Print Page | Contact Us | Sign In | Join RVCF
RVCF Link
Blog Home All Blogs
RVCF LINK focuses on the challenges and trends relevant to today's changing retail landscape. Our newsletter contains case studies, articles of note, and original content regarding collaborative initiatives, research, and training occurring in the world of RVCF.

 

Search all posts for:   

 

Top tags: Omni-Channel  e-commerce  Inventory Management  3PL  Collaboration  Kaizen  Vendor Compliance  Amazon  Brick-and-Mortar  RVCF Fall Conference 2015  RVCF Fall Conference 2016  supply chain  Chargeback  EDI  Onboarding  Shortages  Chargebacks  Compliance Management  Holiday 2014  RVCF Conferences  RVCF Membership  Tariff  Audit  CBP  Economic Sanctions  exports  Holiday 2015  Imports  NAFTA  Ports 

Solutions For Disputing Retailer and Shipper Chargeback and Deduction Claims

Posted By RCVF Admin, Wednesday, August 7, 2019
Updated: Thursday, July 25, 2019

RVCF Link Image 

Solutions For Disputing Retailer and Shipper Chargeback and Deduction Claims

By iNymbus


As a supplier, manufacturer, or distributor who sells products to a variety of retail partners, it’s likely you have an Amazon, Walmart, Costco, (fill in the blank: large retailer) and/or a FedEx, UPS (fill in the blank: large shipper), deduction and chargeback problem. The volume is tremendous and the rate is furious. Your department is overwhelmed and you can't seem to get ahead, yet there is pressure to resolve these deductions and recover the lost revenue.

Maybe you have a disconnect in your supply chain that is causing the deductions to pile up, or maybe the technology large retailers and shippers use to spit deductions at you has them coming in faster than you can keep up. Or maybe it's both. Regardless, resolving chargebacks and deductions is repetitive, tedious, time-consuming, and thankless work, that frankly, most people hate. Any of this ringing true?

What do you do? Most suppliers, distributors, and manufacturers turn to one or all of the following "solutions":

1. Labor

This may include staff augmentation, hiring temps, or outsourcing with a company overseas. Basically, throwing more manpower at the problem and bringing on more people to manually dispute your deductions.

2. Software Packages (On Premise or SaaS)

Companies look to purchase software that their team works in to resolve chargebacks and deductions. These are packages available by ERP Software vendors or specialty software providers. There is a catch, however. These packages help organize work better, perhaps streamline processing a bit. But they do nothing to actually resolve and submit deductions. There are still humans pushing the button. Just a little faster.

3. Generic Corporate Robotic Process Automation (RPA)

I.T. teams love to create big, complicated projects. When faced with the chargeback and deduction processing challenge, your corporate I.T. department may assume they can use generic robots to develop an automated solution themselves. Then they’ll go through consulting, requirements gathering, and implementation cycles to convert generic robots to robots required for chargebacks and deductions. Years later, they may finally be ready to start attempting to dispute these chargebacks. It will cost a fortune, and likely fail or run out of budget before the project is ever even completed.


 The above options are costly, and you're still likely in the weeds and spending a lot of manpower, time and effort disputing chargebacks and deductions manually. These solutions may be comfortable, and perhaps they're all you know or all you have ever done. Or all that you think your company will approve. Outsourcing continues to be a popular solution. And buying yet another software package, or having an I.T. team or large consulting company who assumes they have the expertise to handle everything, is pretty common place in Corporate America.

But the truth is, these solutions will not actually solve your chargebacks and deductions woes. At best, they will simply smooth the rough edges. Due to the size of retailers and shippers and their technology investment, they are setup to outpace their suppliers and distributors, and will continue to do so and use automation to take every chargeback and deduction possible, at a much faster rate than your team will ever be able to keep up. So what do you do?

4. Cloud Robotic Automation

What if you had the ability to use the same technology retailers like Amazon and shippers like FedEx are using, to dispute the deductions they are constantly throwing at you? Finding a robotics specialist who already has robots for claims and chargebacks, designed to solve just one problem: disputing chargebacks and deductions, is the simple, quick win. Just like Amazon and FedEx robots have one purpose … Resolve, Dispute, Submit chargebacks and deductions … at lightning speed.

These such robots work just as a human would to gather information. When a deduction comes in, they identify the deduction type, and pull the PO or other required documentation for you, automatically. They can then do very clever things such as read boxes, compare signatures, and automatically dispute the deduction for you, directly in the retailer or shipper's vendor portal. What is the difference between a human doing this and specifically designed chargeback and deduction robots? These robots are FAST and ACCURATE. And unlike a human, they don't mind the tedious disputing process!

To learn more about how to save hundreds of manpower hours and reduce costs by 80% or more by automating your chargeback and deduction processing, download this free case study which describes how a large book distributor fought Amazon chargebacks and won.

About iNymbus www.inymbus.com  iNymbus DeductionsXchange resolves and disputes deductions and chargebacks automatically, while increasing speed and efficiency by 30X. DeductionsXchange introduces cloud robotic automation to the process of uploading denied claim packets to retail vendor portals and submits disputes on the customer’s behalf. Not only are processing costs reduced dramatically via elimination of manual labor, sales are increased by enabling companies to take back revenue from previously invalid and undisputed chargebacks and deductions.

 

 

This post has not been tagged.

Share |
Permalink
 

Disputes Resolved with Artificial Intelligence

Posted By RCVF Admin, Wednesday, August 7, 2019
Updated: Friday, July 26, 2019

RVCF Link Image 

Disputes Resolved with Artificial Intelligence

By Sonali Nanda, Vice President of Product Management at HighRadius

 

According to Attain Consulting (1), dispute and deduction analysts spend over 1600 hours trying to analyze claims from big box retailers.

AR teams handling retail customers want to resolve open disputes and clear payments as soon as possible. However, ambiguous communications, unstructured document management, siloed operations combined with the high volume of claims from big box retailers leave analysts wanting for some sort of assistance.

Dispute and Deduction analysts still follow and use traditional processes and strategies to handle disputes and deductions, while other AR functions such as credit management, collections management, cash application, etc. have significantly improved due to automation. In addition, analysts require logging onto retailer/vendor portals to access the claims.

Some of the challenges faced by dispute and deduction analysts especially regarding claims from big-box retailers are:

  • Manage large volumes of payment deductions
  • Coordinate with various teams regarding each dispute/claim
  • Gather all supporting documents for every dispute/claim
  • Spend extended amount of time on analysis

An Overview of How Analysts Handle Big Box Retailer Claims:

  • Login to vendor portal: The lack of push notification forces analysts to login to the portal multiple times to check for claims.
  • Download claims: Vendor portals usually do not support bulk downloading; each claim should be downloaded manually.
  • Upload document: Documents including remittance, POD, BOL, etc. need to be uploaded manually and individually for each claim.
  • Information key-in: Information regarding each dispute should be keyed in manually.
  • Manual correspondence: For each invalid dispute, analysts manually key-in and send denial correspondence along with the supporting documents, which include BOL, POD, claims, etc. to big-box retailers.
  • Cross function collaboration: Analysts often need to interact with other functions within AR for dispute resolution. This only elongates the entire process.

As a consequence, the entire dispute and deduction process is

·       Highly manual

·       Time consuming

So, the question here is, is there a solution that:

·       Automates the process, and requires minimal human intervention

·       Is time efficient

·       Adds significant value to the entire AR functions

The simple answer is Yes! Artificial intelligence can automate the entire end-to-end process and requires minimal human intervention. It is effective, efficient, and adds tremendous value to not just the dispute and deductions process but the entire AR function.

What is Artificial Intelligence in AR?

The leading or general understanding of artificial intelligence is ‘the ability of a machine or a computer program to think and learn on its own.’

Leading organizations around the world have enabled their account receivable teams with artificial intelligence allowing them to effectively perform their day-to-day activities. AR functions such as cash application, credit management, collections management, etc. are among those that use artificial intelligence the most.

However, AI is not limited to just those functions. AI helps dispute and deduction teams as well.

How Does AI Help Analysts Handle Big Box Retailers?

Auto-coding of Trade and Non-Trade Deductions

Solution: Claims and disputes are downloaded from big box vendor portals. They are identified as trade or non-trade deductions using AI. Trade deductions are usually processed in a few seconds; however, non-trade deductions require capture of respective BOL, POD, email and remittance. Reason codes are identified and auto-mapped to internal codes using AI and machine learning.

Benefit: Decrease in time spent on identifying and coding disputes. Direct assignment to analyst for further action.

Dispute Validity Prediction and Higher Recovery Rate

Solution: Taking into consideration, historical deduction data, all dispute related parameters, and factors related to cleared invoices and applying prediction models, the machine learning algorithm can predict the invalidity of a deduction with a high confidence level. This provides a prioritized list (with Deduction Recovery Estimate) of high dollar value invalid deductions for analysts to focus on. In effect, Artificial Intelligence helps analysts achieve quick deduction resolution and a higher recovery rate.

Benefit: Analysts can focus their energy solely on trying to resolve high research claims.

Simply put, Artificial Intelligence streamlines dispute and deduction activities not just for big box retailers, but for deductions, claims and disputes in general.

Sources:

1.       https://www.attainconsultinggroup.com/wp-content/uploads/2018/05/2018-Customer-Deductions-Survey-1.pdf

Sonali Nanda is the Vice President of Product Management at HighRadius, leading the development of the Integrated Receivables Cloud Platform and other product management initiatives, including the home-grown Rivana Machine Learning platform. She is responsible for building an effective product management team and defining product strategies and roadmaps, which accelerate sales and create happy customers.

 

This post has not been tagged.

Share |
Permalink
 

Top 3 Steps to Elevate Supplier Communications

Posted By RCVF Admin, Wednesday, August 7, 2019
Updated: Friday, July 26, 2019

RVCF Link Image 

Top 3 Steps to Elevate Supplier Communications

By Steve Norris, Director Supply Chain Collaboration, TrueCommerce, Inc.


As a manufacturer, the quality of your communications with suppliers is arguably as important as your communication with customers, as both are equally critical to your business success. In fact, as markets become increasingly consumer-driven and globalized, the need to continuously improve on cost, speed, quality and operational agility makes your supplier relationships more significant than ever before.

The last thing you want in today’s omni-channel world is a stagnant supply chain where nobody’s talking. Improving supplier communications is sure to yield positive results, from reduced shipping errors to fewer stockouts to more on-time deliveries to better performance against sales targets. Not to mention less stress! 

How best to make that happen? Here are the top three steps to improve the consistency, timeliness, quality and value of communication between your business and its suppliers: 

Step 1: Create a clear, consistent communication plan that includes all your suppliers, from the largest to the smallest.

To drive decisions across your supply chain, you need visibility into your entire supplier base, not just the big guys. Likewise, you need consistency in your reporting and supplier performance management processes. Otherwise efficiency and effectiveness will suffer, and issues will continue to rise up and bite you because you didn’t see them coming. 

Whether you’re onboarding a new supplier or going over new ground rules with a long-time partner, clarity is critical. Set understandable expectations that spell out what data you need from suppliers, what form you need it in and the options for transmitting it. 

An automated, unified platform that can meet the needs of both large and small suppliers is the foundation for establishing and maintaining dependable communications. These features are key:

  • Because it’s universally accessible and minimizes IT demands, a cloud-based solution is ideal.
  • Ease of use and quick onboarding are essential; otherwise you’ll face stiff resistance to adoption.
  • All parties need access to all relevant data in one centralized place—not only for simplicity, but also to facilitate tracking and aggregating data across suppliers for analysis and reporting.
  • When it comes to connectivity options, one size does not fit all. Larger suppliers may already be using electronic data interchange (EDI) to connect digitally with you. Many smaller suppliers will most readily embrace a web-based portal to submit data and documents. Other formats you may need to support include XML, CSV and application-specific formats (e.g., SAP or Microsoft Dynamics).

Step 2: Establish real-time visibility to relevant and validated data.

Incomplete, incorrect or outdated data pertaining to orders, fulfillment, inventory, products or contacts is the bane of supply chain performance. To drive processes (e.g., “endless aisle” or drop-shipping services), answer questions and resolve issues you need complete, relevant, validated and current data from all your suppliers. 

How do you get there? Best-practice approaches that will improve communication and efficiency right from the start include:

  • Standardize your existing data.
  •  Implement data quality rules and validation services as part of the data acquisition process through your communications platform. This will weed out errors while ensuring each data exchange is complete and valid.
  • Give suppliers a self-service portal or other simple method to update their own product, contact and company data. This saves everyone time and improves data quality.
  • Integrate, don’t duplicate. Manually entering the same data across multiple systems wastes time and money, numbs brains and decreases data quality. Do everything possible to automate data interchange using standardized formats and APIs.

Step 3: Track supplier performance through dashboards and scorecards.

Through steps 1 and 2 you’ve set clear expectations for what data you need from suppliers, and ensured that data delivers maximum supply chain value. The third and final step is to leverage all that wonderful data to track (and improve!) supplier performance using dashboards and scorecards.

While dashboards are perfect for displaying current data and trends, standardized scorecards are great for tracking and communicating performance metrics to suppliers on an ongoing basis. Here again, it’s ideal if you can leverage your communication platform for data analysis and distribution, versus exporting data into another system and potentially creating redundancy, complexity and timeliness issues. Another benefit of keeping all your supplier data in one system is the potential to create an alerting function to proactively address issues before they impact your business or its customers.

What data do you need to report to executives and suppliers? Every manufacturing business has unique requirements, but these are some of the success metrics most companies will want to track:

  • On-time fulfillment/delivery performance
  • In-full performance
  • Compliance performance

Be sure to apply the same assessment criteria to all suppliers, and to track and report on performance consistently (e.g., monthly or quarterly). Use quantitative rather than qualitative parameters, which tend to be arbitrary. If your communication platform can automatically log and file reports for easy reference and ongoing analysis, so much the better.

If you’re able to set clear expectations for suppliers, keep your data clean and track performance consistently as just described, you’re sure to elevate not just your supply chain communications, but your bottom line and competitive position.

Of course, communications always flow better when there is trust between the parties involved. Making changes and sharing lessons learned with a partnership/collaboration oriented mindset rather than an “audit/compliance” focus will smooth the adoption process and strengthen some of your most important business relationships.

Steve Norris ImageSteve Norris, Director Supply Chain Collaboration, TrueCommerce, Inc.

  • 16+ years of Supply Chain Management Solutions | TrueCommerce
  • Certified Project Management Professional
  • Supply Chain Collaboration Master

 

 

 

 

 

This post has not been tagged.

Share |
Permalink
 

Top 5 Ways to Ensure Success in Your Endless Aisle Program

Posted By RCVF Admin, Wednesday, August 7, 2019
Updated: Monday, July 29, 2019

RVCF Link Image 

Top 5 Ways to Ensure Success in Your Endless Aisle Program

By Steve Norris, Director Supply Chain Collaboration, TrueCommerce, Inc.


In today’s omni-channel retail environment, savvy customers will quickly find the item they want somewhere else if it’s not at your store. According to Forrester, about
10% of retail store sales are lost due to stockouts. 

To give shoppers more options and keep more of those sales, retailers are employing endless aisle strategies. By drop-shipping products direct to consumers through a network of vendors, you can appear to always have a potentially huge range of products “in stock.” Endless aisle sales are growing, and currently represent somewhere between 1% and 10% of store revenue for brands like Macy’s and Home Depot with proven endless aisle programs.

But building a successful endless aisle program is an elusive goal for many retailers. Offering a greater product assortment means managing more vendors and more data. That can easily lead to inconsistencies, errors, inability to keep brand promises, and an overall unsatisfying shopping experience.

How can you ensure your endless aisle doesn’t turn into an endless hassle? Here are the top five approaches that lead to success.

One: Establish a clear and consistent supplier onboarding playbook

Hands down, the key to a successful endless aisle program is strong supplier relationships. You need to communicate efficiently and consistently with suppliers, ideally through automated means. Moreover, you need to integrate suppliers’ supply chain systems with your own, so you can access their inventory data in real-time and also receive documents directly into your accounting or ERP system.

That all starts with supplier onboarding, which includes outreach, facilitation and management of the relationship along with testing and monitoring message flows, validating data and training staff. It further includes setting clear expectations for things like inventory management capability and shipping efficiency. Consistent onboarding also helps ensure alignment in critical areas like service level agreements (SLAs), mapping product data attributes and meeting requirements for branded packaging.

Upfront consistency ultimately reduces the chance of errors and inconsistencies that impact consumers, while helping to scale an endless aisle program as you add more vendors.

Note that consistency doesn’t necessarily mean “one size fits all” across your many vendors, large and small. Instead, you need flexible processes to accommodate vendors’ differing technology capabilities while landing data and documents in the right places and formats on your end. Offering vendors a portal where they can easily enter invoices electronically, which are then converted to EDI documents and imported directly into your ERP system is an example.

Two: Create a centralized repository for all supplier communications

To track and update drop-ship order, fulfillment and inventory status across multiple sales channels and multiple vendors, it makes sense to manage supplier communications from a central point. Otherwise you’ll be looking for data in different places depending on who sent it, and that’s a juggling act that just won’t scale.

For example, some vendors can invoice you using electronic data interchange (EDI), while others want to send PDF documents via email and still others might want to use Bill.com or mail you a paper invoice. Plus you’ve got to send each vendor a PO, get a PO acknowledgement back, and so on.

Does the data on those documents match up? If you have multiple communication repositories, it becomes a lot harder to answer those basic questions.

Three: Receive timely notifications when suppliers are delayed, out of stock, and/or out of compliance

When you undertake drop-shipping, you entrust your brand reputation to the supplier that is responsible for fulfilling the order. Therefore, you need to know right away if an order is delayed, the supplier doesn’t have the product in stock after all, or some other aspect of the transaction is out of compliance (e.g., the invoice data is incomplete or doesn’t match the PO).

Getting an alert the minute something goes wrong is the first step in ensuring that negative customer experiences are minimized. It’s also a key support for supplier performance measurement and scorecarding. Conversely, if you aren’t alerted when something goes wrong with a drop-shipped order, you’re sure to incur whatever costs and reputational damage follow.

Four: Gain better visibility into supplier inventory levels

A lack of visibility into suppliers’ inventory levels pretty much guarantees inventory management issues that will cost you sales and reduce customer satisfaction and retention. Given today’s high consumer expectations for your omni-channel fulfillment performance, it’s critical to have an automated way to accurately exchange or replicate inventory data with suppliers in near real-time, both at regular intervals and on-demand.

You can accomplish this by exchanging documents (e.g., the EDI 846 Inventory Inquiry) or by direct integration with suppliers’ inventory management platforms. Of course, the data you receive will be only as good as the suppliers’ awareness of their own inventory positions. This is another reason why getting to know suppliers’ capabilities and setting clear performance expectations at the start of onboarding is important.

Five: Decrease/eliminate manual touch points

What’s the status of that order? When will it ship and when will it arrive? The last thing your company needs is to lose time and money trying to answer questions like those in frustrating runarounds with suppliers over fax, phone and/or email.

Processes based on manual touch points are inherently inconsistent (if not downright chaotic), don’t scale and lead to errors and poor customer experiences. To handle a growing volume of supplier communications without adding staff, you need to automate all possible aspects of your endless aisle program. That includes document exchanges, business process controls, alerts and getting data in and out of different applications.

Ultimately, a successful endless aisle program means digitizing your supply chain so that all participants can share key data at high velocity to serve the end customer. With appropriate communication and automation, your supplier community will become a source of competitive advantage that drives more sales, greater customer loyalty and improved operational efficiency.

Steve Norris Image
Steve Norris, Director Supply Chain Collaboration, TrueCommerce, Inc.

  • 16+ years of Supply Chain Management Solutions | TrueCommerce
  • Certified Project Management Professional
  • Supply Chain Collaboration Master

 

 

 

This post has not been tagged.

Share |
Permalink
 

From the Desk of Kim Zablocky ... Join us at the RVCF 2019 Fall Conference

Posted By RCVF Admin, Wednesday, August 7, 2019
Updated: Thursday, August 1, 2019

RVCF Link Image 

Join us at the RVCF 2019 Fall Conference

From the Desk of Kim Zablocky

 

RVCF Fall Conference 2019 is quickly approaching. We are going to have a great show, with diverse topics and timely issues that will help our attendees to better understand & manage the entire Retail Procurement Cycle. With 35+ Retailers and over 100+ Nation’s largest Brands, we will gather for 3 days to collaborate on the Perfect Order. To gain insight of individual issues confronting Trading Partner relations, over 700 one-on-one meetings are scheduled throughout the event!

Highlighted below of some of the categories of topics we plan on addressing;

Direct to Consumer:

We will look at best practices of developing an EDI platform/road map for participants to develop their own in-house E-Com sales fulfillment program

New and innovative ways to reduce the cost to serve the E-Com consumer

Improving custom sizing using digital tools, thus reducing returns

Finally, a Full day Design Thinking workshop focused on E-Com sales returns

Transportation issues and solutions:

KPI’s of building a carrier scorecard

Newest Government rules around Global Security requirements

Addressing product Shortage issues, identifying all aspects of determining, reason, cause and solution

ASN workshop, improving root causes that otherwise lead to deductions

Product and Inventory Management:

Prop 65 and other related product safety requirements State & Federal

Improved digital tools for on-boarding merchandise suppliers

Financial issues for merchandise suppliers:

Amazon order fulfillment best practices

Deduction resolution automation

Financial Executive Reporting of AR

Building Cross functional teams, Negotiating with trading partners

Open Forums for both Retailers and Merchandise Suppliers, respectively

RVCF offers programs for both Retailers and their Merchandise Suppliers, focused on Business Process Improvement, Improved Trading Partner Collaboration and best of all, Improved Margins for both!

Come join us!

KZ

This post has not been tagged.

Share |
Permalink
 

New CA Proposition 65 Enforcement Trend: PVC and Vinyl Packaging

Posted By RCVF Admin, Wednesday, August 7, 2019
Updated: Monday, August 5, 2019

RVCF Link Image 

New CA Proposition 65 Enforcement Trend: PVC and Vinyl Packaging

By Bao M. Vu, Of Counsel at Stoel Rives LLP

 

 California’s Proposition 65 requires that products exposing California consumers to certain chemicals carry specific warnings.  As a refresher, new regulations went into effect a year ago that significantly changed the required warnings.  Among other significant changes, the following abbreviated warnings are now acceptable under certain circumstances:
 

WARNING: Cancer – www.P65Warnings.ca.gov.

WARNING: Reproductive Harm – www.P65Warnings.ca.gov.

WARNING: Cancer and Reproductive Harm – www.P65Warnings.ca.gov.


As many in the industry know, there are certain size and placement requirements, and situations in which the above warnings may not be enough under Proposition 65.  Indeed, many manufacturers and others in the distribution chain are well versed in Proposition 65’s requirements and thoroughly test and place warnings as needed on their products. 

But a new enforcement trend among plaintiff’s lawyers (who are on the prowl to make big money off seemingly trivial violations) involves PVC, vinyl, and similar packaging.  Specifically, those lawyers have caught on that manufacturers sometimes don’t think to test the clear packaging in which their products are displayed and sold.  That clear packaging may independently trigger the warning requirements under Proposition 65, because that clear packaging is often made of PVC, vinyl, or similar materials that contain phthalates such as DEHP, DINP, and DBP, just to name a few.  In other words, that clear packaging may trigger the warning requirements under Proposition 65, even if the actual product itself has test results that do not reveal any Proposition 65-listed chemicals.  So please don’t forget to test your packaging for Proposition 65-listed chemicals too!

For more information about Proposition 65 and this new trend, please contact Bao M. Vu, Of Counsel at Stoel Rives LLP, at 415-500-6572 or bao.vu@stoel.com.  Bao is an experienced Proposition 65 lawyer who has significant experience defending clients in state and federal courts throughout the U.S.  His clients include manufacturers, packagers, distributors, and retailers.  Bao has a successful track record of aggressively defending clients in Proposition 65, false and deceptive advertising and labeling, and unfair competition lawsuits, as well as favorably resolving government investigations. 

 

This post has not been tagged.

Share |
Permalink
 

Retailers can Outsource Supplier Workshop Planning to RVCF

Posted By RCVF Admin, Wednesday, June 19, 2019
Updated: Tuesday, June 18, 2019

RVCF Link Image 

Retailers can Outsource Supplier Workshop Planning to RVCF

By Susan Haupt | RVCF VP Operations and Member Services


Retailers, did you know that you can outsource your supplier workshop planning to RVCF? 

Whether you want to present new initiatives, accelerate adoption and execution of existing requirements, or improve your trading partner relationships, RVCF can help you build a program customized to meet your needs.

From venue selection to marketing, registration, on-site management, and post event follow-up, our experienced event staff will take care of all the logistics.  Maybe you would like to co-locate your session before or after an RVCF event or maybe you would prefer to address your suppliers via a virtual session.  Our team can assist with those as well. 

We take the planning and execution off your plate so that you can focus on your core business initiatives.  RVCF has successfully hosted events ranging from 15 to 500+ attendees for our own membership and for our retailer partners for almost 20 years.  Ask what we can do for you. 

 

This post has not been tagged.

Share |
Permalink
 

How to Calculate Fulfillment Cost Per Order

Posted By RCVF Admin, Friday, June 14, 2019
Updated: Thursday, June 13, 2019

RVCF Link Image 

How to Calculate Fulfillment Cost Per Order

By Brian Barry | President, F. Curtis Barry & Company

 

Fulfillment cost per order (CPO) is the sum of all the warehousing expenses involved, including:

  • receiving, putting away and storing the product.
  •  fulfilling orders through picking, packing, shipping.
  •  reverse logistics or returns processing from customers.

Historically, fulfillment managers only looked at the labor portion of the CPO. But, this may only be 50% of the costs. A fully loaded cost per order is a better metric and includes facilities and occupancy costs and packing material costs.

For omnichannel businesses, the cost and complexity of filling customer orders from DCs and stores is much harder to identify and may be considerably higher.  This blog shows you how to calculate the fulfillment cost per ordercost per line, and cost per box shipped from ecommerce DCs.

Calculating Cost Per Order

Comparing the cost per order between fulfillment businesses is difficult because businesses, product, and order profiles vary widely. Varying application automation and technology also makes comparison difficult.

The best way to compare your CPO is to create internal historical comparisons to show the trending.

Data required to calculate fully loaded fulfillment CPO

The following are the basic statistical and cost data elements you’ll need to calculate cost per order:

Statistical:

  •  Annual net sales $ - the gross sales net of returns and exchanges.

  •  Annual orders shipped – the number of marketing orders processed.

  • Total order lines – the total lines ordered on the marketing orders.

  •  Annual boxes shipped – the boxes or cartons shipped by the fulfillment center. The number will always be higher than orders because it will take multiple cartons to ship some orders.

Expenses:

  •  Total direct labor $ – the cost to complete functions including receiving, putting away, picking, packing, shipping, and returning items required to fill orders.
  •  Total indirect labor $ – the cost to complete any warehouse labor function not classified as direct labor. Usually includes support functions, such as supervision, maintenance, clerical, and inventory.
  •   Total occupancy $ (fixed CPO) – the facility costs for leases, utilities, amortization and depreciation for material handling, conveyor and sortation, WMS.
  •  Total packing supplies $ – the cost of any boxes, envelops and dunnage required to fill orders.
  •  Total warehouse $ – the sum of warehouse expenses above.

Calculating Fulfillment Cost Per Order

Here are the four calculations which are helpful in understanding your four walls fulfillment costs:

1.    Total warehouse cost per order - total warehouse costs divided by annual orders shipped.

2.    Total warehouse cost per order line – total warehouse costs divided by total order lines.

3.    Total warehouse cost per box - total warehouse costs divided by annual boxes shipped.

4.    Total warehouse cost as a percent of net sales $ - total warehouse costs divided by annual net sales in dollars multiplied by 100. Further details about this measure are below.

Download our guide: "70+ Cost Reduction and Productivity Improvement Ideas"

 Metrics to Consider

Labor costs

More than 50% of your cost per order is direct and indirect labor costs. What are you doing to use labor more effectively? We recommend implementing these six major strategies that will help you manage your warehouse labor more effectively while also controlling your warehouse expenses.

Fixed cost per order

When you review your warehouse expenses, the fixed cost per order is mostly made up of the total occupancy costs defined above. The total occupancy cost represents the costs to store product and fulfill orders until the capacity is totally used. In other words, that fixed expense will be allocated over more orders as the business grows until capacity is used up. 

There is also a fixed cost of management overhead for the director of fulfillment and the departmental managers. Their salary and benefit costs can be spread, or allocated, over an increasing number of orders, too.

Outbound shipping costs

For outbound shipping costs, you will want to calculate the cost per order and box separately from the warehouse costs above.

Outbound shipping costs vary widely between companies. For example, in consumer ecommerce small parcel shipping, the cost of shipping now exceeds all of the other expenses shown above. Adding it into the warehouse expenses distorts any comparison you may wish to make.

Additionally, business to business ecommerce companies, which have larger orders, distributors, and wholesalers, may use LTL. So, a comparison to ecommerce using small parcel shipping is not valid. 


Instead, calculate these two additional fulfillment costs

1.    Outbound shipping cost per order: the total outbound shipping costs divided by the total orders.

2.    Outbound shipping cost per box: the total outbound shipping costs divided by total boxes.


Employee benefits and payroll taxes

We also exclude these costs from warehousing costs above. These costs include the employer’s share of payroll taxes and paid benefits, such as medical, retirement, and educational assistance. Employee benefits vary widely between companies and can add 15% to 30% additional cost to those costs shown above.

Departmental metrics

The above calculations of fulfillment cost per order are helpful when understanding your overall business. Now the challenge is to apply this process to the departmental costs and productivity. Departmental functions include any major warehouse functions, such as receiving, putting away, picking, packing, shipping and returning items to fill orders and process returns. 

To get a meaningful measurement of these departmental costs and functions, you will need to have data collection at a much lower level and include paid hours for those activities. We recommend using a timekeeping system that allows measurement of the employee in/out for various departments. Without this, any cross training you have adopted will distort how many transactions, such as orders, lines, and boxes, are processed.

You’ll also want to calculate the paid hours worked in the department from the time collected.

As you start the measurement of department functions, different units of work may be applicable between departments. For example, receiving functions may have little performed inspection compared to other businesses. The number of cases or pallets received rather than units received may be a more meaningful metric.

Now That You Know Your CPO

How does my fulfillment cost compare?

What are good fulfillment CPO results? Unfortunately, industry surveys often fail to give accurate and usable results because they average together dissimilar businesses. 

If you are going to compare your results to other similar businesses, it will require considerably more data than we illustrated above to ensure you understand participating businesses and are making a valid comparison.

Here are a few things to consider:

  • Did you define cost per order the same way, with the same data elements?
  • How does the order profile differ between businesses? For example, consumer ecommerce businesses average less than three lines per order. Business to business will often average far higher. What is the number of lines and units per order average? If you are a consumer apparel ecommerce business, your returns may be 20%. A home décor business may be 8%. Those operating costs affect CPO.
  • Labor cost per hour will vary by marketplace and company as much as $3 to $4 per labor hour.
  • The level of automation between fulfillment businesses varies. Most are conventional, largely manual operations and are not highly automated. CPO will vary widely where automation has been effectively applied.

Chief Financial Officers often want a convenient ratio to compare fulfillment costs between companies. While a true comparison is likely impossible, the best way to do this is to calculate the fulfillment costs as a percent to net sales.

Percent to net sales = total warehouse costs divided by annual net sales in dollars multiplied by 100.

The danger of this method is that the average order value (AOV) can be widely different between businesses. Generally, this discrepancy is caused by wide differences in average retail price points and average order value. We understand the desire to compare, but it may give a result that is misleading.

Most important measurement

In the end, the most important aspect is creating a historical comparison for your business and adding history to management reporting. Is your productivity measured in dollars and units of work produced improving seasonally and annually? Many businesses are not. Low unemployment and increasing labor costs, as well as outbound shipping costs, are eroding profits.

Can third-party logistics (3PL) stabilize or lower CPO?

Third-party logistics may benefit your business by helping you maintain high customer service and cost-effective fulfillment applications. While 3PL isn’t for everyone, we have seen companies use 3PL and achieve quality and competitive costs

Companies using third-party fulfillment will pay an order fulfillment fee for particular services, such as receiving, inventory storage, order processing (pick/pack), and returns processing.

Before deciding if a 3PL is right for you, it is important to complete a fully loaded cost study. To get an apples to apples comparison between internal fulfillment and third party, consider all of the cost per order elements. 

Product net contribution to profit

Another use of fulfillment cost per order is with your company’s merchants. This will be helpful to them to understand the cost of storing product, filling and shipping orders, and processing high return products. We recommend including the cost of fulfillment during their decision making process about your product line and also using it in their postseason merchandise analysis.

Summary

Rising labor costs and outbound shipping costs are hurting many companies’ profits. When trying to improve CPO, the best comparison is reviewing your internal operational results historically with your company.

By Brian Barry | President, F. Curtis Barry & Company

 

This post has not been tagged.

Share |
Permalink
 

Label IT Expands into Vietnam and Approved by QVC

Posted By RCVF Admin, Friday, June 14, 2019
Updated: Thursday, June 13, 2019

RVCF Link Image 

Label IT Expands into Vietnam and Approved by QVC

By Randy Kane | CEO of Label IT


Label Interactive Technologies (Label IT), a leading provider of printed compliant barcode and RFID on-product and master carton labels, is excited to announce the opening of their Vietnam production facility.

“Located in Ho Chi Minh City, vendors and manufacturers simply log into our StreamLine portal (https://streamlinelabels.com), select Vietnam as their production facility, then place their orders for the labels and tags they would like produced and sent to their factories for application”, said Randy Kane, CEO of Label IT. “This facility can service not only Vietnam but the surrounding countries such as Cambodia, Thailand, Laos, Myanmar and most importantly Bangladesh until our India facility goes live in fourth quarter”. 


In addition, Mr. Kane was extremely proud to advise the RVCF that they were recently approved & published by QVC as an Authorized Provider of their required Saleable Unit and Master Carton labels to their global vendor communities.

“Label IT's service level has been unparalleled to our HSN vendors since 2004. With facilities in North America, Hong Kong & Vietnam along with their anticipated entree into India in late 2019, QVC is looking forward to their assisting us in streamlining the labeling solutions offered to our global vendor communities”, said Matt Keenan, Sr. Manager – Vendor Operations, Inbound Supply Chain I QVC.   
  

About Label Interactive Technologies, Inc.: Founded in 2003 as a global on-product, package, or carton certified GS1 solutions provider that delivers in-house and outsource barcoded & RFID labeling and price tag solutions to manufacturers, importers, trading companies and 3 PL’s (third party logistics).  Through their StreamLine® portal, vendors and trading partners can place, track & manage their on-product, package or master carton label orders from Label IT’s production facilities located in North America, Hong Kong, and Vietnam.   

 

This post has not been tagged.

Share |
Permalink
 

Observations and Reflections on the RVCF Spring Conference (May 5-8, 2019)

Posted By RCVF Admin, Wednesday, June 12, 2019
Updated: Wednesday, May 29, 2019

RVCF Link Image 

Observations and Reflections on the RVCF Spring Conference (May 5-8, 2019)

By Felton Lewis IIII | Principal, Business Development | Newmine

 

I had an opportunity to attend the Retail Value Chain Federation Spring Conference last week in Teaneck, NJ and co-present with Mark Lightbody, a Partner atNewmine,on the topic of “Leveraging AI (Artificial Intelligence) and ML (Machine Learning) to reduce consumer Returns." RVCF brings retailers and vendors together throughout the year to solve supply chain problems and grow profits. The agenda included many Supplier Only and Retailer Only forums to address key challenges the industry faces as the industry transforms, such as drop shipping or growing merchandise returns.

One of the highlights of the conference was a full-day workshop that familiarized attendees with Design Thinking methodology, a human-centered approach to problem solving that focuses on approaching a problem through the eyes of the end-user, or the customer. The workshop was intended for those who manage returns from consumers, and direct to consumer shipments. The workshop was moderated by Jeff Warren, President and Founder of Barkley Consulting.  

 

Why Design Thinking?

 

Design Thinking is a customer-focused, solution-based approach to problem solving that is divided into a series of iterative phases. It enables the problem solver to challenge their own assumptions and redefine problems to identify creative, alternative solutions to the problem. It Is a way of thinking as well as a series of hands-on processes that Include the following stages:

 


Jeff Warren divided the group into three project teams and taught Design Thinking concepts and techniques such as: how to use open-ended questions when interviewing end-users to collect valuable insights. Each team was challenged to move through the design thinking process to uncover consumer insights and then ideate solutions, prototype them, and test them.

 

 

 

The Design Thinking Challenge: “Rethink the Returns Process to Provide Better Value to Consumers and Increased Benefits to Retailers and Manufacturers”

 

Our project team focused on one of the leading causes of returns: Inaccurate Product Descriptions, which are often vague or incomplete. We conducted interviews with consumers who returned merchandise they had purchased online in the last two weeks, or to the store within the last week. Customers frequently referenced lack of detail in product descriptions for apparel items they returned. The consumer interviews our team conducted provided additional insights on how to improve product descriptions. In addition, the interviews we conducted allowed us to capture several other “voice of the consumer” concerns such as:

  • Consumers can be reluctant to share their comments on product reviews because of privacy concerns due to publicizing their personal information on an ecommerce website.
  • Retailers who do not have a loyalty program or recognize their loyal customers miss out on the opportunity to personalize the returns experience.
  •  Consumers feel slighted when brands do not provide loyal customers with the ability to request a return credit against their original method of payment.

 

With the initial research done, it was time to prototype. Barry Graff, the COO of www.alpha3pl.com introduced a creative idea to leverage user-generated content (product reviews) to improve product descriptions, similar as to how a an individual can contribute to a wiki.  Call it a "Product Description Blockchain".  As consumers share their insights on why they like or do not like an item, key product description attributes could be automatically updated. The manufacturer of the item could accept or reject the additional description identifiers.

 

All the solutions that were prototyped included Artificial Intelligence (AI) and Machine Learning (ML) elements. Another innovative idea featured an online Concierge Chat Bot guest order assistant. The Chat Bot guest order assistant was non-invasive and designed to enhance the online shopping experience. The Chat Bot leveraged both AI and ML to  review prior orders and the customers return history plus the customer's body profile information maintained online. The Chat Bot suggested that there were items the customer had placed in their shopping cart that may not be the “perfect fit”, prior to checkout, or would recommend substitute brands that would better fit.

 

If multiple sizes of the SKU were ordered (which is commonly referred to as "bracketing") then the Chat Bot might even flag the order to be held to engage a “fit expert” after order capture, especially if this was the very first order. The “fit expert” could reach out and request additional body dimension data before shipping the order or allow the customer to upload a picture of the front and side view of their body profile to ensure the retailer was shipping a product that would fit. The logic being, that if online retailers spend more time with the consumer at the beginning of the relationship, and if we can allocate more time to making sure the items ordered will be the “right fit,” then we can minimize returns.

 

The three different teams prototyped solutions to address the rising returns challenge. What amazed me was the quality of the solutions that the project teams created after spending only one day together in a moderated session on Design Thinking.  If we were presenting to private equity investors…I’m sure a few of the prototypes would have generated an investment interest.

 

Newmine www.newmine.com adopted many core Design Thinking principles into the product conception, creation, and launch of Chief Returns Officer®, the Returns Reduction Platform.  We partnered with several retailers, beginning in 2004, and captured their interview comments, insights, and the key business challenges when managing returns.

 

We encourage both brands and retailers to conduct a historical Look Back Analysis of all return transaction data and user-generated content (product reviews) by Vendor, Brand, and Style. Leverage the vendor insights we provide to collaborate with your suppliers during 1:1 sessions at the RVCF fall conference, November 3-6th, in Scottsdale, AZ.

 

For additional information on how to think outside the box for new remedies to stem the flow of returns from consumers, or to schedule an overview of how the two (2) year Look Back Analysis can be leveraged in 1:1 sessions with your trading partners, please contact Felton Lewis fel@newmine.com or Mark Lightbody mark@newmine.com

 

 

 

This post has not been tagged.

Share |
Permalink
 
Page 1 of 41
1  |  2  |  3  |  4  |  5  |  6  >   >>   >| 
          Innovative Retail Technologies EDI Academy