The ecommerce industry is competitive, which is why online retailers need to find ways to stand out from the competition. A number of merchants recognize that subscription boxes may offer them a new potential market. To learn more about adding a subscription channel, Internet Retailer spoke with Nicole Lee, director of fulfillment at Saddle Creek Logistics Services.
IR: Why are a growing number of retailers looking to implement subscription fulfillment?
NL: Offering a subscription channel gives retailers a new way to sell existing products and generate an additional monthly revenue stream. But subscription fulfillment is often more complicated than retailers anticipate.
IR: What makes subscription fulfillment challenging?
NL: With a batch model, for example, where a retailer ships all orders at the same time each month, there can be intense spikes in order volume. Retailers must invest in space and staff to accommodate peak order processing. Personalized orders compound staffing issues because the work is more labor-intensive.
It also is important to meet subscribers’ expectations that they will get good value from their subscriptions. Therefore, retailers need to control operational expenses—especially for shipping. Minimizing transit time and cost is critical. To complicate matters, shipments need to be synchronized within tight delivery windows. Social sharing is an important aspect of the subscription model, so everyone needs to receive their orders around the same time.
IR: What fulfillment mistakes do subscription retailers often make?
NL: Retailers expect to fulfill subscription orders the same way they handle ecommerce orders, but it doesn’t work that way. Too often they fail to pay adequate attention to process engineering. They should design their subscription fulfillment operations for optimal efficiency to accommodate peak order processing needs. However, it’s important to find the right balance. Sometimes over-engineering and excessive use of technology can add too much cost.
IR: What strategies should retailers use to implement subscription fulfillment into their business effectively?
NL: Make inventory and order management a priority. Invest in cost-effective technology that can help to optimize inventory, improve visibility and process orders faster. It can be helpful to hold safety stock and safety SKUs as backup to planned SKUs.
Retailers can stay ahead of the game by anticipating monthly spikes in volume and establishing processes to customize multiple order configurations. This will make it easier to plan for their space and staffing needs. It’s also wise to have a plan for sudden growth to enable retailers to scale to meet demand quickly.
To reduce transit time and cost, retailers often utilize multiple distribution centers in strategic locations to move products closer to subscribers. Rate negotiation, planned shipping volume and zone skipping to specific sortation hubs can also be helpful.
IR: How is technology helping retailers do this?
NL: A robust order management system (OMS) enables companies to increase visibility, process a higher order volume and pull from multiple fulfillment sources. Material handling equipment can help to speed order processing time, increase accuracy and reduce labor costs.
IR: How can a third-party logistics provider support retailers?
NL: Many companies find that they get better results by outsourcing subscription fulfillment instead of investing time and resources to handle it themselves. A third-party logistics provider with a shared space environment can scale to accommodate dramatic spikes in order volume. The provider is likely to have proven processes in place to handle peak order processing efficiently and cost-effectively. And its technology systems and fulfillment automation allow retailers to process orders quickly and accurately.
Nicole Lee is director of fulfillment at Saddle Creek Logistics Services.Favorite