E-commerce businesses face many challenges, and order consolidation can be seen as a new problem, or a potential solution. In warehouse terms, this all depends on what you offer to your e-commerce customers and how widely distributed they are. So let’s start at the beginning.
What is order consolidation?
It’s a retail practice that is being adapted to ecommerce businesses. Essentially it means combining multiple products into one shipment, but it can also mean combining multiple orders heading to the same relatively specific destination into a single shipment. Obviously, its very nature requires e-commerce retailers to work with business partners and distribution companies to pull off the consolidation process.
Why order consolidation matters
The traditional methodology of ecommerce fulfilment has been to use ‘split shipments’. This may in part be a result of having SKUs stored in different warehouse facilities, or to the fact that some parts of your pick and pack operation are faster than others, but split shipment processes have become negatively viewed for the following reasons:
- They use more packaging and therefore create more waste
- They use more energy, especially fossil fuels, which can damage the planet
- People can become frustrated by having part of their order arrive while waiting for other parts, which is a reputation risk
- Warehouse personnel can find it tricky to process orders using the split shipment process so order items may be missed or duplicated.
The benefits of order consolidation are pretty clear too:
- The cost of e-commerce shipping is always an issue. Nearly two thirds of customers say that shipping costs are the most important factor in deciding who to purchase from, when e-commerce retailers have similar or identical products. In the USA, 68% of shoppers will abandon a purchase if it doesn’t qualify for free shipping.
- Shipping costs aren’t just important to customers, they matter to e-commerce bottom lines too. Reducing the number of shipments leaving a warehouse is a major contribution to increasing profits and the Amazon model of shipping things out as fast as possible, using a multiple order system, generally only works if you’re an ecommerce giant, and even so, can lead to bad press and disgruntled customers when half a dozen different packages show up, over a two or three day period.
- The saving isn’t just on shipping, it’s also on packaging materials, which is a direct saving on absolute costs and a secondary saving on labour costs because there’s much less work in the packing section of pick and pack if you’re consolidating orders into one shipment.
- Another benefit to order consolidation is shorter shipping lead times. Because the consolidation is being carried out at the warehouse point, order shipping can be quicker and the logistics route is simple with much less chance of one parcel going astray from a multiple ship. In other words, customer satisfaction is likely to be higher because all their choices arrive in one go and probably faster than they would if you sent out several parcels at different times.
- Order consolidation can have a reputational benefit – using less packaging and less fossil fuels means your company is less environmentally damaging which is a great message to convey to your customer base and can make you a preferred choice with people for whom this is a significant consideration.
- Order consolidation may also protect your company against volatility in the supply chain, because it ensures more consistent delivery dates as the whole order will be picked, packed, shipped and delivered at the same time.
- For many organisations, order consolidation can lead to better tracking, inventory management and accuracy because it necessarily leads to improved control over each order, more opportunities to ensure the right items are being sent to the right address. This reduces the need for returns and exchanges which means those cost centres are reduced.
- Instituting order consolidation can have a surprising benefit – it may actually simplify order tracking. This one isn’t always obvious; but once the system of consolidated order processing is in place, customers get used to being able to check the status of a single delivery. This means they have a simple and transparent process that is streamlined and straightforward, giving them more confidence, and giving you a simple and effective way to deal with queries, which can be a time and cost consuming part of ecommerce fulfilment.
Of course there are challenges to order consolidation, as well as benefits. Finding a partner you can really trust to undertake order consolidation can be tricky and you’ll need to thoroughly map your order process from beginning to end, detailing who has responsibility for each step from order receipt through pick and pack, order review and shipping logistics.
The how of order consolidation
If you feel that order consolidation could benefit your warehouse operation, or improve the performance of your e-commerce business, these are the stages you need to consider:
Finding a partner
There are two levels of partnership – they first is finding fulfilment centres or shippers who specialise in consolidated fulfilment services. The second is looking at software harmonisation to ensure that you’re all working with this same systems or platforms. This can be time-consuming and depending on where you’re based geographically, your choice of partners may be limited.
Defining your fulfilment systems
Going through a number of processes to ensure you’re completely clear about who is responsible for each action and when, how they report to the next process in line and what happens if there is a problem, are all essential to setting up good order consolidation
Implementation
This is a critical point – moving from multiple packages to streamline order consolidation will reveal several potential weaknesses such as training failures, bottlenecks or places that they system breaks down because it lacks a feedback loop to get back on track. Correcting these is essential to obtaining a valid order consolidation process. Test runs can be useful and may help you set up your warehouse space to optimise your systems – some partners even offer a free test run to help you decide if they are right for you.