[vc_row][vc_column][vc_video link=\”https://youtu.be/sgNvQwIga8g\”][/vc_column][/vc_row]

Surviving a Pandemic Through Innovation, Collaboration, and Agility

2020 was a year like no other, with no exception for retail stores, e-commerce businesses, and third-party logistic providers. Product Fulfillment Solutions started the year by launching a new marketing program. Our new tag line focused on a core element of working with clients in a seamless and customized manner. Who knew Your Brand> Delivered>> would take on a greater meaning than ever imagined?

By the end of the first quarter, major shifts in supply chain operations and order processing were already underway. PFS worked in collaboration with each customer to find the best methods and procedures to quickly implement for the immediate period while consideration was given to long-term possibilities. PFS’s client customer base, focused on sales through retail outlets, had to transform and scale their ecommerce sales channels. Scaling the operations on the part of PFS and its clients required significant shifts in almost every part of the organization.

The leadership at Product Fulfillment Solutions quickly revised staffing, equipment, and production lines to dramatically scale e-commerce order fulfillment. It was clear that clients would need to find ways to sell direct-to-consumers and PFS would need to be prepared to align operations to fulfill e-commerce orders. Through ongoing discussions and collaboration, the transformation was almost seamless. The result: phenomenal growth for PFS’s clients and for PFS.

To meet the growing demands of customers and enhance operations on the west coast, PFS added a second facility in Las Vegas, NV. With warehouses in Ohio and Nevada, most shipments can be shipped in under 48-96 hours utilizing standard shipping rates.

Did your order fulfillment department or partner support your operations through the hurdles presented by the pandemic? Mastercard Inc reported a 49% growth for e-commerce orders. Were your orders shipped accurately, quickly, at a reasonable cost, and on time? If you can’t answer yes to these questions, you may want to schedule some time to discuss how Product Fulfillment Solutions could be a trusted and valued partner to your organization. Email Denny@productfulfillmentsolutions.com to schedule a time to learn more about your needs and how PFS can be of assistance.

Barron’s Magazine reports an expected increase of 1% to 1.5% in holiday shopping, in spite of an economic recession. While smaller than increases in previous years, the anticipation of any growth is encouraging during a year plagued with COVID-19 challenges.

…

What Online Retailers Should Expect During the 2020 Holiday Shopping SeasonRead More »

Product Fulfillment Solutions strategically works with every customer to develop the best practices and policies to ensure orders are delivered to your customers exactly as you intended.

…

Seamless Partners – Blind Shipping Can Make a DifferenceRead More »

[vc_row][vc_column][vc_row_inner][vc_column_inner width=\”1/2\”][vc_column_text css=\”.vc_custom_1605190758855{padding-top: 10px !important;}\”]The nuances and intricacies of owning an e-commerce business are significant and varied. The type of products sold can be any tangible goods: car parts, cosmetics, medical supplies, clothing, furniture, luggage, food – the list goes on and on. Each product has its own set of characteristics to consider, size, weight, storage requirements, shipping needs, and lead times for production are just a few. When starting out, it makes sense to try to manage all aspects of a business. As demand grows, business owners have to regularly decide which functions are best managed internally and where a third-party may be the better option.[/vc_column_text][/vc_column_inner][vc_column_inner width=\”1/2\”][vc_video link=\”https://vimeo.com/487473295\”][/vc_column_inner][/vc_row_inner][vc_column_text]Order fulfillment is a significant component of the sales and delivery process and is frequently outsourced to a partnering company. Here are the top four reasons why entrepreneurs consider outsourcing.

  1. Experience and Knowledge
    No one knows a product line better than the founder or creator. Many businesses are started by identifying a need and then work to offer a complementary solution or product to solve problems. The research and development process to create products typically includes a great deal of learning, research, and refinement. Your brand and your products are your passion. An experienced third-party order fulfillment partner can enhance your operations by using its experience and expertise to focus specifically on processing, warehousing, picking, packing, and shipping your orders. Outsourcing fulfillment services can result in cost savings, faster order processing, and improved order accuracy.
  2. Better Utilization of Resources
    There are many costs associated with packing and shipping orders. Warehouse space is often needed. Additional staffing is required with skill sets that can be quite different from most other departments in a business. Warehouse management software and integrations to receive and process orders are required. Equipment to move, pack, store, and ship products is needed. When outsourcing fulfillment services, business owners can benefit from having access to all of these components without the financial burden associated with large capital investments.
  3. Focus and Growth
    Managing order processing has a number of complications. Resolving issues with damaged packages and incorrect orders can be time consuming. Hiring and retaining employees is an ongoing process. Managing daily activities and operations to ensure timely and consistent delivery of orders is imperative. These tasks can be distracting and involved. A trusted fulfillment partner can manage these activities so that you have more time to focus on building your brand and developing new products.
  4. Scalability
    Does your business have seasonal fluctuations in sales? Do you plan to expand your product line? Is the demand for your existing product line increasing? Each of these scenarios requires additional space and incremental staffing. The cost to secure more space can be expensive. It becomes even more costly when adding space requires a move to a different facility. The ability to hire and make staffing adjustments can also be challenging. Order fulfillment companies frequently adjust operations to address variations in demand for storage space, staffing needs, and increased order activity. The best fulfillment centers stay in touch with clients to anticipate changes in activity to ensure flawless management of order processing.

During the onboarding process, the staff at Product Fulfillment Solutions will get to know your business. products, operations, and your plans for growth and development. PFS isn’t just a vendor. We care about your business as if it was our own. We will serve as a seamless, trusted, and reliable partner for your business. We can quickly integrate our operations with your business and begin shipping your orders within a couple of days of receiving your products. Contact us to get started.[/vc_column_text][/vc_column][/vc_row]

Selecting A Provider

  1. Choosing Your Fulfillment Provider Solely on Price – The cliché “You get what you paid for” can have drastic effects if you choose to outsource fulfillment. Basing a decision on price alone ignores a company’s skills, experience, and actual competency at doing their job.

While you may be saving pennies on the dollar in the initial stages of product fulfillment, the errors that company may make can drive up costs on the back end including:

Also consider the potential loss of customers due to poor customer service and negative reviews. Be wary of choosing a low-cost solution and contending with continual errors and problems that need to be addressed.

  1. Not Allowing Enough Time for Responses to Bid Requests – You wouldn’t want your fulfillment solution to rush its process of managing your company’s inventory; If your company wants quality service, you should let the suitors prepare and provide a quality bid.The best fulfillment providers want to invest the time, effort, and thought to submit their most innovative and accurate proposal. Without the proper time to sort out the details and nuance of a project, assumptions and guesses will be made to try and acclimate to the timeline of your company’s deadline. What happens if the scope of the actual work drastically changes?

    Do we blame the provider for changing their price when your bid request isn’t what it was originally? Give your fulfillment outsourcing partners an opportunity to demonstrate their skill and expertise in their field. Carefully plan your bid request and give a sufficient timeframe for responses.

Planning for Implementation

  1. Not Including Your Fulfillment Provider in Early Discussions and Planning Sessions – Your partnership with a fulfillment provider is only as effective as you allow it to be. Take the time early on to thoughtfully plan out strategy for the entire length of the partnership.

Being able to spot early opportunities can help extract the best out of your fulfillment partner. When we understand the entirety of a firm’s operations, supply chain, and fulfillment process, costs can be reduced, shipments made more accurately, and efficiency increased as a whole.

 

  1. Setting Unclear or Unreasonable Expectations – Mistakes are inevitable in the fulfillment process, especially when people are involved. Being able to understand the causes of those mistakes and being able to adjust is the key to staying consistent.Setting clearly defined and reasonable expectations along with a set of KPI’s (Key Performance Indicators) can help keep you and your product fulfillment partner on the same page: solving your logistical needs.

    Managing After Start-up

  2. Not Sharing Pertinent Data – Safekeeping the important information for your business may be a quality competitive strategy, but it’s also a potential threat to your fulfillment operations and strategy.Not sharing/Sharing? (This section is unclear whether sharing or not sharing is the intent) vital information that is pertinent to a fulfillment partner’s operation such as SKU lists and lot codes can save a lot of headaches later. Saying, “You’re hired, now go do it” doesn’t really benefit either party. Fulfillment partners engage in operations across a variety of customers and fields, so trust them to utilize your data in your best interest.

 

  1. Overlooking KPIs, Regular Meetings, and Critical Checkpoints – Don’t simply dump your fulfillment needs onto a fulfillment provider and walk away. Trust and blind trust are two completely different concepts when it comes to working with your fulfillment partner.Both the shipper and provider need to be aligned on KPIs and expectations for the entire fulfillment process. Agree on key statistical measures that matter and directly impact performance and set up routine meetings to review the current progress. Utilizing a fulfillment partner is not a dump-and-run business partnership, it’s a symbiotic relationship that can make operations smooth and efficient.
  2. Not Communicating Volume Fluctuations and Forecasts with Your Fulfillment Provider – If you don’t share your sales and inventory-related projections, both you and your fulfillment provider can be caught extremely off-guard with random spikes and lulls in volume.Planning out and relaying these forecasts and their changes simply allows your fulfillment provider to be better prepared. Extraneous labor costs and shipping errors can be avoided simply by ensuring a strong channel of communication on what the future holds.

    Usually, a few days’ notice gives your fulfillment partner ample time to adjust their strategy to accommodate a new forecast.

Fulfillment Outsourcing: Closing Tips for Success

 

Want a personalized consultation to discover what 3PL solutions can do for your business? Contact PFS today!

What is a Backorder? How Not to Lose Customers

What Does it Mean if Your Item is Backordered?

In our world of online shopping and two-day shipping, getting those must-have items quickly is expected. High demand is a good thing for business, but there are certain times circumstances can push demand to a level that can’t be filled, and demand outpaces supply. For example, the holidays or Black Friday sales can create high demand, the company cannot fill the item, and it is placed on backorder.

What is the Difference Between Backorder and Out of Stock?

Backorders should not be confused with out-of-stock. These are two different situations. In the case of out-of-stock items, the supply or production of an item is unclear. Maybe an item was discontinued and it is no longer available. A backorder is in production, but it may have hit a snag in the fulfillment process along the way. The product will be made; it’s just not ready at the time a customer places the order.

What Causes Backorders?

Backorders can occur for many reasons.

Supplier Issues. When the supply chain is stretched across the globe, there will be the occasional issue. There could be labor strikes, regulatory compliance issues, or it could be the result of bad quality products on the supplier’s end.

Unusual Demand. A common reason for backorders is an unusual demand such as a seasonal event, Black Friday, Cyber Monday, or a new release on a high-demand item that the media is pushing.

Low Safety Stock. Companies try to manage their supply chain to keep from having too much or too little stock. Sometimes, even with the best supply chain management process, there will be a time when safety stock levels are miscalculated.

Tips for Minimizing Backorders

Backorders can be managed to be beneficial for the company. The key is to make sure your production system is properly balanced.

1.     Review High-Demand Items. A product that takes off is great, but lifecycles vary, and understanding the history of the popular items will help manufacturers develop strategies to balance the system.

2.     Set Safety Stock. Evaluating your safety stock to address multiple variables can reduce the need for backorders.

3.     Have Multiple Suppliers. Working with several suppliers can have its advantages if your main supplier encounters an issue and can’t supply an item in time.

Don’t Lose Customers to Backorders

Customers can flip back and forth between websites to find what they need. If an issue develops with an item, notify them. Communication is key. Let the customer know what to expect every step of the way. Give manageable arrival times and collect email addresses on the product page so you can notify customers when items are restocked.

\"\"

Final Thoughts

While backorders are always a possibility, having the right strategies and processes in place and reviewing them often will ensure that you handle them efficiently. The bottom line is that you want to ship your orders quickly to deliver the best customer service.

Want a personalized consultation to discover what 3PL solutions can do for your business? Contact PFS today!

Economic Order Quantity (EOQ) Formula & Definition

Businesses re-order inventory based off of the needs of the current business situation; if there is more expected demand coming, the order will be larger. Using an EOQ or Economic Order Quantity formula can help accurately identify the ideal amount to order and pay for more product.

Using the EOQ can impact savings in multiple areas of the supply chain for a business, from warehousing/storage costs to the shipping costs of actually receiving the order.

What Is EOQ?

EOQ is the optimum size an order should be. The EOQ is used to minimize the extra costs involved when re-ordering inventory including storage and transportation costs.

Benefits Of Calculating EOQ

Lowering Storage Costs

Storing extraneous amounts of inventory can increase rent charges and warehousing fees. Calculating the ideal economic order quantity can minimize these costs by ordering the closest ideal amount of inventory for the anticipated sales window.

Minimize Stockouts

Running out of available inventory to be sold is a double-negative situation for companies not using the EOQ formula—the loss of current customers looking for inventory/products to buy, and the loss of future customers from even considering your products because they don’t know when they will be able to purchase them.

Finding the Economic Order Quantity can help avoid these inventory issues entirely. EOQ can help identify the ideal amount of inventory to both satisfy the overall needs of your customer base, as well as prepare for future demand.

Improved Overall Efficiency

“Gut feeling” is essentially a complete guess. When dealing with revenue-impactful decisions, using the EOQ formula will cancel out the guesswork of inventory management and ordering. Storing and managing the ideal amount of inventory, and actually knowing the exact level of inventory you will be purchasing, can reduce logistical costs across the entire logistics process and help better prepare your company for future sales opportunities.

 

The Three Variables Of Calculating EOQ

1.    “H” For Holding Costs

Holding costs (a.k.a. carrying costs) is the total cost of holding inventory. This cost includes both the initial storage and the holding of that inventory for its lifetime in the warehouse/storage facility. Here’s a simple formula to identify your holding costs:

 

(Storage Costs + Employee Salaries + Opportunity & Depreciation Costs)

                             Total Value of Annual Inventory

 

2.    “D” For Annual Demand

Simply, how much demand do you get for a product each year? This data can be found from the ordering data of previous years.

 

3.    “S” For Order Costs

Also known as “setup costs,” this variable references how much an order costs per purchase. This is calculated on a per-order basis with shipping and handling costs included.

 

The Economic Order Quantity Formula

            EOQ = Square Root of: (2*S*D) / H

An Example of EOQ

Square Root of (2*750*15,000)/.80 = 5,929 units in one order.

 

Other Factors In Optimizing Inventory

Inventory Tracking (In Real-Time)

Being aware of and monitoring inventory levels can help you identify how much of a product needs to be shipped and streamlines ordering decision-making. The increase in efficiency will also improve stock-related communications (out of inventory notices, reorder points, etc.).

Reorder Points

Setting automatic points to reorder more inventory at a certain threshold can help optimize the ordering process for speed and reaction time to inventory level changes. Inventory management software or a 3PL can make this quite simple.

Safety Stock

At times of random demand spikes, having safety or extra stock to satisfy unexpected demand can be a great asset. Having safety stock during a flash sale or holiday promotional season can help ensure the most sales are made.

 

Eliminate EOQ Guesswork With Product Fulfillment Solutions

Track Inventory In Real-Time

Product Fulfillment Solutions’ Electronic Data Integrations (EDI) can quickly and easily integrate with your e-commerce platforms, allowing real-time inventory tracking with access to information 24/7. You’ll never have to worry about your inventory counts or shipments. Log in any time of day to monitor and manage real-time inventory and track inventory to manage your products and business.

Optimize Your Safety Stock Levels With On-Demand Warehousing

Whatever your circumstance, Product Fulfillment Solutions can fill the gaps and provide warehouse on-demand services. With on-demand warehouse space, companies are able to avoid fixed costs associated with long-term contracts in exchange for short-term variable costs. This also creates a more agile supply chain that can be adjusted as demand shifts.

Let Their Logistics Experts Study Your Best Workflow

For new products, Product Fulfillment Solutions will conduct time-and-workflow studies to find the perfect balance that maximizes efficiency and minimizes your cost. It’s a win-win. It’s tempting to ask for a standard price list, but these lists often include services you neither want nor need. Our Right Price includes the services and procedures required for your items to arrive safely and intact.

Conclusion

Using the EOQ formula for your ecommerce business improves your inventory management systems. If you’re looking for a more all-encompassing fulfillment partner, Product Fulfillment Solutions provides real-time inventory tracking and warehousing optimization and will conduct its own workflow studies to determine the best logistical processes for your business and ecommerce situation.

EOQ FAQs

What Is EOQ/What Is The EOQ Formula?/How Do You Calculate The EOQ?

E.O.Q. is the economic order quantity, which is the ideal order quantity for a business to minimize costs and space usage and optimize its inventory management. The E.O.Q. formula is:

EOQ = Square Root of: (2*S*D) / H

*Variables for EOQ formula listed here.

 

Example Of Economic Order Quantity

Square Root of (2*750*15,000)/.80 = 5,929 units in one order.

 

What Companies Use The Economic Order Quantity Formula?

Any business that manages and stores inventory uses the Economic Order Quantity formula.

 

Want a personalized consultation to discover what 3PL solutions can do for your business? Contact PFS today!

 

Minimum Order Quantity (M.O.Q.) Formula & Definition

When demand arrives for your e-commerce business, you need to have the inventory available to meet those demand expectations.

A minimum order quantity (or M.O.Q.) tends to be implemented by suppliers to ensure that they are also making a profit from your ecommerce order.

Identifying the difference between a suppliers’ M.O.Q. and your economic order quantity is essential in determining the sustainability of a supplier partnership. If their minimum order quantity is higher than your economic order quantity, that supplier’s pricing may not be best suited for your business.

 

What Is Minimum Order Quantity?

A minimum order quantity is the lowest amount of inventory that needs to be purchased at a single time. This quantity is usually used by suppliers or manufacturers to ensure they are able to make a profit off of all orders to their business.

Here is an example of a minimum order quantity:

 

The 4 Steps To Calculate Minimum Order Quantity

1.    Determine When You Reach Profit

Before you try to establish your minimum order quantity, knowing your break-even point is essential. The whole purpose of your ecommerce business is to make a profit, so understanding at what inventory level your profit begins will tell you what the minimum order quantity should be, so that you aren’t losing any money.

Be sure to adjust inventory costs and their effect on your break-even and minimum order quantity values when interacting with wholesalers.

 

2.    Be Aware Of Your Holding Costs

Depending on the size, length of stay, and other warehousing requirements of your inventory, holding costs may be cutting into your profits.

Your minimum order quantity should also be mindful to try to lower holding costs and should be impacting your overall ordering decisions.

 

3.    Find Your Estimated Demand

Using demand forecasting, identify the estimated quantity of sales of your product over the last period. If your demand is close to what the manufacturer/supplier’s minimum order quantity is, that supplier may be suitable to purchase your inventory from.

Be sure to monitor your demand during volatile times, including:

 

4.    Calculate Your M.O.Q.

Depending on the previously listed factors as well as any minimum order quantities your suppliers or partners may have, identify the minimum inventory order to net a profit, and then place order floors on that specific inventory type or product.

 

How To Get The Benefits Of M.O.Q.

A minimum order quantity can be limiting on the side of the ecommerce business and beneficial on the supplier’s part. An M.O.Q. can be a major point of interest when working with partners, but here are some ways to work with an M.O.Q. in place:

 

Keep Your Inventory Strategy Simple

Many brands tend to over-complicate their storage and fulfillment operations with more SKUs than necessary. Keeping your SKU count down and manageable will not only reduce those costs, but also assist in inventory forecasting.

Having excessive varieties of the same product only makes inventory management and holding costs increase, and clouds inventory decision making. Make your ecommerce product lines simple to understand, manage, and sell.

 

Encourage Larger Purchases

When interacting with wholesalers or retailers, your ecommerce business can require an M.O.Q. for bulk buyers to ensure you’re making a profit. An M.O.Q. can also provide an opportunity to offer volume-buy discounts to lower the individual cost of each purchased unit, while increasing the total dollar amount spent.

This strategy also applies directly to shipping discounts, such as offering free shipping on any order over your M.O.Q. or dollar amount for the entire purchase.

 

Sell Out Faster

Ordering more inventory incentivizes selling quickly (having a high inventory turnover rate). With more inventory comes more pressure to sell quickly due to the larger inventory costs on the front-end.

A minimum order quantity that is too high (that’s attempting to fix large amounts of held inventory) will only turn off the interest of customers due to ridiculous minimum purchase amounts. If someone needs one of your products, but you require them to buy five at the minimum, you’ll end up keeping the one you would’ve sold, along with the extra four your minimum order required, a lose-lose.

 

Mix Up Your Inventory Ordering

There’s no shame in trying to mix, match, and transform an agreement to find an agreeable M.O.Q. Try mixing up inventory orders to solve the minimum order concerns from a supplier or manufacturer. Also try asking if they have any of your products from other orders that were cancelled.

 

Find Another Partner

If your potential partner or manufacturer has an M.O.Q. that’s just too high, walk away. There is no harm in trying to negotiate with the manufacturer but finding another possible partner or even a wholesale distributor is a completely legitimate alternative to getting into an M.O.Q. standoff.

 

Develop Trust With Your Supplier

As your business grows so do your manufacturing needs, and if that growth occurs with the same manufacturer, their trust and willingness to adapt their requirements to satisfy a long-time partner may work out for both your business and the supplier. Flexibility with a supplier is built over time and consistency.

 

Successfully Install Minimum Order Quantities With Product Fulfillment Solutions

Real-Time Information And Management

Product Fulfillment Solutions offers 24/7 access to your inventory in real time. Their programs and software packages allow you to manage your demand forecasts, minimum order quantities, and all other logistical decisions at any time. The ability to adjust on the fly with demand and changes in terms with manufacturers and customers is a key factor in success.

 

Strategic Inventory Distribution

With warehouse locations in Ohio and Nevada, PFS is strategically positioned to make both international and domestic inventory distribution a breeze. PFS is able to properly address regulations, customs, and other shipping requirements to expand your ecommerce business internationally.

 

Conclusion

A minimum order quantity can be a double-edged sword when it comes to running your ecommerce business. On one hand, having your own minimum order quantity ensures that every order will be making a profit, and that inventory is managed in an efficient and orderly manner. On the other hand, dealing with suppliers’ M.O.Q. requirements may create difficulties in finding a supplier that allows you to purchase inventory at a cost and quantity that suits your ecommerce business.

 

Minimum order quantities will vary across businesses, but with careful identification and detailed investigating on different factors including demand and holding costs, finding the right M.O.Q. for your business is in reach.

 

FAQs

The Four Steps To Calculate Minimum Order Quantity

  1. Determine Demand
  2. Calculate Your Break-Even Point
  3. Be Aware Of Holding Costs
  4. Find Your M.O.Q.

 

When Should We Have An M.O.Q.?

When your company needs to ensure it’s making the proper profit margins on your sales, implementing an M.O.Q. eliminates orders that will not net you a profit. They have the potential to drive off smaller-than-required sales, but that is the inherent risk in establishing an M.O.Q. for your ecommerce business.

 

M.O.Q. vs E.O.Q.?

M.O.Q. is the minimum order quantity for profit, which may be used either by a business or manufacturer, while the E.O.Q., or economic order quantity, is the ideal level of inventory to be purchased and stocked to avoid extraneous inventory and storage costs.

 

Want a personalized consultation to discover what 3PL solutions can do for your business? Contact PFS today!