This post is by Sam Moses, CEO of RetailOps.
A few years ago you had faith in your idea, took the plunge and started your online retail company. Now you’re seeing all that passion, drive and hard work pay dividends – your business has taken off! It’s a wonderful feeling, and well worth basking in. Go on, I’ll wait.
However, as great as this growth feels, sustaining this trajectory as a seven, eight, and nine-figure operation poses added challenges. Once you’ve identified your niche and know your customer, scaling your business operations can prove overwhelming – especially when success happens so quickly.
The challenges of warehouse and fulfillment management at scale can be huge – but not so big that they can’t be comfortably managed. As well as some everyday methodical tweaks, effective warehouse management software (WMS) exists to help you crush your problems and ease those challenges, allowing you to take charge of your growing business.
Let’s see how:
Challenge #1 – Multiple Warehouses
You started your business selling bikes in sunny San Diego a few years ago, fulfilling orders from your 10,000 square foot warehouse that proved more than ample through your first years of operations. However, your clever marketing campaigns worked, your brand and products became more popular than you could have imagined, and you’re suddenly inundated with orders. Life is great!
But due to this extra demand, you’ve maxed out your warehouse and soon need to secure more space to handle the volume. The first thing you ask yourself: do you break the lease and move the business to a larger facility, or do you open a satellite warehouse in a more central part of the country?
If you’re lured in by the cheap rent, low-cost labor, and proximity to East Coast customers – what seemed like a simple decision to open a satellite warehouse just brought on a new list of operational challenges. For example, on the human resource side, remote management of staff can be solved by bringing on a good warehouse management team.
The biggest challenge usually comes around the management of inventory, orders and fulfillment across multiple warehouses, and making that scalable. Ask yourself these questions:
- Can a SKU be stored in different locations in the same facility?
- How is the total available quantity calculated and how is it conveyed to the storefront?
- How are customer orders routed to the right facility at the right time? And what if the required inventory is split across both warehouses?
- When inventory is received at one location and not the other, how are photography and copywriting teams notified of its existence?
The vendor can deliver goods to your East Coast warehouse within a day, but not to the central warehouse. Is your current system smart enough to route the PO accordingly?
The solution to this is to ensure your order management software (OMS) and warehouse management software are tightly synced and working for you to automate the new operational challenges inherent in running two or more facilities. Without automation, these tasks will add labor to your operation that are not scalable, leaving room for errors and inefficiencies which go straight to your bottom line.
With the right OMS and WMS tools in place, your second warehouse will bring down fulfillment costs through lower overhead and cheaper shipping without adding to back-office headaches.
Challenge #2 – Receiving Efficiency
As retail businesses grow, so do the demands on your available inventory. Even before you begin worrying about inventory churn and warehouse density, the first challenge of keeping up with a growing business is receiving inventory efficiently and accurately.
Success and growth will challenge receiving workflows on their ability to scale and remain accurate under increased volume. It’s therefore imperative that you receive your inventory efficiently and turn it around quickly, so it’s off the pallet and ready to be shipped as soon as the inventory hits the warehouse.
Successful and efficient retail operations work hard to cut down their “time-to-live” cycle. Doing this reduces inventory overhead and increases revenue. But it all starts with an efficient inventory management system.
There are several ways to improve how your team receives goods, but I believe the one that precedes them all is to restore pride in the receiving area. A well-organized, clean and uncluttered work area is crucial.
Take a trip to the warehouse and actually watch the receiving process. Is it being carried out in a poorly lit area of the warehouse, on an old pallet, with a blunt pencil? If so, it’s time to clean up your act. Invest in desk, a lamp and a basic, cheapo computer that can be used in the warehouse solely for the receiving process. By using this new computer, there are likely to be a lot less mistakes than by using paper and a telephone.
It sounds simple – obvious even – but you must instill some pride in the work being done to give this pivotal activity the credit it’s due.
Inventory management software is another ideal way to ensure timely and accurate inventory receiving, and an effective WMS tool can tailor the software to meet your exact inventory management specifications.
As well as software and keeping an organized receiving area, I also suggest three things that will help you streamline your receiving process: Blind Receiving, Barcode Everything, and Use Images:
Blind receiving is one of the most valuable tips I can give. It’s easy to implement and can start paying dividends almost immediately. What is blind receiving? Blind receiving is the process of taking in inventory without the receiver knowing the order count. This practice is so invaluable since the receiver can’t place assumptions or have misaligned intentions (see’s that 11 pairs of shoes were received, but knows the company only ordered 10, therefore, I’ll take this 1 pair home).
Barcode Everything: Not every business has the capabilities to barcode or use a barcode scanner, but if you can, do it. It’s reliable and at least 75% faster than manual data entry.
When receiving inventory, I recommend a short process that your receivers can easily follow:
- Identify the product
- Enter the quantity received
- Assign the current location
- Generate and apply barcode labels
Use Images: I can’t tell you how many times a wrong order goes out because an employee didn’t correctly match the inventory to the order. A quick and easy way to make sure your fulfillment process is accurate are to use images. Put images on the outside of the stock item or on the purchase order / picking slip. This will ensure that the picker and shipper are using visual cues to check that the correct item was pulled.
I go into more detail on these three processes in an article I wrote on improving inventory management systems.
Challenge #3 – Order Fulfillment Accuracy
The more orders you receive, the more pressure your fulfillment teams are under. And whenever pressure is added, the greater the chance that mistakes will be made. Unfortunately, most of these mistakes end up being made during order fulfillment.
Imagine your valued customers opening the package they have waited a few days for:
Customer #1 – “Awesome shoes, but I ordered red, not blue…”
Customer #2 – “Awesome shoes, but I ordered two pairs, not one…”
Customer #3 – “Awesome shoes, but why have they sent me two pairs? I only ordered one…”
Whether you have shipped the wrong item, have not shipped enough, or have shipped too much, poor order fulfillment is a great way to ruin trust and relationships with your customers. Aside from the damage it does to your reputation, it also impacts profit (especially if you are shipping too many items to Customer #3 – do you really think they’ll let you know and send them back?).
So how do you prevent – or at least severely reduce – these mistakes?
I touched upon using images in the last point, and it’s another simple but effective solution to this challenge.
An order fulfillment tool allows online retailers to scan barcodes and include images of items in their database on the shipping screen. This practice can really help some pickers – especially temporary or inexperienced warehouse staff – who may have doubts that what they are putting in the package is the correct item. A simple image will help confirm that the item they hold in their hand is actually what the customer ordered, taking the guesswork out of it.
Another way to help increase accuracy at warehouse level is by posting up individual picker error rates for all to see. Now, we’re not talking about unnecessarily ganging up on or embarrassing an employee, but by posting daily/weekly/monthly picking accuracy rates you can set realistic targets and show employees where improvements are needed. You can also use this method to reward the best pickers. Use it as an incentive to work smarter, not as a punishment.
Challenge #4 – Shipping
Shipping errors can have a disastrous impact on your business. Customers that order through Amazon Prime or pay for next day delivery expect next day delivery. If they don’t get it, be prepared for some abuse directed your way!
One shipping challenge you’ll face as you grow is prioritizing the items that need to be sent out first. If Customer A wants standard ground delivery and Customer B wants next day delivery, you’d better be sending out Customer B’s order first – even if he ordered after Customer A. It’s vital that next day orders leave the warehouse before standard ground – that’s why your next day customers are paying a premium.
Another challenge: customers demand free shipping; or if not, the lowest cost shipping available. They want the item they paid for, and anything else they spend is seen as an annoyance (even if it is necessary). But as you grow, it’s costly to dedicate the time to shop around for the lowest shipping rates that meet your customer expectations.
One way to solve these problems is by implementing a WMS software package, which allows warehouse staff to prioritize orders to meet shipping delivery requirements, ensuring strict delivery schedules are met. The software also automates the price comparison process by instantly shopping for the lowest rates, then automatically updating shipping costs based on the newly negotiated ship rates.
And if you are using Amazon’s Seller Fulfilled Prime (SFP) program, you’ll also have to keep in mind that you are under intense scrutiny to adhere to an On-Time Shipment Rate of at least 99% for SFP trial orders. A good WMS tool can help ensure you consistently meet that 99%.
Challenge #5 – Returns Logistics
As your business grows and order volumes increase, so do returns – in lockstep. Regardless of whether it was a picking, packing or shipping error, or a customer that simply changed their mind, returns happen.
Returns remain a consistent percentage of sales volume, usually dependent by sales channel and industry. For any high-return industries – think apparel – it’s vital to have a seamless returns management process which handles returns alongside your other warehouse workflows. Two tips to doing this:
- Set up a portion of your warehouse to be dedicated to returns handling. Quality control at this station is key, as any inventory which is deemed re-stockable has to 100% match the as-sold description on the sales channels it will be posted on. If the item cannot be restocked as New but is still re-saleable, a new SKU should be built out which notes the imperfections for relisting. Failing to do so leads to unhappy customers and negative feedback.
- Returned inventory which leaves the receiving station of your warehouse for restocking should match the stow-away or put-away workflows of inventory being received into the warehouse for the first time. By front-loading the work at the receiving station, your warehouse team doesn’t have to learn a special workflow for returns inventory – making your operation better equipped to continue to grow and bring on seasonal workers with ease.
- Bonus tip: by finding a software platform which ties together your WMS, Inventory Management, Order Management (OMS), and Customer Relationship Management (CRM) tool, the administrative workflow for handling returns becomes an automated process. When the warehouse receives a returned shipment, order information from the marketplace or notes from customer service are easily available for access within the returns tool’s workflow. As the return is processed in the warehouse, the OMS writes back to the respective sales channel automatically to process the return. Great software is the missing piece to reducing the number of touchpoints required in returns handling and setting your business up to scale.
On the topic of returns, if you are part of the Fulfillment by Amazon (FBA) program, it’s worth considering making the switch to Amazon’s Seller Fulfilled Prime (SFP) program, which can ensure better returns control. As an SFP member your organization will handle returns on Prime purchases, which means you will be much less susceptible to fraud.
To illustrate, those using the FBA service are likely to receive a general box of returned products from Amazon, finding it difficult to tell which item is tied to which product return, opening them up to customer fraud. By using SFP, it’s easier for you to identify exactly which returned item ties to which order.
Finally, if you’re in an industry which is susceptible to product recalls, you’ll want to be sure you’re WMS is tracking inventory at the lot level as opposed to the SKU level. This allows you to identify which customers received the defective product, and which items still on the warehouse shelf were affected by the recall. Not having to alert every customer, nor having to pull every item of a SKU off the shelf for safety, can pay for the software upgrade in itself.
Challenge #6 – Loss Mitigation
The loss of inventory is inevitable. Whether it’s internal theft, inaccurate order fulfillment, or bad receiving – inventory goes missing. While it’s hard to avoid completely – especially as on-hand inventory grows, along with the warehouse staff to fulfill it – there are some easy ways to take control of inventory, with or without back-office tools to help support this.
We’ve discussed the importance of a solid receiving process. Accurate receiving is the first step towards well managed inventory, with any mistakes here trickling down through your entire organization.
Another great place to tackle shrinkage is by building a positive work environment for your warehouse staff. Implementing fair employment practices and keeping open lines of communication between management and employees, as well as recognizing and rewarding employees for consistency and productivity, all help reduce the likelihood of internal theft.
A structured WMS tool helps as well. For example, an all-in-one WMS software package has eyes on your inventory from the moment it enters the warehouse, tracking it during its stay, all the way until it leaves the warehouse ready for delivery to your customer. Each incremental move through the warehouse is tracked with both a time stamp as well as with who the inventory was moved by.
One of our customers, ShoeMetro CEO David Duong, noted:
We’ve been through over five inventory audits in the past 1.5 years. All of them passed with flying colors for accuracy, driving value for our company both through acquisition by DSW, as well as allowing us to take out lines of credit against inventory on-hand.
Wrapping Up
Through this article we’ve looked at six genuine challenges that all growing online retail companies are likely to face, impacting every department and spanning the entire fulfillment process from receiving to returns.
But through a holistic mix of methodical tweaks, smart man-management, and efficient software-based solutions, we’ve seen that all are easily remedied – allowing you to get back to the important task of growing your business to new heights.
This post was by Sam Moses, CEO of RetailOps.
RetailOps is an all-in-one warehouse management system for small to medium-sized businesses. Their web-based platform is built to scale and work with the processes of how ecommerce businesses operate.
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