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Turning Your Fulfillment Center into a Profit Center

by Mike DeFabis on 2015-05-20 11:35:37

While the fulfillment center is an extremely critical part of any organization shipping products, it is often viewed as just another cost center cutting into your profits.  Finding ways to generate revenue within a fulfillment center can be difficult, but very possible.  Looking for ways to generate revenue within a fulfillment center takes creativity and knowledge.  This blog will discuss several ways on how you can turn one of your biggest cost centers into a profit center.

iStock-175543608.jpgDrive Down Cost

Before you can start making money, you need to begin to break down your costs to know all your expenses.  Get as granular as possible and start looking for your biggest expenses. For many companies, that will most likely be in outbound shipping, labor and packaging. 

There are many ways to lower your outbound shipping costs.  Refer to “6 Unique Ways to Save Money on Outbound Shipping” for more information.

Setting up metrics and implementing LEAN processes into your fulfillment center can help drive down some of those labor costs.  Make sure you know how long it should take someone to pick an order, package an order and ship an order.  Once you have defined how long it should take someone to perform a task find ways to track performance.  This will help you understand where you can become more efficient.

Cutting costs in packaging can be a great way to quickly and easily cut costs fulfillment center.  Review box sizes and packaging material.  Is their less expensive tape or dunnage material that you could be using in your packaging?  Making sure each employee is using the appropriate size box for each order and putting in processes and procedures to ensure this happens every time.  An employee using a much bigger box than required can be very costly (dim weight).  Also, review your pricing with your packaging supplier to make sure they are giving you the best price on your supplies.

Find Revenue

Now that you know your costs and have worked to drive those costs down and become more efficient, it is time for the fun…finding revenue.  This is where it takes some creativity and not all companies will be able to find revenue the same way, but here are a couple of ideas that might get your creative juices flowing. 

  1. Outbound Shipping

While outbound shipping is one of the biggest expenses you can also turn this into a revenue stream.  While free shipping is great for the consumer, it is not necessary.  If you are able to charge slightly more in shipping to the customer it can make a tremendous impact on revenue.  There have been many studies done on the psychology of pricing and, in the customers’ mind, there is little to no difference between paying $5 and $6.99.

  1. Returns Processing

Returns in any business are inevitable.  Often times a return can be more costly than the actual fulfillment of the order.  Many companies are starting to charge a return processing fee.  For companies in the apparel industry with high returns this can be a little more difficult. But, for industries where returns are not as great, making the customer pay for a return processing fee can generate significant revenue. 

  1. Creative Sales Channels

Returns and other slow moving items that are difficult to sell on your current sight might require some unique sales channels.  Liquidation companies, eBay and other used retailers might be able to help you sell items that would otherwise be discarded or donated.  Make sure before you dump old inventory you exhaust all your options for selling.

  1. Get Them to Come Back

When a customer receives their package, this is the BEST time to market to this customer.  Including a coupon, catalog or other form of marketing to get the customer to come back and purchase again help increase revenue.  Make sure that you have a way to track these types of sales with specific coupon codes or order numbers.

  1. Vendor Non-Compliance Charge Backs

Big box retailers do it all the time, but smaller companies tend not to charge back their vendors if they are not compliant.  You are the customer and you should have your vendor make life easy on you when you receive that product.  If the vendor is late on a shipment, does not include a packing list or product is not labeled correctly, issue a charge back.  In order to do this, you must lay out clearly upfront what is “compliant” and “non-compliant” and what the charges are. 

Turning a cost center into a profit center is never an easy task, but it is very possible.  Thinking outside the box and experimenting with different ideas can help.  Make sure that you know your costs and continuously work to help drive those down.  Once you have done that, begin to look for creative ways to generate revenue and pretty soon your fulfillment center will go from a money grabber to a money maker.

For more information on how IDS can help with turning your fulfillment center into a profit center, Contact Us Today!

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