Mitch Bittermann is the Chief Logistics Officer at aCommerce. He has worked on a multitude of international logistics projects including customer service operations in Canada and setting up distribution centers in Thailand and Europe. In this guest post, he shares his expertise in scaling your business and optimizing B2C eCommerce operations.
As a B2B eCommerce business grows, many consider branching out operations to also serve B2C customers. Why? Having a B2C customer database is advantageous for your business because it allows your company to create valuable direct to consumer relationships, gain customer insights and higher margins.
It also creates potential to sell your B2C customers adjacent products and services. Unilever had the right idea when they acquired Dollar Shaving Club for $1 billion.
So you have a UX-friendly ecommerce site and great online marketing, but what about logistics? Scaling eCommerce operations can be a challenge no matter what stage or segment your company is in. The trick is to be aware of the phase your business is at to effectively deliver the best to your customers.
In order to scale your business and optimize B2C eCommerce operations, follow these three phases:The illustration shows B2B operations with a separate incubator for B2C.
In the first phase, a business usually has low sales volumes and no prediction about growth. At this stage, the focus most likely is on marketing of the product. If monthly orders remain 1,000 and under, it’s best to keep it simple and cost efficient.
The advantage of having existing B2B operations is you would only need ample space to set up a B2C incubator area. As long as the B2B and B2C operations don’t interfere with the other, this model saves your company resources.
After sales volumes pick up and exceed 1,000 orders per month, it’s time to smarten up. With increasing volumes, investments in space, people and systems are necessary for your B2C operations to run smoothly.
To optimize operations processes in your fulfillment center for B2C, it’s vital to ensure the warehouse and order system has the ability to easily scale order volumes and the flexibility to support different value added services during fulfillment, for example, bundling of multiple products to sell together.
Space will become an issue with higher order volumes. Extra space is always handy as there are recurring spikes in demand thanks to marketing promotions and public holidays. Southeast Asia’s leading eCommerce solutions provider, aCommerce has seen cases where these spikes can be as high as eight times the daily volume.
Outsourcing to a service provider with fulfillment centers provides support for short notice peaks in volume but there are things to look out for. For example, it is crucial that there are options for future expansion. Every potential corner in the warehouse should be racked up or if needed, there should exist a short term storage space close by.
But be warned, if utilizing an additional warehouse, the pick and processes will be much more complex and time consuming, so use only as an interim solution.
Running scalable and efficient operations require strong leadership with experienced logistics managers. Don’t simply hire blue collar workers and someone to oversee the warehouse and distribution operations on the side - they should be able to drive down cost per order and maintain quality customer experience. Because logistics costs can contribute 15 to 25% of total product costs, it’s smart to invest in the right people.
To accommodate spikes, you may consider hiring contract workers but rates can be 60% higher per month compared to permanent warehouse staff.
Only a few companies actually scale as high as 100,000 orders per month – this means almost 5,000 orders per day for a five day operation. If an order fulfillment process takes 12 mins, this would entail a workforce of 140!
This doesn’t even include any overhead such as a supervisor, team leads, returns workers, quality control staff or managers.
It also gets interesting from a space perspective. Let’s assume there are 2.5 million units for storage and presume each SKU has the same measurements allowing the same amount of SKUs to fit into one storage box.
2.5 million units leads to a 9,000sqm warehouse without accounting for office space, canteen, packaging storage, returns, shipping and other operations. The third phase requires a sustainable warehousing and distribution model to accommodate the sheer size of manpower and space involved.
At such scale, even the smallest details can add up to impact the efficiency and costs significantly. Here’s what to watch out for:
It is absolutely essential to understand all processes in the warehouse to predict possible bottlenecks for future set ups. Imagine the number of operators needed if a redundant step is repeated 4,762 times daily during processing.
Robots and other forms of pricey automation can be evaluated but requires justification in terms of efficiency and return on investment.
Sometimes overlooked, the layout of the warehouse can add extra steps, time, and costs to order processing. For example, if the warehouse layout has mezzanine floors, order processing time can double due to longer walk ways.
In an ideal world, each country is full of 10,000sqm warehouses ready for move in, but unfortunately warehouses are rarely fitted and planning of the space has to be done from scratch.
In Indonesia, aCommerce converted an old carpet manufacturing factory into a 7,000sqm world class warehouse fitted with four level mezzanine and semi automation for its client, completed with the warehouse processes as well as running the operations were set up for the client in less than three months. You may want to consult professionals or outsource warehouse operations to ensure smooth scaling.
Build strategic partnerships with third party logistics (3PL) who offer guaranteed volumes or have a wide network in the country for quick delivery and support for local-preference payment options such as Cash on Delivery (COD). The last mile delivery from the warehouse to the end customer should not be overlooked.
No matter whether you are in startup, smart up or scale up phase, your logistics staff should always keep the big picture in mind and decide what fits your purpose in each phase. If trying to ‘smart up’ or ‘scale up’, it’s best to seek a professional opinion as the operations process can make or break your business.
Mitch Bittermann is the CLO (Chief Logistics Officer) at aCommerce. He builds and leads aCommerce cross-border initiatives to fulfill the increasing demand for easy intra-regional transactions in Southeast Asia. He has worked on a multitude of international logistics projects including building up customer service operations in Canada, setting up distribution centers in Thailand and Europe and driving global freight optimization projects.