What is data-driven fulfillment, and why does it matter? In our increasingly data-driven world, many small businesses are still missing out on easy opportunities to advance their operations.
When making decisions about your business, it is vital to understand exactly what is going on within all aspects of your company so you can make continuous improvements. Otherwise, your brand can be trounced by larger businesses.
“It is a capital mistake to theorize before one has data.”
– Sir Arthur Conan Doyle, author of Sherlock Holmes
Your company likely already collects many points of data that can be used to help you make smarter decisions about inventory management and order fulfillment. The key is to analyze and leverage these data points regularly. Simply collecting data is virtually meaningless. It is the strategic analysis and application of that data which can propel your company to success.
Read on to learn about data-driven fulfillment and how it can skyrocket your company’s efficiency.
What is data-driven fulfillment?
Data-driven fulfillment uses analytics to continuously improve the efficiency of each step in the order fulfillment process.
“Most of the world will make decisions by either guessing or using their gut. They will be either lucky or wrong.”
– Suhail Doshi, CEO of Mixpanel
Let’s explore some ways in which you can leverage data to improve your fulfillment efficiencies and make better decisions in all aspects of your business.
Inventory management
Utilize the sales data collected by your fulfillment software to determine reorder points for your inventory. By understanding when to reorder products, you can set automated reorder notifications to help you prevent becoming out-of-stock on popular items. Not only will you be able to prevent backorders, but you’ll also avoid frustrating your customers and missing out on sales.
Multi-channel fulfillment
Using data to better understand the demand of various sales channels will allow you to match supply with demand. However, it’s also important to understand your costs of doing business on each of your sales channels. Do you know which of your sales channels are the most profitable?
Using data to understand your costs associated with each sales channel can help you improve your decision-making in your brand’s marketing and promotional efforts as well. Ultimately, using a data-driven approach to fulfillment will enable your business to leverage data in all aspects of your business.
Remember: Once is never enough when it comes to data analysis. Be sure to continuously monitor, test, analyze, and adjust. Ignoring data can significantly decrease your ability to create a smooth, profitable multi-channel fulfillment process.
Multiple locations
Leverage your company’s historical sales data to decide how you’ll allocate your inventory across multiple fulfillment centers. By understanding the sales patterns of various regions, you can strategically split your inventory to meet the demands of customers based on location. Using a more sophisticated process for determining inventory distribution will allow your company to benefit from reduced shipping costs and quicker delivery times, resulting in happier customers.
If you have an extensive list of products, begin with your top-selling SKUs. This will enable you to make the greatest impact on your bottom line.
Note: In addition to analyzing historical data, be sure to take past and future marketing campaigns into consideration. Running regional promotions can have a significant effect on your data.
Why is it important to choose a fulfillment center that makes data a priority?
Working with a great fulfillment center should allow your company to become more efficient in every aspect of logistics.
The various data points collected by your 3PL’s inventory management and fulfillment software can hold the keys to unlocking your company’s ultimate potential. By utilizing the help of a third-party logistics company that understands the nuances of fulfillment data, you can catch and prevent logistics problems (such as backorders) before they arise.
A great 3PL does not simply fulfill your orders. They should be a true partner in your operations, allowing you to benefit by using their expert insights to identify opportunities for improvement within your logistics processes.
“Some of the best theorizing comes after collecting data because then you become aware of another reality.”
– Robert J. Shiller, winner of the Nobel Prize in Economics
When choosing a third-party logistics company, be sure to partner with a 3PL that leverages data in all aspects of your fulfillment operations. Ensure that your fulfillment center offers inventory management and advanced reporting capabilities. Data reports should include customer location data, peak order times, sales by channel, daily revenue of orders fulfilled, weight of packages shipped, shipping methods, shipping costs, peak fulfillment times, and more.
While some CEOs may wish to keep their sales data private, sharing this information-rich data with a trusted 3PL is key to enabling the fulfillment center to make the best possible decisions. Pairing this information with the insight of your fulfillment partner will position your company to continuously improve your operations – as well as your bottom line.
Want more information about choosing the right 3PL? Visit the ShipMonk blog for free resources to help you pick a fulfillment company that will become a strategic partner and a true asset to your ecommerce business.