Navigating the Potential Minefields of Retail Order Fulfillment
by Ayal Latz
You might be asking yourself, are all retail orders fulfilled the same way? What’s the difference between order fulfillment in one area versus order fulfillment in another area? Well, let us break it down for you.
These days there are various requirements that Marketers face with regards to Order fulfillment. It’s not all the same thing. As we begin, let’s dissect each of the three most common categories for you:
- Direct to Consumer (D2C) – Expectations of the consumer are ever-changing and keep marketers on their toes as they fight for consumers’ business. The bar continues to rise; which can sometimes be hard to believe considering the bar is currently set at same day shipping with fast shipment methods.
- Retail Distribution – (B2B) – When selling to retail that often means shipments to distribution centers or bulk shipment direct to store. B2B Order Fulfillment for retail is a completely different process than shipping retail to the consumers themselves.
- Drop Ship – Think of this as a hybrid between categories 1 and 2. Drop Shipping is a D2C method of fulfillment that has the marketer shipping ON BEHALF of the retailer. Representing the retailer, as you can imagine, is risky business. With retailers expanding product assortments without increasing distribution capabilities, drop shipping has continued to grow in popularity. However, this method is managed closely by the retailer and thus should be managed.
D2C, B2B, what’s the big deal?
Well, shipments direct to consumers involve the picking and packing of individual orders. Retail usually involves pallet quantities or multiple cartons of inventory. In order to be successful, the fulfillment facility needs to be designed effectively and have all the proper equipment in place.
When it comes to D2C, volume is dependent upon the timing of the media (the promotion of the product that’s being ordered), but also how successful that media is from a sales standpoint. With B2B, you ship bulk quantities well in advance to the retailer and should be on demand for when the retailer needs it.
Another big difference is in supply chain issues. Supply chain affects planning and budget in many different ways. With shipping D2C, marketers tend to deal with “just-in-time” product arrival as part of the media campaigns they run. Conversely, B2B dictates bulk shipments to the retailer in a predetermined window and may require advance orders and storing/staging of product to prepare for that small window of time.
The biggest and most challenging difference between the two; however, is going to fall within shipping protocol. In D2C, these can be involved, but generally the options are limited. In B2B, each retailer has their own set of requirements, which can be extremely different from one another. And the protocols are highly specific and detailed.
What’s required to Ship Retail?
In general, there are two things you will need: 1) Sophisticated Technology and 2) Ample Shipping Experience
Retail can present numerous problems in the order fulfillment realm. Software necessary to ship retail is both complicated and expensive. It is vital that you have a strong IT resource available at all times to manage it. Even with high retail volumes, it proves to be extremely difficult for marketers to handle this type of fulfillment on their own. Overall, costs are burdensome, the learning curve is steep and risks due to non-compliance are punitive.
EDI – it’s not just another acronym!
Electronic Data Interchange or EDI, for short, is a method for transferring data between organizations. In the world of Retail, EDI is the method of choice for managing Purchase Orders, Shipment Notices and even Invoicing; however, retailers have the ability to set their own requirements within the fields of data. This is what makes EDI even more complex because each retailer could be using the data fields differently. In other words, integrations of systems can vary for each trading partner depending on their preference.
When it comes to implementation of EDI, because of its complexity and potential costs, more and more marketers are outsourcing to what is called Value Added Networks (VANs) and their fulfillment partners. VANs and competent fulfillment partners should already be integrated with virtually all retailers, which in turn helps marketers to piggyback on the existing connections that are in place.
The Cost of Non-Compliance.
Retailers can impose financial penalties for errors in communication (EDI), packing, labeling and shipping. It is crucial that either your shipping department or your order fulfillment partner understand the retail requirements and guidelines. That ample shipping experience requirement really comes in to play here!
Be Sure you are up to the Challenge!
When it comes to retail distribution, it’s best to both have a keen knowledge of and an appreciation of the complexities involved. This is where an experienced fulfillment provider can be of terrific service to you. Fulfillment providers have the experience, software, equipment and the warehouse space to handle the task. Most importantly, a fulfillment partner can take your hand and lead you correctly through the intricate realm of retail shipment.
Okay, I’m ready to ship retail! What Strategy Should I Take?
The life cycle of your product needs to be thought out very carefully. Not every product and campaign is created equal and there’s definitely not a “one size fits all” approach to order fulfillment as this blog has explained. With careful planning, a marketer can move the product through the life cycle and maximize profitability.
The biggest thing to take away from this blog is this – know the difference between D2C and B2B. Feel free to meet with experienced fulfillment partners that can fully explain the processes and help you to better understand how it works. Because your product is different from anyone else’s, it’s best to trust the experts to explain which approach will fit you the best.