With intense digitalization and the exponential growth of online shopping, supply chains across the world are constantly being challenged with customer demands. One of those demands is a more efficient order fulfillment strategy, which can be achieved through accurate inventory.
The order fulfillment process
In supply management, the order fulfillment process follows four basic processes with one additional step required to manage returns and refunds. Today, consumers expect ecommerce purchases to be delivered within two days or less, so developing an efficient order fulfillment process is crucial.
1. Receive inventory
In order to sell products, you must first gather inventory. Businesses use past data and future predictions to estimate the amount of inventory to order. Some companies are large enough to have their own production centers, but most businesses rely on other businesses for manufacturing raw materials.
Whether you buy from an internal or external production center, error is inevitable. Count all the inventory upon arrival to ensure you are receiving the correct order. Inspecting inventory allows the business to fix any issues before a customer receives the final product.
2. Store inventory
Just like production centers, inventory storage centers can also be managed internally or externally. Some businesses do not have enough space to store inventory, so they rely on a digital inventory management system. These systems outsource much of the inventory process in order to streamline your business. You are still able to track and control inventory through electronic records, but don’t need to worry about storage locations, warehouse employees, or damaged goods.
3. Process customer order
The customer order process in the fulfillment journey will look very different depending on the scale of your business. Small companies may have one person dedicated to processing and packaging customer orders whereas large companies with access to advanced technology can automate the entire process from pulling inventory to packaging. Amazon, for example, uses robotics and AI to manage their warehouses. Machines read inventory labels and sort packages for delivery. Use of advanced technology in order fulfillment ensures inventory is accurate through the removal of human error.
4. Ship the order
After packaging is complete, products are ready to be shipped to consumers. The most efficient way to get products delivered to customers on time is to use a third-party logistics company, or a 3PL. A 3PL connects your business with an available carrier to move your freight. 3PL’s are experts at handling the entire transportation process, so if you’re unfamiliar with this area of business, outsource.
5. Returns and Refunds
Even if your product is delivered on time and in pristine condition, a customer still might want a return. In 2021, the average return rate for online sales was over 20%. Whether a customer changed their mind or is unhappy with the final product, it’s your job as the business to fix the issue in order to maintain your reputation. Since a return and refund is the last point of contact a consumer has with your business, it’s important to keep the process as simple as possible to increase future customer loyalty. Whether you offer full refunds, store credit, or simply sell products as final sale, the best thing you can do is be extremely clear about your return policy before customers checkout.
Why inventory accuracy is important
On the broadest level, an accurate inventory provides more accurate knowledge of your business. Inventory accuracy can also be broken down into key performance indicators (KPIs) to manage and guide your business.
1. Reduce dead stock / spoilage
Dead stock, or spoilage, is the inventory available to customers, but no one wants to buy. Not only does deadstock not turnover and therefore make no profit, it takes up open space for products that sell well. Depending on your business, it may be difficult or impossible to liquidate dead stock. In this case, the warehouse needs to donate or trash the inventory.
Spoilage can be reduced with a thorough inventory management system. Keeping count of which products sell well and which do not will help you when placing future orders. Customer research such as surveys can give you a better idea of which products customers like and dislike.
2. Reduce stockout
On the other hand, stockouts occur for products that are highly sought after. Stockouts can occur because of internal or external error. Incorrect demand forecasting, production issues, and human error are all common causes of stockouts.
In today’s market, consumers have infinite choices of what to purchase and who to purchase from. If your business is constantly out of supply and unable to fulfill orders, even the most loyal customers will begin to look elsewhere.
3. Decrease order cycle time
Order cycle time is the time it takes in between a customer ordering and receiving a product. This KPI shows how effective your whole supply chain is on average. Consumers demand products at a fast rate and it’s your job as the business to keep up. Having a quick order cycle time is key to customer satisfaction. Automating as much of your supply chain as possible will help decrease efficiency.
How do you achieve higher inventory accuracy?
Now that you understand the order fulfillment process and KPIs to measure to ensure an efficient process, we can review pivotal steps to take to reduce inventory inaccuracies.
Review your warehouse strategy
It is crucial to take a closer look at what’s happening at your warehouse facility. Are you using your organizing your space in the most efficient way possible? What does the order picking process look like? Are you self-storing or using a warehouse service provider? It can be especially challenging for small businesses to implement automation and optimize their warehouse strategy. In addition, small business owners should consider using a proper warehouse provider or optimizing the fulfillment processes in their warehouse.
Upgrade your inventory management software
Software is an essential tool for managing a business in today’s world. It gives you visibility into processes and transactions in real-time with historical data records. The most important thing about a robust inventory management system is that it prevents going out of stock rather, eliminating the reliance on instinct to detect frequently occurring issues. There is a huge opportunity for cost savings and an increase in inventory accuracy when you can find an error before it inflates into a costly issue.
Control and consistency
Ultimately, market demands are changing very fast. It is crucial to keep an eye on your inventory and warehousing. Regular warehouse check-ups will help you keep a finger on your supply chain’s pulse and be more proactive with your strategy. Consistency and control will help maintain a properly organized warehouse space and enhance order.
Turn to the experts
Running a business is not an easy job. Thankfully, there are thousands of online platforms to assist from customer order to delivery. A simple, self-service, platform that connects your business to carriers is GoShip. With GoShip, simply enter your freight dimensions and route and you’ll be instantly connected to verified LTL carriers across the United States- no talking to a freight broker or contracts. If you’re ready to ship, get a quote with GoShip, today!