Five Fulfillment Fundamentals
Want a world-class back-end catalog operation? Here's what you'll need.
By Bill Spaide
Catalogers possessing high-performing operational units concentrate on the following five fundamentals.
1. Optimum Location
Superior merchandise fulfillment begins with facility location, which should provide
average or better solutions to the following criteria:
• An adequate labor supply of both full-time and seasonal workers, as measured in terms of costs, availability, stability and productivity. Note: This is the single most important location-related criteria.
• Proximity of suppliers and customers to the facility, as measured in both inbound and outbound transportation costs and delivery time.
• Local economics includes reasonable construction or building rental costs; availability of government incentives; and reasonable taxes (e.g., income, personal property, inventory, real estate, sales).
• Quality of life issues include climate, housing availability and costs, schools, cultural and recreational activities, low crime rate, and availability of public transportation.
• Proximity to corporate headquarters: Your facility should be close enough not to impede visits by company management and other involved staffers.
2. A Well-designed Facility
An effective and efficient fulfillment operation requires a facility with the following physical characteristics and a design that optimizes performance.
• Adequate space: This impacts every activity that's performed and how your operation is managed and controlled, including introduction of new systems, workflow, worker efficiency, supervision, security, employee morale and retention.
• Building design: A one-story square or a broad rectangular building is the preferred configuration for direct commerce fulfillment. This design permits merchandise to move in and out easily and minimizes handling.
• Bay size: A structure with large-sized bays (e.g., 40 feet by 40 feet) and few building columns is easier to lay out with storage racks and conveyors. It's also simpler to design straight aisles without jogs, and to achieve maximum floor space utilization.
• Clear height: For merchandise storage, a maximum clear ceiling height of 30 feet or more is ideal.
• Flooring: It should be level, smooth and sealed with a load capacity of 250 pounds per square foot.
• Lighting: Employees' eye strain, headaches and tension caused by poor lighting severely impact their productivity and work quality.
• Enough parking: Because direct commerce fulfillment operations tend to be labor-intensive, adequate staff parking is a critical factor in facility design. The ideal number of parking spaces depends on the availability of public transportation in your area. When public transit is limited, a parking space for each one to 1.25 employees is recommended, plus a limited number of spaces for visitors.
• Expansion capabilities, either by leasing contiguous space or by adding onto your existing facility.
3. Flexible Workforce
As you know, most catalog businesses experience peaks and valleys in sales and work volume. That's why a flexible workforce is one of the most important elements in maintaining service levels and controlling costs.
The most effective organizational setup features a three-tiered staffing strategy: a mixture of full- and flex-time permanent staff, supplemented by temporary, seasonal workers.
Typically, flex workers are guaranteed a minimum number of work hours per week in off-peak processing periods, with expanded hours required during peak seasons. The base staffing level of a particular function consists of full-time staffers and the contracted hours of flex workers. Meet your peak seasonal needs by expanding your flex staff and adding temporary workers.
Also, studies show that flex workers are at least as productive as full-timers, and that in many cases they're more cost-effective, because they can be sent home when work runs out.
Also, a flexible workforce constitutes a talent pool for full-time hires.
4. Engineered Systems and Processes
In well-run operations, technology alone is not viewed as a panacea. Rather, technology's effectiveness depends on the strength of underlying processes. As a result, management is committed to process improvement. Managers implicitly believe that tasks always can be performed better. They continually look for problems to solve. For them, process improvement isn't an initiative, it's a mind-set. Following are some operating processes commonly found in these companies.
• Job standardization: Workers involved in similar tasks perform them in an almost identical and efficient manner. They have one way to pack an order, and every packer follows that method. Moreover, they have one, carefully crafted way to respond to customers' e-mails, and every rep responds accordingly.
• Proper equipment: In well-run catalog operations, individual workstations are equipped with all the proper tools and supplies that employees need to do their jobs well. Each element has an established position in the work station, and the arrangement has been designed to make it easy and pleasant for the worker to perform the required tasks.
• Controlled workflow: Work and supplies, where feasible, are delivered to the workstation, and the completed work is taken away by either a conveyor system or a service person. For example, in the warehouse, fixed transport systems, such as conveyors, are used to maintain a uniform and regulated workflow. Similarly in the contact center, customers' e-mails automatically are presented to the rep when phones are idle.
5. Focused Management
Eventually it all comes down to execution. Work measurement is the key component to successful performance management. The following basic work-measurement techniques almost always are found in high-performing operations.
• Superior performance is instituted as a company goal with management committed to providing adequate financial and human resources.
• Basic cost, service and productivity standards are established for all activities, with actual performance being measured against those standards.
• Outstanding performance is recognized by either rewarding workers who exceed standard performance with merit wages or by implementing an incentive system.
• Finally, in well-run operations, line managers share a sense of urgency and zero tolerance for poor productivity. They maintain a laser focus on key performance indicators of their departments. Typically, the managers generate a "dashboard" of key indicators each morning, with weekly and monthly summaries for upper management. The specific metrics depend on activities being measured, but in general, I'm talking about workload and staffing projections vis-à-vis actual results, labor costs per transaction, transactions per hour and operating cost as a percentage of net sales.
In short, organizations that focus on optimizing the five basic building blocks to superior fulfillment — location, facilities, people, processes and management — will provide markedly better service and experience substantially lower unit costs than those that don't.
Bill Spaide is a partner in the management consulting firm of Spaide, Kuipers & Co., which has provided operations management and information technology consulting services to more than 300 direct marketers, retailers and distributors during the past 15 years. He wrote this article at the request of Catalog Success editors. Contact him at (610) 668-8296 or via e-mail: email@example.com.