Among the most knotty challenges multi-channel retailers face is the need to efficiently fill different types of orders — one-offs from e-commerce sales along with volume orders to store locations — while closely managing inventory so that costs don’t spiral out of control. While sales are key to any retailer’s financial well being, effective inventory management and order fulfillment play a big role in ensuring a healthy bottom line. Carol’s Daughter, a developer of hair, skin and other beauty products, offers its wares online and through about 1,400 stores, including Ulta and Sephora and some 100 independent salons. Television shopping shows, though, are its largest channel, says Kara O’Rourke, manager of logistics and distribution. In fact, Carol’s Daughter is the No. 1 beauty brand on HSN, she says. Sales from television shopping shows often come in large volume hits and require specific handling. For instance, a show may offer a kit featuring several items that need to be pulled together in the warehouse, perhaps shrink-wrapped and embellished with a ribbon, and then packed according to HSN’s specifications. Shipping one or 100 Dotcom Distribution, a provider of logistics and fulfillment services to retailers and manufacturers, has been helping its clients handle multiple types of orders for more than a decade. The firm began operations in 2000 — about the same time that many retailers were discovering the complexity inherent in managing high volumes of direct-to-consumer e-commerce orders, says Doug Sternberg, executive vice president of client strategy. Those transactions typically require different information systems, warehouse layouts and skill sets than the large volume orders that most retailers were experienced in handling. Logistics providers need to be able to efficiently pick one or a handful of items, move them to a packing station, and then box, label and ship them off. Moreover, they need to be able to do this many times each day; some of Dotcom’s clients receive up to 30,000 orders daily during certain times of the year.
To make this work, the systems used by Dotcom communicate directly with a client’s website to receive order information and provide regular inventory updates. Dotcom also offers such capabilities as gift messaging, gift card activation, custom inserts, gift wrapping or boxing, sampling programs and other marketing initiatives. In addition, the systems need to scale in order to deal with increases in order volume during the holidays or special sales. That means they often need to allow for creative order management and batching that takes advantage of efficient ways to process similar orders. The warehouse layout typically includes compact, custom pack stations. In addition, assembly line processes and automated conveyors are often used to apply shipping labels and ensure each package is loaded onto the appropriate carrier’s vehicle. In contrast, a P.O. from a large national chain may contain several hundred orders, usually headed to several distribution centers and then on to different store locations. A worker in the warehouse typically will use a forklift to pull large quantities of the products. These often need to be moved to a pallet in such a way that the products going to Store A are in one place, those going to Store B are in another, and so on. Many orders headed to the larger retail chains also have to meet specific packaging and labeling requirements, or risk incurring penalties. “Noncompliance often results in substantial fines,” Sternberg says. For instance, retailers may mandate the use of labels that identify everything being shipped, and require that this information arrive before the products themselves do, he says. Many retailers also mandate the use of electronic data interchange (EDI) to convey information on the shipments or invoices.
Reporting and analysis tools
Carol’s Daughter began working with Dotcom in 2009, after outgrowing its previous logistics firm. Management was looking for a logistics provider that could handle both B2B and B2C orders, O’Rourke says.
Just as critical was a provider that could keep pace with the growth Carol’s Daughter has experienced. Since 2008, when Carol’s Daughter began partnering with major retailers, sales have jumped about 1,000 percent, O’Rourke says. “It’s important to have a partner who could scale and meet the demands of our growth.”
To meet the diverse requirements of Carol’s Daughter and other clients’ businesses, Dotcom Distribution “operates a proprietary order management system in conjunction with a third-party” warehouse management system, Sternberg says. “These integrated systems offer multi- and omni-channel clients the flexibility to allocate inventory to a wide range of customers while benefiting from lower costs of maintaining a single inventory in one location.”
Dotcom Distribution also offers analysis tools that help its clients better manage their inventory, such as reports that show how the demand for a product has changed over time. Retailers can see how long their merchandise has been in stock, and the number sold (or not sold) over a period of time, broken down by SKU. “The first step in managing inventory is visibility,” Sternberg says.
Armed with this information, retailers are better equipped to develop solutions for managing inventory more effectively. Should they entice customers by more actively marketing the products? Offer a discount? Or is it time to move the inventory to an outlet store?
This is key, because retailers that don’t manage their products’ lifecycle and develop strategies for dealing with them “will end up with more inventory and more cash tied up in old inventory,” Sternberg says. They also have to pay to store the unpopular products. That can curtail a retailer’s ability to purchase new inventory, which can, in turn, drag down sales. “If you don’t manage inventory, the costs will cripple a company,” he says.
The reports are available via the web. And because many of Dotcom’s clients use spreadsheets to manage inventory, the data can be exported to spreadsheets, Sternberg says.
“The transparency of information, having real-time information on all our orders, whether e-commerce or wholesale,” is one key to Carol’s Daughter success, O’Rourke says.