Improving your Supply Chain efficiency, using Fulfilment Partners

A lot of retailers are using some cleverness in their supply chains to get ahead of their competition. I have worked with some clients who have adopted innovative approaches in their Value Chain and this has led to opportunities for competitive advantage. An example of how you can consider this approach, I want to share with you some real world examples of this approach. 

A Fulfilment service provider is someone who will run a warehouse facility for you, including the Picking, Packing and Despatching of orders.  Its actually not a new service, its something that Amazon has been doing for a while, they have a capability where they can hold your stock, you sell something and they Fulfil the order on your behalf. Sounds great, it means I can be very lean and the overhead or headache of running a warehouse is outscored to someone else.
A key part of Amazon’s value proposition is this part of their business, you order something now, you get it tomorrow. If Amazon were to outsource this they will put their Customer Service into someone else hands. Many sellers on Amazon use Amazon as their Fulfilment partner, so they hold your stock, take customer orders for you and then despatch them on your behalf. If a customer searches for a product on Amazon, then Amazon give ranking priority to those suppliers who use Amazon, as Amazon can guarantee the delivery from its own warehouses.

When making a decision to switch over to this service, think about whether your business is suited to this business approach. Do you need a partner who you feel will be as passionate, flexible and agile as you would be? When you have a situation with a customer that needs you to be flexible or agile will your outsource partner be able to do this in the same spirit that you would do? Will they be willing to go the extra mile for you? You may have a great Sales Team, if their service is inflexible it will reflect poorly on you. Also what about returns o damaged packaging? Ideally your partner needs to have a good solution to receive and deal with faulty products or will your customers return those to you? This is a key issue in many of these situations and something that gets overlooked.
Like most things, if done right this can be an advantage, but if done poorly it would be ineffective or even negative. So when considering this approach, what should you do?

  1. Select a partner based on their beliefs, values and track record. Take feedback from other people who use their service. What’s their approach to employing and managing their staff? Do they rely on Students who are seasonable employees or do they encourage career development so their staff are more professional?
  2. Build in a series of measures and metrics, ensure you don’t just measure volume of thro-put, measure quality of service. Do you want them to focus on shipping 100 deliveries an hour,  or do you want them to limit delivery related complaints to 3%?
  3. Treat them as a Partner, not a Supplier and build the relationship on that basis. Build an agreement that helps them and also helps you, if there is profit in there for both parties, then they won’t be tempted to cut corners which will ultimately reflect badly on you.
  4. This arrangement has to be a mutually beneficial relationship built for long term success rather than simply a service contract setup for short term profit.