Ecommerce Order Accuracy: Smile (or cost) Driver

Posted by JR Siegel on Thu, Apr 04. 2013 @ 11:04 AM

The stakes in eCommerce order fulfillment are high.  All of the excitement your customer experiences when an order arrives will evaporate if the wrong product shows up on her (or his) doorstep.  You might lose that customer forever.  Worse still, she might tell her friends that your brand has lost it.  That it can't even get a simple order right.  She might vent on Facebook and Twitter and in person.  Beyond the lost customers and bad buzz, there are real, hard costs associated with incorrectly fulfilled orders (more on this later).

Everyone knows that sending customers the wrong products is bad.  The problem is that many third party logistics companies struggle to fulfill eCommerce orders accurately—especially for especially for premium fashion and apparel brand.  Why is this?  Two reasons: lots of SKUs and lots of similar SKUs.

Think about all of the options on the typical fashion and apparel eCommerce site.  Each size, color and style is a unique SKU. Not only does apparel include various garment types, but it also involves shoes and accessories. Factor in several seasons a year, and you're quickly ateCommerce order accuracy, bullseye several thousand SKUs per brand.  Multiple that across dozens of brands in a multi-tenant distribution center, and the number of SKUs can easily exceed one hundred thousand.  

Did I mention that a Size 2 can look like a Size 4, and shades of blue can look awfully similar? 

It’s critical that you ask all potential third party logistics partners about the order accuracy levels in their distribution centers.  Prod them to provide you with data validating their assertions.  See if they’ll provide information about the level of order accuracy for expedited and next-day orders.  Customers want to receive the products they ordered, but they don’t want to wait forever

The Hard Costs: An Example

Imagine that you’ve been asked to select a fulfillment provider for your company, which ships 20,000 eCommerce orders a month.  After performing your diligence, your choice comes down to two third party logistics companies:  Average Joe’s and Exceptional Ernie’s.  The order accuracy rate for Average Joe’s is 99%; for Exceptional Ernie’s, it’s 99.95%.   

The pick and pack cost per order for Average Joe’s is $0.15 less than Exceptional Ernie’s.  The question is, which company is really less expensive? 

Average Joe’s will incorrectly fulfill 2,400 orders a year compared with 120 by Exception Ernie’s.  When we factor in the hard costs of these errors—shipping incorrect products back to your distribution center and processing these returns; contacts to customer service; picking, packing and shipping the correct item for customers that reorder the original item—it adds up to $0.17 additional in pick and pack costs for every order shipped all year.  And this doesn’t begin to contemplate the impact of fulfillment errors on customer retention, future sales and brand equity. 

We’ll cover these costs and go into additional detail on the hard costs in future blog posts. 

And let’s get back to that question:  which 3PL is really less expensive?    

Image Credit: jamespuckey  

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Topics: Third party Fulfillment