Seasonal e-commerce is growing, making up nearly 15% of total holiday retail.[1] As sales climb, shipping volume increases as well, creating a need for quicker, more efficient operations.
In this article, we’ll dive into the order fulfillment process for online holiday sales, helping you get your orders to customers as quickly and efficiently as possible so you can make the most of the next holiday shopping period.
First, we’ll show you how to evaluate your last holiday season so you can identify ways to lower costs and better meet your customers’ needs going forward. Next, we’ll guide you in analyzing your company’s inventory management process, as well as packaging, shipping and returns. Finally, we’ll help you take a closer look at your shipping data and warehouse tech.
Working through these steps to create a detailed plan of action can help you save time and money, create more efficient operations and better prepare you for holiday seasons ahead—all while building customer loyalty.
Take a Look Back
To fix a problem, first you have to identify it. So, let’s begin with some basic questions on last year’s package-delivery system performance:
Receiving, storing, picking and replenishing stock
- Did bottlenecks prevent goods from flowing smoothly from trucks to your warehouse or shipping-room floor?
- Were there times when your warehouse was overstaffed or understaffed?
- Was it easy for workers to find the right products and package them quickly?
Packaging, shipping and handling returns
- Did shipping costs for lightweight products cost more than you expected?
- Were you surprised by unexpected surcharges on your shipping invoice?
- Was your returns process as efficient as possible for both you and your customers?
Crunching the numbers
- Do you know what it cost you on average to process an order?
- How much did carrier surcharges add to the cost of each package shipped?
- Did you keep track of the percentage of packages shipped on time?
- How much did you spend on returns?
Working smarter with technology
- Did your technology perform as well as you thought it should?
- Would upgrading your warehouse management system pay off in more efficient operations?
- Would barcoding or radio-frequency identification (RFID) tags improve shipping accuracy and customer experience?
Key Steps to Holiday Shipping Success
Dive into each of these issues in more detail as we walk through the four key steps to a successful holiday shipping season.
1 Receiving, Storing, Picking
and Replenishing Stock
Move Quickly from Dock to Stock
What happens when goods are delivered to your store or warehouse? If the process wasn’t as smooth as you would have liked last year, here are a few strategies to consider:
- Schedule a specific window of time for each delivery. This helps eliminate traffic jams at warehouse docks and lets you plan ahead to free up space for large shipments.
- Have shippers provide an electronic advanced shipping notice (ASN) so you know ahead of time exactly what is arriving. That way, you can identify which products coming in need to be shipped out as soon as they arrive. If orders will be shipped out immediately, have shipping labels ready before they come in.
- Use the ASN to automatically add everything on a shipment into inventory. That cuts down on inventory errors and prevents rush orders of unneeded products.
Store and Retrieve Products Efficiently
It’s also important to assess your inventory management process. Before diving in, first ensure that your warehouse space can handle your business growth. Whether you’re using multiple warehouses or simply a back room at your store, you need to eliminate extra steps and move goods quickly.
Here are some tips:
- Put your fastest-moving items in a “pick” location where they can be easily reached. That means you’d place the top 20% of your items mid-level, so workers don’t have to reach down or up to retrieve them. This may require you to reallocate space for top-selling items. Thinking ahead can save both time and money here: Can you predict which items will be top sellers?
- Store items that often ship together close to one another.
- Reevaluate your pick locations regularly as the popularity of items can change. You may be able to expand capacity by storing items that aren’t in high demand in harder-to-access areas.
- Don’t store more than one type of item in a single bin location.
- Keep processes simple so new employees can get up to speed quickly.
- Try working with your suppliers to schedule deliveries more precisely.
Keep processes simple so new employees can get up to speed quickly.
Replenish Bins the Right Way
You may want to take another look at your replenishment process. Here are three approaches you can take:
- Demand-based. Refill bins only when you need to fulfill orders. This is a good idea if you have limited space or need to be certain that old inventory is used up first.
- Routine. Refill bins when supplies drop below a preset level. This works well when you have a consistent demand for an item and enough space to accommodate it.
- Topping off. Refill bins during slow periods, especially if you’re expecting a surge in demand for the product later on and need to keep workers busy during lag times. Back to Menuarrow_right_alt
2
Packaging, Shipping
and Handling Returns
The way you package and ship your products and handle your returns can go a long way in reducing your shipping costs—and can also play a big role in boosting customer satisfaction.
Use the Right Size Package
It’s important to be aware of dimensional (DIM) weight pricing. DIM weight pricing is used by the transportation industry to establish a minimum charge for the space a package occupies, not just for its weight.
For example, a 1-pound shipment in a 12” x 12” x 12” box would cost the 13-pound price by dimensional weight, despite only weighing 1 pound. Carriers use DIM weight pricing because they have to account for the weight of the item, as well as the amount of space a package takes up in a truck or plane.
Look back at the size of the containers you used last holiday season. Is there room for improvement? How many of your shipments were subject to dimensional weight charges?
In some cases, it may be helpful to add a few new sizes to ensure you always have the best fit for your products.
A few extra touches can help turn your package into a marketing tool.
When the DIM weight is larger than the actual weight, you’re paying extra. You can avoid these costs by using the smallest container that will safely hold your product. Adding a wider assortment of box sizes can prevent the use of unnecessarily large boxes. Consider using padded or nonpadded envelopes when possible.
Deliver a Pleasant Experience
A few extra touches can help turn your package into a powerful marketing tool. However, it’s crucial to first examine your packing process. How were your packing stations set up last year? Were they efficient? Did your workers have everything they needed to quickly package and ship inventory? Identify areas for improvement and have processes in place to ensure accuracy.
Finally, to create a memorable customer experience, you may want to include free samples, coupons or discount offers, or add a personalized thank-you note. Consider asking happy customers to write a testimonial and follow your business on social media.
Aim for Accuracy
Check and double-check that the right products are shipping in the appropriate quantities and are being delivered to the correct addresses. Using barcodes or RFID tags on your products can go a long way in reducing errors.
Verify addresses before you ship: A typo in a street name, a missing apartment number or a wrong digit in the ZIP Code™ can lead to costly carrier surcharges—up to $17 per package—as well as delayed delivery. Choose a carrier that offers a comprehensive address verification system to help ensure your packages are headed in the right direction.Look for Savings on Shipping
Now let’s look at how to ship more efficiently. You may be spending more than you need to. Be aware that some shippers add surcharges for:
- Residential delivery (Unlike USPS, some shippers charge more for residential delivery than business delivery.)
- Delivery to less populated areas (These are referred to as “delivery area surcharges” and “extended delivery area surcharges.”)
- Fuel (Charges may fluctuate according to the carrier’s fuel index.)
- Large packages
- Saturday delivery
- Returns (You may be charged for print or electronic return labels, as well as pickup attempts.)
- Package pickup and intercept
- Delivery confirmation response
- Address correction
- Shipments returned as undeliverable
Keep these charges in mind when choosing a shipper. What seems like a good deal might not be once the surcharges are added.
You can use the USPS shipping surcharge calculator to help uncover potential costs, while the “Residential Delivery Indicator” can help you identify residential addresses in advance, allowing you to make more informed shipping decisions.
If you’re offering your customers free shipping during the holiday season, you should also consider your options for offsetting any related costs.
Finally, keep an eye out for net minimum charge. This is an often-overlooked area when negotiating a shipping contract. To ensure a minimum revenue amount per package, most carriers specify the published rate for a Zone-2, 1-pound package as the net minimum charge. This charge often prevents you from receiving the full benefit of any discounts you may have negotiated. So it’s important to ask your carrier how net minimum charges affect your shipping contract.
You may be able to save money by choosing different delivery options. For instance, one-day ground shipping, delivered by the end of the day, is less expensive than overnight delivery, which arrives by 10:30 a.m.
Make Returns Easy
In an omnichannel environment in which retailers seek to offer a user-friendly online experience while retaining all the benefits of a brick-and-mortar store, returns are simply a cost of doing business and staying competitive.
Here are some tips for dealing efficiently with returns:
- Designate special areas for returns and, if you have the staff, dedicate a special person or group of people to handle these products.
- To maintain goodwill, make sure you credit your customers’ accounts promptly after you accept their returns.
- If you can tell through tracking that a large number of returns will be coming in, staff up to handle the volume so you can restock products and issue credit quickly. Assess how long it took you last holiday season to return products to inventory, then identify any areas for improvement.
- Make returns, refunds and exchanges easy for your customers: Provide them with prepaid shipping labels, tracking updates and convenient return drop-off locations.
For more information on efficient returns, dive into the “The Reverse Logistics Landscape” experience on USPSDelivers.com.
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Crunching
the Numbers
You need solid numbers to make good decisions. Start by taking a look at your key performance indicators for last year’s holiday season.
Here are some of the issues you’ll want to examine:
- How much did it cost you to process each order? Consider how much you spent on labor, supplies, shipping, returns, warehouse space, etc.
- How quickly were you able to fill orders? How often was the wrong item sent?
- How many items were returned due to damage during shipping?
- How much did you spend on returns?
Here are a few simple equations that will help you gain insight into how efficiently you’re moving products to customers:
- On-time delivery rate = Orders on time / Total orders shipped
- Order accuracy = Error-free orders / Total orders shipped
- Order cycle time = Actual ship date and time – Customer order date and time
- Damage rate = Items returned because of damage / Items shipped
- Damaged inventory in dollars = Total damage cost / Total inventory value
4
Working Smarter
with Technology
Now let’s assess where you used technology last year and how well it performed. If your business is outgrowing your current systems, it may be time for a tech upgrade.
For instance, if you’re using barcoding to track inventory, did your scanners work properly? Would radio-frequency identification tags be a better fit for your company? Technologies that many companies find helpful include:
- Automatic data collection, such as barcodes and RFID tags. These help you immediately identify products when they arrive, so you can process them quickly and avoid errors in shipping products to customers.
- Point-of-sale (POS) software. In addition to traditional cash-register functions, modern POS systems can help you analyze inventory and calculate when to reorder. This can help prevent problems with back orders or overstocks.
- Enterprise resource planning (ERP) software. These systems collect and organize data from various parts of the business, from supply chain and inventory to finance and human resources. While traditionally used in large enterprises, ERP software is now available for small businesses too.
- Yard management system (YMS). This helps track activity in all dock and yard locations at warehouses. A YMS is often used along with a warehouse management system and a transportation management system.
- Upgrading technology. If you plan on upgrading your tech, be sure to put it in place well before the holiday season so you have time to work out any glitches. If you have an earlier rush period—say, the back-to-school season—you might want to test it out then to understand how it works during a busy period. When done right, technology upgrades can help you operate much more efficiently during the holiday season.
Which Is Better—Barcodes or RFID Tags?
Barcodes are smaller, lighter, easier to use and less expensive than RFID tags. However, RFID tags can carry much more data and don’t have to be physically scanned to be read. Multiple RFID tags can be read simultaneously and from a greater distance than barcodes.
Back to Menuarrow_right_altKey Takeaway
Analyze, Decide and Implement
You’ve looked at warehouse organization, packing, shipping, returns, KPIs and technology. Now it’s time to create a plan and put it in action. Take some time to create a list of the changes you need to make to ensure a successful holiday shipping season. Then outline a detailed plan for getting there, week by week, month by month.
The USPS holiday trend report can provide further guidance as you begin laying the groundwork.
By taking a careful look at last year’s holiday shipping processes—and examining ways to control costs while serving your customers more effectively—you can help ensure success for the many busy seasons ahead.
Footnotes
keyboard_arrow_down- [1]Mastercard 2019 SpendingPulse™ Holiday E-commerce Report, Mastercard, 2019. arrow_right_alt
