Dropshipping, where the manufacturer fulfils orders directly to the end consumer on behalf of an e-commerce retailer, has increased manufacturer profit margins by over 50%. To see these returns, it is critical for manufacturing companies to have Warehouse Management System (WMS) technology in place. The e-commerce model is different to bulk orders and involves more frequent, smaller orders being processed around the clock. Ultimately, dropshipping offers huge potential for manufacturers, not just to regain greater profit margins, but to increase their understanding and control of the customer relationship itself.
One of Indigo’s customers, the lingerie manufacturer Panache, has seen significant sales increases after adding dropshipping to their existing retailer relationships. Dropshipping through Indigo WMS has enabled them to get involved with e-commerce and expand the revenue opportunity. Margins have improved because Panache are selling a higher volume of products more frequently. They also benefit from customer insights and have gained a better understanding of buying trends and who their best customers are.
What is your ‘cost to serve’?
Cost reduction is consistently among the top ten goals for companies to recoup eroding margins as a result of increasing competition. But whilst companies know what their costs are – as in, what they are spending – very few actually know their ‘cost to serve’ – the minimum expenditure required to operate the warehouse and logistics functions.
During project Phase Zero, Indigo’s supply chain consulting team does exactly this, exploring what changes they should make to operations before implementing a WMS. These changes may be to organisational structure and roles / responsibilities or to the detail of business processes, for instance to picking and replenishment tasks. Indigo’s approach is to consider, if there were no resourcing issues or software constraints, how best would the warehouse operate?
In one recent Phase Zero initiative, Indigo identified that order picking could be optimised with wave picking before introducing a WMS, thereby allowing for greater savings to be achieved post implementation.
Almost without exception, Indigo encounters very few businesses that understand their cost to serve. They know their costs, overheads and sales revenues and they might know the difference between warehousing and transport costs, but they have no idea how it is built up and how to improve it. Yet with expert support and guidance, it is such a straightforward problem to resolve and deliver real efficiency cost savings for the business.
Do social media #influencers affect the warehouse?
What happens when a new ‘must have’ item goes viral on Instagram? How do warehouse operations cope and how does a WMS ensure the right items get to the right customers as quickly and cheaply as possible?
An essential tool to get through the day’s order pool efficiently and without having to rely on too much additional labour, WMS software needs to have the flexibility to support multiple approaches to picking, depending on the different types of products being sold.
Batch Pick and Sort Picking
This is ideal for high volumes of small orders because it allows multiple orders or shipments to be picked simultaneously and then grouped into individual orders. Batch pick and sort picking increases the throughput possible in a warehouse, because it reduces the travel times to gather stock items and makes the whole process as efficient as possible. It is essential WMS functionality for manufacturers facing ‘viral demand’ generated by social media. Once picked, goods are brought to a central marshalling area where order assembly operatives finish each customer order, adding brand specific finishes as a value add where relevant. If your WMS supports batch pick and sort functionality, social or e-commerce orders can be released in the shortest possible time, for the lowest cost possible.
Larger orders (numbers of SKUs per order) can be picked using wave picking and a good WMS will have the flexibility to support this method too. In wave picking, each SKU for an individual order is picked discretely. The benefit of this approach is that orders can be scheduled for a set time within the day, depending on their profile or priority. Orders coming in from VIP customers or with a special delivery request can be scheduled for times when additional resources are available, or to reflect the delivery carrier being used.
For brands wanting to capitalise on the power of social media to create demand and increase sales, the ability to switch seamlessly between wave picking, batch pick and sort picking is an essential WMS feature to specify. When new products are first launched, wave picking can ensure those orders are prioritised, meaning that must have items are hitting the streets (and social media) as quickly as possible, for the lowest possible delivery cost. The faster items can reach end consumers, the faster they can be promoted with selfies to perpetuate demand!
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