Consultants in Logistics

Small Orders, Big Problems?

As more and more small and medium sized consumer goods manufacturers and distributors begin to sell direct to the consumer, either through their own sales channels or via larger retailers’ online marketplaces, fulfilment operations originally designed to deliver small numbers of large orders require a major re-think.

According to a 2013 survey by CapGemini, 78% of manufacturers drop ship their orders. Of these, 27% indicated that at least one in four orders is sent direct to the customer.

In some cases, selling direct to the consumer is seen as a necessary evil - something which is being mandated in order to remain competitive and which must be endured rather than actively pursued. In these cases, the temptation is simply to ‘make do and mend’ while continuing to focus on the core sales channel. Unfortunately for these companies this can be to the detriment of quality and service levels for all customers and, as multichannel becomes the rule rather than the exception for manufacturers, this approach is unlikely to result in a ‘steady state’.

At the same time, many manufacturers are recognising that multichannel selling offers significant new opportunities. However, by radically changing their traditional order profiles, it is also putting increasing pressure on their fulfilment operations, potentially resulting in rising costs and falling service levels.

In many cases, the response is simply to throw people at the problem. However, while small order fulfilment is inherently more labour intensive than fulfilling larger orders, the B2C order profile is also typically less predictable, making planning more difficult. During busy periods, companies may therefore find themselves pulling permanent staff off other tasks in order to meet their service promise for online orders and/or bringing in agency staff to make up the numbers, both of which have implications for productivity, cost and quality.

If this is not addressed, the cost of fulfilling direct customer orders can swallow up some, most, all, or – in the worst case scenario - even more, benefit than it actually brings.

To prevent this, manufacturers seeking to maximise the multichannel opportunity should consider their fulfilment operations in a more systematic and process driven way to find more efficient ways of fulfilling direct to consumer orders.

This involves reviewing current operations and performance levels, evaluating alternative operational solutions and, in most cases, reengineering processes in order to establish a robust, efficient and scalable fulfilment operation, ensuring that costs remain closely aligned with growth in small order volumes.

Has the internet changed your business and put increasing pressure on your customer order fulfilment operation? Perhaps the few B2C orders you used to receive have been creeping up, or your sales and marketing function have introduced new service formats and offerings that have changed the order profile you used to experience. Maybe your operational methods for order fulfilment are not as ‘fit for purpose’ as you would like, resulting in pressure on cost and failure to meet increasingly demanding service levels.

If this sounds like you, Davies & Robson can help. For more information, call us on 01327 349090 or contact us