The warehouse is the lifeblood of any e-commerce business.
If it doesn’t run smoothly, your customers are left waiting. Or worse – receiving mixed up or totally incorrect orders.
MetaPack’s 2015 State of Ecommerce Delivery Report claimed 66% of shoppers bought goods from one retailer in preference to another because the delivery services on offer were more appealing. And 96% of the same shoppers said a positive delivery experience would encourage them to shop with a retailer again.
Meaning it doesn’t matter how good your marketing and conversion tactics are. If you can’t fulfilll orders on time and in one piece then you’re destined for failure.
That’s why having a solid warehouse strategy in place is imperative.
So in this post, we go through five quick wins to take control of your warehouse management and save time and money for your entire e-commerce operation.
Warehouse strategy #1: Arrange it optimally
Getting your warehouse running efficiently all starts with making sure it’s arranged in the best way possible for your business.
Research we did on 20 Veeqo retailers concluded that:
- 60% of sales are generated from just 20% of their products.
- And a massive 60% of pickers’ time is spent simply walking around the warehouse.
Meaning there’s a huge amount of time to be saved by identifying that 20% of products in your business and arranging them as close to the packing desk as possible.
It can be useful to use the inventory management technique of ABC Analysis here.
Simply divide all on-hand inventory into three groups – A, B and C:
A Items: Are of high value with low sales frequency.
B Items: Are of a moderate value with moderate sales frequency.
C Items: Are of low value with high sales frequency.
You can then ensure ‘C items’ get stored closest to the packing desk, while ‘A items’ will be farthest away. Like this:
Warehouse strategy #2: Use optimal labelling
Another key part of a solid warehouse strategy is to make sure everything is clearly labelled. And that this labelling can be easily and quickly understood by your team.
This usually means going for a simple alphanumeric solution.
So your warehouse would get broken down into different rows, shelves and bin locations. With each one given its own alphanumeric identity, like this:
Giving each SKU its own bin location makes it so much easier and quicker for pickers.
It means they know exactly where to go for each item and don’t need to search around to find the correct variation – a huge cause of human error in the picking process.
You may need to take your labelling another level deep for larger warehouses. Dividing everything up into sections and areas could work:
Warehouse strategy #3: Use the right picking method
Picking is a warehouse activity that takes up huge amounts of effort and time.
In fact, the research we did on 20 Veeqo retailers also revealed that a huge 70% of labour time when processing orders was taken up solely by picking.
So getting this part of your warehouse strategy perfect could have huge benefits for overall efficiency – not to mention order accuracy.
Most retailers would benefit from choosing one of the following picking methods to manage orders:
- Single. Where you’d pick each order in full before moving onto the next one.
- Batch. Where you’d assign pickers a batch of orders to pick in one go before returning them all to the packing desk.
- Zone. Where each order gets passed through various warehouse zones to have its items picked by the pickers in each zone.
- Wave. Similar to zone, but where all zones are picked at the same time and brought to a central packer for consolidation.
Each method has its own strengths and drawbacks, depending on the size of your operation. Here’s a handy slideshow going through each one:
Warehouse strategy #4: Get your box sizes right
It’s becoming commonplace nowadays for shipping companies to incorporate package dimensions into their pricing – as opposed to just weight alone.
The bigger a package is in physical size, the more expensive your quote will be:
So using a box size that’s bigger than an order requires could be increasing your shipping costs unnecessarily. Plus, you’ll be using up more internal packaging material trying to pad it out and stop the items moving around during transit.
But there’s also another side to this coin:
Having a huge range of box sizes available simply to minimise shipping costs is a great way to overwhelm and confuse packers.
Of course, the perfect number is dependent on your individual business needs. But most retailers find that 3-5 box size options strikes a good balance between shipping costs and packer productivity.
Warehouse strategy #5: Always measure performance
Having reliable data to track your performance is essential to be able to improve in any area.
And when it comes to the warehouse, this generally comes down to knowing how quickly you process orders and how accurately these orders are fulfilled.
Here are two specific KPIs that are worth keeping track of for this:
Picking accuracy requires you to first segment all your return orders into the reason for each return. This means you can see how many orders were returned due to an inaccurate item.
In other words, orders that had either a wrong or missing item from it.
From here, it’s pretty simple to put a solid figure on picking accuracy. Just use the total number of orders in a period along with inaccurate item returns in the following equation:
Order lead time
Order lead time is simply the average time it takes for a customer to receive their order once it’s been placed.
Meaning this is basically measuring how quickly your warehouse operates when it comes to fulfilling orders.
Having a piece of software that records timestamps of exactly when an order was received and shipped is typically the best way to track this. This will then be able to give you an average order processing time based on every order shipped.
These five points should give you a much clearer idea on building a solid warehouse strategy for your ecommerce operation.
Get these aspects right and you’ll soon be on your way to a warehouse that runs like clockwork – and being able to fulfil customer orders quicker and more accurately than ever before.