products. Simple doesn’t mean it’s easy. It requires someone with good instincts to predict trends and analytical skills to transform data into information. The old rules have changed. Economist Vilfredo Pareto’s 80/20 law worked because 80

Doug Eckrote, senior vice president of operations for the technology products and service provider CDW, provided a blueprint to how CDW — which had $8.1 billion in annual sales last year — handles its product distribution in a session at the recent Internet Retailer Conference & Exhibition in Chicago. Competition=Savings With the abundance of freight options available (FedEx, UPS, DHL, USPS), CDW contracts with them all, Eckrote said, to get customers the best rate. The company’s Web site lists every shipping choice for customers after a purchase, with pricing included. Invariably, customers select the lowest price, Eckrote noted. “If a carrier raises its prices,

On June 17-18, Catalog Success and F. Curtis Barry & Co. co-presented the first Evaluating, Selecting and Implementing Direct Commerce Systems interactive workshop in Richmond, Va. The success of this intimate event — we drew 50 percent more attendees than we had planned on — represents an exciting, fresh beginning for both of our organizations, one that could easily lead to greater rewards down the road for us, and most of all, for attendees. For this edition of The Corner View, I asked Curt Barry to give his expert synopsis of the key issues that were addressed during the conference. As he points

Most fulfillment processes are largely manual in nature, as only the very largest companies can justify advanced automation. Looking at the total cost of back-end order fulfillment — including direct and indirect labor, occupancy, and shipping supplies — total labor generally makes up 60 percent to 65 percent. That excludes any shipping costs because they distort the comparisons. Benchmarking ShareGroups, a proprietary program in which participants share benchmarking data, reveals that labor rates were typically around $7 an hour five years ago. Today, they’ve reached $12 to $13 an hour for many direct marketing businesses, plus a 20 percent benefit rate. But overall productivity

When reviewing a software vendor’s proposal, evaluate the services as well as the training that the vendor offers. Some vendors underbid the training and services; watch out, as that will cost you more than you budgeted. Get in writing the number of days each training session will take and for how many people, then do the same for project management. Talk with other companies that have converted to find out what their experiences have been like. Compare this against how much time you really feel is necessary to properly implement the system. Learn much more at the upcoming two-day interactive workshop, Evaluating, Selecting and

Editor’s Note: Beginning this week, we’ll bring you an operations and fulfillment tip of the week, courtesy of the consulting firm, F. Curtis Barry & Co. These tips will lead up to our inaugural interactive workshop for multichannel merchants on choosing direct commerce systems. (See below for more details.) — Paul Miller, editor-in-chief While converting from one order management system to another, it’s best not to try to convert the open customer orders and open purchase orders. Instead, rekey these to eliminate the risk of improper conversion. This also gives the staff a little extra “practice” with the system. Catalog Success and F.

Gen Y apparel retailer American Eagle Outfitters doesn’t bulk-mail catalogs, but it does operate a thriving direct-to-consumer business from Web sales and orders placed in its stores. Like many other retailers that historically only dabbled in direct sales, American Eagle farmed out its fulfillment to a third-party firm. But as Web orders continued to increase, the company realized the need for its own fulfillment center. So one was built last year in Ottawa, Kan. The facility has a unique fulfillment operation that adapts to changing work volume requirements and available labor resources, said Steve Lyman, the retailer’s vice president of distribution, during a session

1. Forecast based on demand instead of sales. Improve the accuracy of your buys by considering changes in demand, rather than basing your entire decision on past sales performance. 2. Consolidate demand streams across all selling channels. This allows you to take advantage of special pricing while gaining internal efficiencies that save money. 3. Identify when inventory needs will occur. Then schedule shipments accordingly to reduce inventory costs and back orders while increasing sales and the overall customer experience. 4. Plan multiple smaller buys. This enables you to optimize pricing and shipping, reduce warehousing costs and back orders, and it makes it easier for

It’s a problem as fundamental as supply and demand: When supply fails to meet demand, you have to back-order. When supply exceeds demand, you have overstock. When it all works according to plan, pinch yourself; you may be dreaming. Or, you may be one of the smart multichannel marketers who bucks business as usual to adopt a more realistic approach to the planning and purchasing of product. An approach called “continuous inventory” yields several benefits: • more predictable demand streams; • more accurate inventory levels; • special vendor pricing; • optimized shipping; and • improved customer experiences. The best part about continuous inventory