Using Forecasting to Improve Order Fulfillment Predictability for Ecommerce Retailers
By Dustin Kapper, Marketing Director, PayKings
Note from eFulfillment Service: We invite our partners to write for our blog, introducing our audience to new ideas, tips, advice and different points of view. Efulfillment Service partner Dustin Kapper is a process-driven business analyst in the payment processing industry. Working internationally with businesses ranging from CBD startups to enterprise-level subscription box stores, he evaluates supply-chain structures and key distribution channels in order to maintain sustainable processing for high risk ecommerce merchants.
How Well Do You Know Your Supply Chain?
Your supply chain controls the flow of products to your ecommerce business and ultimately to your customer. From beginning to end, each step is a new variable where items change hands. From sourcing basic materials all the way to the final online order delivery logistics, your supply chain is filled with variables that can change your business.
Most internet retailers have a very loose understanding of their supply chain, which is understandable. One reason is that it’s hard to track. For example, let’s say you sell nutraceuticals on Shopify. You have various oils and tinctures that are made in different areas with different methods. These raw ingredients are shipped to a manufacturer that processes the product and then to a third party logistics (3PL) company or fulfillment center that organizes and packs them. At this stage, there are demands for packaging materials. Likely your packaging will have plastic, paper, cardboard, and any other key items needed for the final delivery. All of these packaging components are supplied from other sources. Altogether, the complex network of manufacturers, fulfillment companies and others is a vast array of different channels that eventually lead to your customer.
Telling The Future Means Understanding Order Fulfillment Variables
Every link in your supply chain has a certain measure of predictability. The more connected you are to each aspect of your production and order fulfillment, the more accurately you’ll be able to guess what will happen next. Many businesses plan for risks and weigh them against costs. For example, having a clothing manufacturing business operating in the USA will reduce issues with international shipment or translations barriers. But you could pay premiums for production and material costs. Correspondingly, if you run an international business, you will need an offshore merchant account in order to process payments. Decide which variables are most important for your business and figure out the ongoing variability in shipping times, before and after an online order is placed.
Sourcing multiple materials adds levels of risk to your product deliverability. If one piece isn’t available, then it needs to be sourced elsewhere and your manufacturer or distribution center doing your kitting, will hold the order until the materials arrive. As a result, if one critical material has a shortage, it can cause a chain reaction. If this happens, delays are felt in related businesses everywhere.
What’s Essential In Your Supply Chain?
Understanding the basic levels of your supply chain can help you forecast the risks to your future shipments. If your product line is composed of materials from large companies or major fulfillment providers, it will be easier to follow, and the predictability of future orders will be greater. But if a large company fails, there may not be as many options in the marketplace to replace them. And if you are a smaller ecommerce company, your place in that supplier’s priorities may be lower than bigger internet retailers.
In contrast, if the products you’re sourcing have many moving pieces and materials, it will be harder to find out which items come from where. Nonetheless, keeping track of the main parties involved and key elements to your products will help you stay ahead of any shortages. Shortages mean late deliveries and can affect your abilities to deliver online orders on time.
Keep in mind that the customer is not the only one who is affected by late deliveries. If they decide to file a chargeback, your relationship with your merchant account provider is hurt. With too many chargebacks major companies like Square, Stripe, and Paypal may drop your high risk merchant account.
Build A Relationship With Suppliers & Fulfillment Centers
Know the company who creates your products. Many companies have trademarked goods which take time to engineer and construct. In this case, they work closely with suppliers who also put together the machinery and processes specific to those goods. The more you interact with your supplier, the better you’ll understand your product. Visit the factory and ask for a detailed walkthrough from start to finish. This way you’ll have a deep grasp of the many factors involved in production. You’ll also gain a greater appreciation for how your product is made, and with that you can brand and sell your goods more effectively.
Follow these same steps with your fulfillment partner. Understand how important it is to send inventory to them in an organized and compliant way, so that your products are loaded into inventory quickly and efficiently. Your manufacturer should be able to pack your products to the specifications of your ecommerce fulfillment center. And your direction is the connection required to make that happen.
Inherent in supply chain management are transaction costs. Every time an item transfers from one entity to the next is considered a transaction. The “cost” associated with the transfer can take different forms:
- Time – When a product is shipped from one geographical location to the next, the time from creation to delivery increases.
- Mark-up – The increase in the cost of a commodity that a business charges to make a profit. It occurs at every level of the supply chain.
- Mishandling Risk – As items switch from warehouses to semi-trailers to shipping containers, the risk of damaging them increases.
Have Backup Suppliers
If you have back-up suppliers you can have an alternate source for goods, in case your main supplier faces a delay. In this world we live in, there’s no telling if a pandemic or industrial malfunction can affect your business directly.
Many ecommerce companies had to scramble when their products were deemed “non-essential” and Amazon delayed fulfillment of their products by weeks, and in some cases as long as a month or more. These companies had to solicit, vet and divert inventory to new fulfillment centers in a very short time, so that sales weren’t interrupted. Mitigate risk by having these options negotiated and ready, using fulfillment centers for Fulfillment By Amazon (FBA) Prep that can become Fulfillment by Merchant (FBM) providers if required.
- Hedge risks by vetting your manufacturing, shipping and fulfillment options ahead of time and be sure they can handle the demands for your business.
- Certain manufacturers may not be licensed to sell trademarked products. In order to pivot quickly, you’ll want to find other legitimate companies as a fraud prevention precaution. The more options you have, the more leeway you’ll have to negotiate costs and figure out which company will work best for you.
- Offering several shipping options appeals to online customers as well, if you let them choose the delivery service level they desire from a number of options. And if one service is delayed, then you have other options already available.
- There are so many options, that choosing a new fulfillment partner takes some time. Additionally, you don’t want to delay sales while you wait for an Amazon removal order to be fulfilled and delivered, rush to set up the fulfillment processing and ship inventory to them.
Forecasting Inventory Delivery Dates
Predicting exactly when products will arrive is like guessing next month’s weather. The more you know about the current conditions in your business environment, the more you can put together trends and deadlines shared by your respective sources. It may not always be 100% accurate, but the more you can chart out each variable and your expectations, the closer you’ll be to calculating an educated estimation.
Ask for timelines frequently and stay apprised of any changes. If you notice the main shipping company you’re using increasing their delivery times, ask why. See if their delay situation is a symptom of the greater industry. In general, don’t be afraid to demand deadlines and receive quotes often. Any business that works with you should be ready to share their information with you, their valued customer. In turn, you’ll have the ability to forecast each aspect of your supply chain and hedge risk with probability and reassurance.
Practices To Aid in Forecasting
- Identify every source for your products from raw materials, to the final box that goes to your customer.
- Find alternate sources and partners, and develop a relationship with them, even for the largest of companies.
- Communicate often with every point along the path of fulfilling your customer’s orders, track who’s on-time and determine the source of any delay—is it fleeting or will it chronically affect your order fulfillment timelines.
- With the pandemic continuing, expect high volumes, labor issues and shortages to be part of our new normal.
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