eCommerce businesses must have strategies for overcoming supply chain challenges to maintain efficient operations and fulfill orders on time. Given the fundamental and overarching role of fulfillment centers in the supply chain, having a plan for managing fulfillment center shortages is a critical skill every eCommerce manager must have.
Fulfillment centers provide eCommerce stores with the logistical support for running operations such as inventory management and order fulfillment. Reliable fulfillment providers such as Quickbox offer businesses end-to-end fulfillment solutions. This includes ordering and receiving goods from suppliers to making door-to-door deliveries. Thus, if there’s a fulfillment center shortage, such as understocking, it drastically impedes operations and triggers a ripple effect throughout the supply chain.
However, fulfillment center shortages shouldn’t prevent you from pursuing and achieving fulfillment efficiency. If you know how to react to shortage at a fulfillment center, you can avoid protracted delays and subsequent supply chain challenges. This article discusses proven strategies for managing and overcoming these shortages.
Many shortages affect fulfillment centers, each triggered by different factors. Some shortages are caused by external factors like shipping delays beyond a fulfillment center’s control. Other shortages are triggered by internal factors like operational inefficiencies, which are within a center’s control.
Here are common shortages fulfillment centers experience:
Due to the high interconnectedness of the supply chain, a shortage or challenge in any part disrupts the entire supply chain. Some immediate effects of these shortages are:
Prolonged fulfillment center shortages lead to long-term effects that can, at worst, cause the closure of an eCommerce enterprise if not solved on time. These extended consequences include:
Fulfillment centers play the following pivotal roles in the supply chain.
Fulfillment centers receive inventory from suppliers on behalf of an eCommerce business. They then sort and store the inventory, waiting for the store to send customers’ order details for processing. Some resourceful fulfillment centers also outsource goods from suppliers for an eCommerce store.
Online store managers share their order details with the fulfillment center for processing. This involves picking and sorting products from shelves and racks of the fulfillment warehouse. Top fulfillment providers have advanced order processing technology that allows them to integrate with a store’s customer relationship management system. This allows them to see and receive customers’ orders in real time.
After receiving order details and picking the right products, fulfillment staff package them properly to prepare them for shipping. Packaging involves selecting the right-sized boxes for each product and using appropriate cushion-wrap packaging materials such as styrofoam sheets or bubble wrap.
Fulfillment centers send the packages to a customer’s preferred pick-up location, which is usually their doorstep. They use the most convenient mode of transport, be it by road, air, rail, or maritime.
Fulfillment centers manage order returns in case of shipping errors, such as sending customers the wrong or damaged products. This involves delivering the right products at a customer’s preferred delivery location and picking up the incorrect or damaged products.
Timely and accurate order deliveries are significant factors shaping eCommerce customer experience. In fact, about 40% of online customers say in a survey that they will stop buying from an eCommerce brand after one negative shipping experience. Additionally, 58% of customers in the same survey say they left a negative online review or complained to others after experiencing shipping delays.
Because fulfillment centers are central to order fulfillment, they directly shape customers’ overall shipping experience. That’s why working with a top fulfillment provider like Quickbox directly contributes to the success and growth of an eCommerce business.
We can classify fulfillment center shortages into two main categories — internal and external causes. External causes are beyond a fulfillment center’s direct control. They include:
Internal causes are within a fulfillment center’s control and are mainly caused by a failure on their part. For example:
Here are some dynamic solutions for avoiding fulfillment center shortages and their ripple effects.
Ditch conventional inventory management systems involving manual stock-taking and demand prediction for the new sophisticated forecasting and data analytics tools. These tools leverage artificial intelligence (AI) and machine learning technologies to optimize past inventory data and industry demand forecasts for accurate inventory level predictions.
Implement just-in-time (JIT) inventory systems to optimize and match inventory levels with existing customer demand. This ensures you only stock enough inventory to fulfill current demand. Also conduct regular inventory audits and cycle counting to know the accurate timeframes for replenishing inventory levels.
Diversify your supplier base so you don’t rely on one supplier. This way, even if one supplier experiences challenges, the others will meet your needs and help you avoid supply chain constraints.
Also, sign a service-level agreement (SLA) with your suppliers to establish clear contract terms. Doing so protects you from slack suppliers that may not do their best to fulfill contract terms. Maintaining regular communication with suppliers is also key, as it gives them many chances to notify you of impending supply chain challenges they’re experiencing or expecting.
Fortunately, tech advancements have supported the growth of innovative warehouse solutions such as integrated inventory management systems and warehouse robotics and automation. Investing in these tech solutions fosters the operational efficiency of fulfillment centers, which prevents shortages such as inventory errors.
Maintaining flexible fulfillment operations helps managers deal with different supply chain challenges more rapidly and effectively. Some strategies for keeping operations flexible are:
These are the first-response measures you can take to mitigate fulfillment center shortages, even though they may be temporary:
While proactive measures and immediate response strategies deliver quick solutions, long-term strategies truly fortify your eCommerce business for future challenges. These strategies include:
Invest in premium-quality demand forecasting tools that leverage historical data and predictive analytics to forecast demand accurately. Such tools use advanced algorithms to study and understand ordering patterns and generate accurate demand forecasts.
Using these tools empowers you to prepare for both expected and unpredictable supply chain disruptions.
Continuous process improvement is constantly iterating and optimizing your fulfillment and supply chain processes by applying feedback and knowledge acquired from existing and past operations. It entails applying process improvement methodologies such as Six Sigma, Kaizen, root cause analysis, and lean.
By making small and incremental modifications to your supply chain management, you’ll have a robust fulfillment process that keeps improving. This way, you’ll improve at overcoming supply chain challenges until you eventually perfect the strategies that work best for your business.
Buffer stock, also called contingency stock or safety stock, is the extra inventory you keep to navigate supply chain disruptions caused by shortages, unexpected demand spikes, and other challenges.
A suitable buffer stock maintenance strategy should leverage inventory data to direct you to the ideal buffer stock amount you should retain throughout a season.
Globally acclaimed fulfillment providers like Quickbox help shield eCommerce stores who partner with them from the consequences of fulfillment shortages by applying dynamic solutions, including:
Contact us today, and let us be your champion fulfillment provider who shields you from fulfillment center shortages and supply chain disruptions.