The Warehousing & Operations Lever of eCommerce Efficiency

In the Volo Levers framework there are 5 growth levers and 5 efficiency levers you can pull to varying degrees to grow your ecommerce sales and profitability. In our last post, we covered the first efficiency lever, which was inventory & stock control. In this post we cover ecommerce warehousing & operations, and how best to control your costs as you run your business on marketplaces like Amazon, eBay and OnBuy, as well as webstore platforms like Magento and Shopify.

When we think about multichannel ecommerce business processes, it’s easy to focus on sales and growth. We put our customers first and we’re focused on attracting their attention with good products at fair prices, converting them into delighted buyers, and hopefully retaining them as loyal repeat buyers. 

The moment the delivery truck turns up at our warehouse, however, we start to incur costs. A salaried member of staff books or scans the deliveries in, checking that we’ve received exactly what we ordered. Then they allocate each product to a warehouse location. The products get moved from the delivery area to different but specific part of the warehouse where we know we can find them again, perhaps using other members of staff, operating machinery like fork-lift trucks to get the product stored in the right warehouse, aisle, shelf or bin number.

After the transaction occurs, our back office operations adjust stock levels, process payments and post to our accounts systems. From there, we incur fulfilment and dispatch costs, and finally customer service costs. If the customer decides they don’t want some or all of the items in their package, then, depending on our returns and credits policy, we have to do things in reverse, at our expense: taking the returns back, warehousing them, doing the back office refunds checks and balances, until the product is sold again.

So what makes a good process? The better you are at managing these costs, the more profit you’ll make. The converse is also true. Companies with poor warehousing procedures and lack of control over their operational processes can suffer high costs from mistakes and inefficiencies. These are costs that can turn a business into a broken business.

It’s all about having the right warehousing & operations rules, since before the items get to the buyer’s house, we need to keep them in our house. The three inputs into these rules in any organisation are the people in our warehouse and operations, the processes we follow, and the systems we use. We have to work hard to manage them and unfortunately plenty of challenges exist in these areas.

It’s hard to get the resourcing right in the warehouse. Some staff are more experienced and productive than others, getting through the work more quickly and with fewer errors. Some staff are permanent, whereas others are temporary, brought in to cope with seasonal fluctuations, and there will naturally be differences in abilities and workload.

In any warehousing or commercial situation, there is also the potential for fraud. Mistakes happen of course and items or parts of larger items can genuinely go missing. Sometimes though, the disappearances are the result of deliberately coordinated efforts to defraud the business, with resulting impacts on staff morale and business profitability.

For example, we know of a pre-digital-era story of a manufacturer of snooker tables, clearly a valuable item, who discovered an unscrupulous and careful operative taking 12 months to gradually ‘accumulate’ all the parts they needed to build their own table. Theft is a tricky subject to broach in any business, especially without a solid audit trail.

When it comes to our processes, the more manual and the less fluid they are, the more costly they tend to be. They’re more time-consuming, involve more people, and are more prone to mistakes and inaccuracies. Sometimes when you’re under pressure it’s easy to feel like as long as the problems get sorted and the customers get they want at the end of the day, that’s OK. The reality is that the sum of these small inefficient parts adds up to something quite significant, like an extra one or two permanent members of staff. Volo customers typically find that the system and its automation save them a minimum of two full-time staff.

Finally, sellers dealing with virtual stock where their suppliers receive the purchase order and fulfil and dispatch the product to the buyer on the seller’s behalf also need to have processes in place to handle this way of selling. To further add complexity, what is the right set of processes for returns and credits for each of these supply chains?

So, there are a number of challenges and costs associated with warehousing and operations for multichannel ecommerce businesses. For each person, and each step in a process, there need to be spreadsheets or ideally software to keep a record of everything. Often, the systems taking care of different parts of the business are separate, and not joined up into one integrated end-to-end solution. 

From the booking in of goods, through to the back office reconciliation, systems that can’t talk to each other need manual intervention to do workarounds: re-keying information and connecting the links in the chain, otherwise the numbers don’t add up. As you can imagine, this adds an extra layer to the costs of doing ecommerce business, and the potential for error.

Since 2006 we’ve worked with hundreds of companies and developed some best practices around how to improve and automate the inventory management, warehousing and operational sides of the business. You can boil these best practices down to two essential factors to control your costs: flexibility and co-ordination. Flexibility allows you to adapt and run a number of different processes and systems to match the complexity of your operations. Co-ordination allows you to bring together all the areas of your operations and link up the chain.

The goal is a back office process without seams. For example, for deliveries, you can accurately book in your received goods and automatically assign them to warehouse locations with a barcode scanner attached via a USB to your warehouse computer running a system like Volo. Your system should be able to support multi-item locations, multiple warehouses and virtual locations, as well as a combination of all three. Full automation of your purchase order system for ordering and re-ordering also drastically cuts down on administration time.

Systems like Volo can organise the printing of the location on the invoice, the shipping list and the pick list for your fulfilment team, saving you time and reducing errors. Systems can also take care of printing product labels based on the items received, for use on the product packaging and as shelf labeling, cutting down on manual intervention in the warehouse and making it easier and quicker for your order fulfilment team to locate the exact item they need as they assemble the picklist.

Back office operations have the tricky task of providing the necessary information to several parts of your business. Your customer service staff need to be informed with dispatch confirmations. Your supplier management staff need to understand stock levels and be sure the reordering processes are in hand. Your returns management operatives – probably part of Customer Service – need to process refunds and exchanges, reclassify goods and return the original products to the same or different locations. Finally, your finance staff need to post orders, invoices, sales and refunds to the accounts system.

How to do this? Automation is the short answer. The more you can automate, the more you can eradicate errors, accidental or otherwise, the more time you can save, the quicker you can operate, the more compliant you’ll be for legal, regulatory and tax purposes, and the fewer people you need to manually intervene during the end-to-end process.

Ultimately, the more you can automate – for the budget you have – the more you grow your efficiencies, your margins and your profits. Multichannel systems like Volo’s are designed to automate your ecommerce warehousing and operations processes and integrate them into one central system. It’s dual aim is to help you sell more, and save more.

In conclusion, when you have sophisticated warehousing & operations you can eradicate errors and maintain an iron grip on your costs. Companies that are great at warehousing and operations have scanning systems, can handle multiple locations and multiple items in the same location and have streamlined processes. We help companies reduce costs through streamlined warehousing processes and rules-based operational automation.

Sports clothing and accessories seller Only Global uses Volo’s system to manage its warehousing and operations and estimates that it does in 2 months with Volo what would have taken 12 months. Nafees Din, Managing Director, Only Global: I’ve already said it, but the biggest thing for us is control.  Every business needs it, and with Volo you’ve got that control, over your listings, your stock, your reporting, the whole operation.”

To talk with us about the warehousing & operations lever and the other efficiency levers in your own business, please send us a note here.