With a current market size of $514 billion and an anticipated CAGR of 7.8 percent, U.S. eCommerce revenues are anticipated to exceed $740 billion by 2023. Given the size and growth of eCommerce, it’s no longer a question of whether your company will be selling products online. Instead, given how vital eCommerce is becoming to your company’s success, how will you manage your eCommerce business today and in the future? Specifically, how will you create a fulfillment system that minimizes your costs, meets your customer’s expectations, and easily scales to meet the needs of your growing eCommerce business?
Even companies with large warehouse operations need to take a close look at their current fulfillment model -- designed to manage and move products in bulk – and ask themselves if they have the warehouse space, technology, and labor to create an efficient, cost-effective eCommerce fulfillment solution that stores, picks, consolidates, and ships smaller, more frequent orders, quickly and accurately?
It’s no secret that managing warehousing expenses has always been tricky for COOs and supply chain managers. What happens when your warehouse is reaching capacity? Do you build, relocate or outsource your fulfillment needs?
Space doesn't come cheap and can't easily be expanded in small increments. When a company decides to build new warehouse, it typically must build more than it presently needs. In the near-term, much of the new capacity will probably sit empty. On the other hand, space limitations will cap your company's potential revenue or potentially create safety issues for your associates. In both instances, something must change.
How do you strike a balance between current warehousing needs, anticipated future warehousing needs and justifying the projected budget? If you’re looking to expand, follow these steps to determine if it’s time to outsource your fulfillment needs.
The holidays are fast approaching, and visions of high-volume shipments are dancing in every fulfillment center manager's head. However, even as everything even tangentially related to ecommerce is battening the hatches, the "other" holiday season is sneaking up quietly—the flood of returns in January. Not all gifts will hit the mark, which means that store credit usually shoots to the top of the wish list as soon as Santa returns to the North Pole. Are you and your team ready for that flip?
Your choice in fulfillment partner shouldn't be based solely on the prices of your components or finished goods; your vendor's inner workings and performance—and what they mean to you financially—must also be considered. Even if you're getting a "great price" on the basic services you need, if you're wasting resources on filling in performance gaps back at your fulfillment center, those perceived savings will evaporate in short order.
Businesses can borrow a lot of innovation from themselves: Processes that work well in some sectors are, with a little ingenuity, easily extended to others. Some best practices can, and should, be applied throughout your organization. Take vendor management, for example. The way you treat your vendors should be similar to the way you treat your staff. This doesn't mean you should bark orders at your supply chain partners, but, rather, that you should strengthen and maintain your relationships with the men and women running your fulfillment center.
Here's how you can motivate your team through some borrowed vendor principles:
As the weather shifts into cooler temperatures, you can almost hear the stampede of holiday customers waiting to test the mettle of your supply chain. Now is the time to iron out wrinkles and close loopholes to avoid unpleasant surprises in the middle of what is likely one of your busiest periods as a business. Your vendors—and, subsequently, your vendor management practices—are your first line of defense against the 3 great customer reputation-killers as the holidays loom. Here's why: solid, consistently performing vendors are worth their weight in GPS-tracked gold.
The supply chain experienced quite a few evolutions in 2015, and can no longer be accused of being simply a cog in the machine of commerce. Logistics news and breakthroughs have thrust the operations and warehouse teams into the spotlight, giving them the gravity they deserve as contributors to the success of far-reaching business decisions. As the final quarter of the year begins, the fulfillment industry has a great deal to look forward to in the coming decade and exciting new prospects to incorporate into their best practices.
Take a moment to envision how your vendors fit into your workflow. Are they components of the machine of commerce, or are they alongside you at the controls, ready to make the logistics process the best it can be? Engagement should be a large part of your vendor management process. Active engagement efforts not only keeps the lines of communication open, they also generally help improve your own in-house efficiency because it reduces external variables in the supply chain. If your engagement is currently anemic or lacking altogether, here are the best practices you need to start implementing ASAP:
Regardless of disciplines or industry, most business experts will agree that productivity "kryptonite" can be summed up in the phrase, "That's how we've always done it." The space between status quo-disrupting innovations is getting shorter and shorter, which means that the cost of stagnation is higher than it’s ever been. If you aren't searching for improvement opportunities in everything from fulfillment to vendor management, chances are you're shrugging off a chance to gain time, resources and sanity out of an overworked section of your supply chain.
Here's how you can stay at the head of the pack, rather than bringing up the rear:
The relationship between a logistics vendor and their client is just like any other: The more effort that goes into it from both sides, the better the results. Vendor management has a tendency to fall back on "the basics"—fill rates, shipping speed, bids and so on—but fails to inject innovation into their value proposals as a common practice. With business evolving and embracing trends like the internet of things and omni-channel marketing, offering up the basics isn't going to be enough to stay a wandering eye. If business decisions were still made solely on base-level pricing it might be, but those days have ended in the face of technological growth and demand.
Knowing that you're getting the best value and service from the best supplier available requires accurate comparison data—a seemingly simple requirement, but one that even large, established companies struggle with. Accuracy and up-to-date numbers should obviously be a part of your vendor management best practices, but what's the best way to fold them in without needing to reinvent the wheel?
Here are four scalable steps that every business needs to incorporate to clean up their vendor data and save their sanity.
How do you mentally classify your vendors? Do you know how they classify you? Knowing where you stand in your vendor relationships, both from an internal and an external standpoint, is essential for following the vendor management best practices handed down from industry experts. If you view the hardworking companies that provide you with the raw materials, goods and services you need to keep your business humming along as mere resources, you're selling them short and chilling connections.
If you aren't sure where to support the "human side" of the vendor-client relationship, or want to know more about leveraging it to your advantage, here are some helpful jumping-off points:
How you manage your vendors can resonate down the full length of your supply chain—raising or lowering costs, influencing risk and determining product quality. Effective vendor management best practices can prevent your business from enduring a catastrophe, like the Takata airbag recall—which seems to be forever expanding, encompassing ever more manufacturers and car models. After all, not many companies can survive vendor oversight errors on such a large scale. This example makes it clear how much vendors contribute to business growth and shows that, in reality, vendor management keeps businesses in business.
If you were asked to categorize your supply chain's collective, cross-departmental knowledge at the moment, would you call it a train, steadily chugging along or more of a traffic jam? Keeping information—either on purpose or by simply not encouraging an open flow of communication—bottled up in a series of individual cars will only clog up your information flow and productivity. Alternately, emphasizing connection and holistic company understanding—like adjoining train cars—will get you to your goals faster.
If your company has dedicated set of vendor management best practices, there's a good chance that security is discussed somewhere in them. The path between recognizing security as a generally need and efficiently implementing specific solutions is a wide one, however. How savvy are you about your supply chain's risks and risk management initiatives? Take our quiz to find out.
Twitter, Facebook, LinkedIn— they're all about building connections, discussions and ideas, but do they really make a difference in vendor management best practices? The answer is, increasingly, an enthusiastic yes. Having outgrown their beginnings as mere conversational forums, these online tools are shaking up the way business is done, and the reverberations are echoing all the way down the supply chain.
Take a look at how social media is rapidly becoming a critical tool for vendor management success or an Achilles' heel, depending on how intelligently it's implemented.
If your business isn't using social media in some format, they're already in the minority. Author Ed Rusch, in a recent article for Manufacturing Business Technology, cites studies that show upwards of 70 percent of businesses are currently using some form of social outreach. The needs of the supply chain—the up-to-date real time info, the flexibility to respond to challenges, the communication demands— are a natural fit for this ubiquitous medium.
Incorporating social media into your vendor management best practices, whether as part of the workflow or as a convenient communication node, is a recipe for success that many companies are now embracing. Here are a few reasons why you should get on board.
Speaking in a business metaphor, if you've got a collection of beautiful, shiny red apples, the idea that a single bruised-up piece of fruit can turn the bushel to mush seems outlandish at first blush. It's easy to fall into complacency, especially when wrangling a substantial supply chain that's hard to adjust quickly. But that complacency can cause some serious profit-wrecking ripples down the line.
One of the most visible real-world case studies for vendor management best practices comes from 2014's numerous automobile recalls, prolific enough to cause some major headaches for some major names. As a whole, these companies survived problems that seemed far more difficult: bailouts, bad press, an increasingly crowded marketplace and demanding consumers. So what went wrong?
Anyone who has started or “grown up,” as it were, within a small business can affirm that the urge to manage every component of a supply or fulfillment chain is a compelling one. There often seems to be an illusion that maximum control equals maximum profits, and it’s a difficult notion to shake. Mature, steady-growth companies tell a different story, however— one where a pinch of laissez-faire in vendor management best practices and flexibility in their warehousing, resource and logistics operations brings results.