One of the recent trends in retail ecommerce is dropshipping. Dropshipping is a model where an online store sells product without keeping it in inventory. Instead, the store works with a supplier or manufacturer to ship the product directly to the customer.
We’re always talking with our clients about ways to improve their operations. For example, we’re often asked how to reduce the number of returns or the best ways to manage inventory. Regardless of where improvements are needed, the insight we gain and the recommendations we make are rooted in data. And that data almost always comes from KPI’s.
It might not be the most glamorous, but meticulously tracking your inventory is one of the most crucial aspects of warehouse management. There’s a lot to keep track of and a myriad of ways you can get it done.
When a retailer is searching for a 3PL, one main item of consideration ought to be business continuity. But while many 3PL providers market themselves as “technology companies,” and claim that their systems lead to fewer missed orders, what do they do when their system crashes? Are they able to stay on schedule? MKM boasts its ability to keep operations running even in the face of a system crash or other disruption. MKM maintains business, doesn’t miss orders, and keeps running on track.
When you’re trying to create a lean environment where product is available only in the quantities it’s required, you take the risk of running out of product or having too much product on the shelves. That’s why it’s important to work with a distributor who has flexibility and responsiveness when it comes to stocking your product. This is easier said than done. Enormous warehouses can turn into hoarding zones full of bulk pallets and untrained workers. Product gets lost, forgotten, or damaged. Instead, you need a distribution center that knows, in detail, where product is and how much they have, at all times.
Recent second quarter reports show that sales were down from what was expected, so, for retailers, they have a higher inventory of old merchandise. And, partly due to those low sales numbers, many retailers have lowered their expected sales for the rest of the year. Higher inventory, lower sales projections—still, merchandise for the fall and winter is still being shipped from manufacturers, and this will lead to an overstock of inventory, both from poor second quarter sales and, now, inventory for the winter months.
This year, there are six fewer days between Thanksgiving and Christmas—the peak time for shopping—and the sales you normally expect to make are condensed into a smaller period of time. Retail stores will be competing to capture every sale possible in a shorter selling season. Retailers will still want to keep their stock lean, but it’ll be trickier trying to maintain the correct inventory without being able to predict, exactly, when they’ll need certain product.
Say you stock inventory in order to meet the increased demand, but even these sell out. So begins the back-and-forth of ordering more, ordering too much, again and again. Instead, pooled distribution can reduce your shipping costs and will help you manage inventory so that you can be flexible during this year’s unusual shopping season.
Pooled Distribution Reduces Shipping Costs
By using pooled distribution to stock retail stores, you reduce the amount of costs that would come from having to ship directly from the manufacturers to each store or to ship from your distribution center by an LTL or parcel carrier. By having your inventory flow through a distribution hub close to your retail stores, you can quickly and cheaply deliver products on a dependable and consistent schedule. And if your product is being delivered on the same routes as other retailers nearby your combined volumes create economies of scale, saving on fuel costs and handling costs as well.
Better Planning and Customer Service
With pooled distribution, delivery dates and times are controlled completely by the retailer. This allows retailers to staff accordingly; this means inventory gets replenished on store shelves quickly. If an item that a customer wants isn’t on the shelves, customer service associates knows exactly when the store will be expecting more, meaning no guess work for the customer.
Closer Deliveries Mean Quicker Deliveries
Not only do you save on shipping and fuel costs with pooled distribution, but you also reduce shipping time. Neither you nor your consumers have the flexibility to wait for product to arrive. The holiday season is busy enough already, and now, with six fewer days, consumers will want to get to the store and purchase what they need right away. So it’s essential that you replenish your stores quickly and effectively. With pooled distribution you can do exactly, by saving time in transit with the elimination of multiple sort and transfer stops to get product to your stores faster.
Shopping Trends Vary Depending on Geography
Economic, social, and geographic differences between one location and the next can influence what products are purchased and how much product each stores sells. For many retailers, not every store in their network will fit into a pooled distribution model, but by using a blend of parcel, LTL, and pool carriers there may be an opportunity to uncover efficiency gains in your distribution network.
How do you know if a 3PL provider is organized and established enough to ensure your product gets to stores on time in an accurate, professional manner? With so much product on their hands in so many different locations, 3PLs can be difficult to manage. They can fail to arrive on time. They can struggle to meet demand. But, thankfully, some 3PL companies offer data about their distribution hubs so you can know, exactly, what to expect when you do business with them.
Not only should a supply chain be able to stay transparent to itself—informing employees on its progress—but it should be able to demonstrate to clients its awareness and how it tracks product. This is especially the case for 3PL providers whose companies survive on accuracy and transparency.