Roundup Fulfillment & Operations 15 Bottom-Line-Boosting
By Curt Barry
Save cash in your contact center, distribution center and more.
Today, many operations professionals are being asked to reduce costs and increase productivity and efficiency. Following are 15 tactics to try in your contact center, inventory control area and distribution center.
In the Contact Center
1. Focus on agent scheduling. In general, contact center managers do a good job setting customer service reps' (CSRs') schedules based on projected call volumes. But then what happens? Review your original agent schedule against actual call volume and agents who worked. This simple task often provides insight into a schedule's effectiveness. Takeaway tip: Try using agent-scheduling software; those who have it say their costs are reduced.
2. Review organizational structures. Such structures tend to remain intact for long periods of time at companies. But with so many changes in sales channels — namely the increase in Web orders — and their accompanying operations, now may be an optimal time to review that structure. Do you really need the same number of full-time agents as you did a year ago? A change in staffing may, in turn, affect your supervisor-to-agent ratio (1:20 is a good ratio).
3. Discern if off-phone work is necessary. Off-phone work in typical contact centers has increased in recent years due to, for instance, e-commerce sales growth and online chat. Indeed, many off-phone tasks in the contact center have evolved into major projects. Internet orders that require product customization or special instructions, or that accommodate customer comments, typically are handled in an off-line fashion because they require special treatment.
Of course, maintaining product data in your order management system is a critical task that helps you provide great customer service. However, in many companies, updating data in the system is a task that has been pushed into the contact center. Is that really the best place for it? Analyze your contact center's off-phone work, looking especially to eliminate unnecessary steps performed by your CSRs.
4. Streamline product training. Training CSRs on the features and benefits of your merchandise probably has become a complex undertaking, especially as merchants continually search for new items to offer. In fact, for some contact centers, it's become a continual product churn. With multiple titles, multichannel sales and a large breadth of SKUs available, keeping agents informed of the latest product data is a real challenge.
Agents who aren't well trained on products must ask for assistance, which can lengthen call times. Contact centers that provide CSRs with product training through an established, formal training program, benefit when customers place orders. Large contact centers usually have a full-time trainer. Along with product training and information, communicating important messages to CSRs is a must.
Takeaway tip: Provide pop-up windows to CSRs when they log on to their computers at the beginning of their shifts. This offers an effective tool to relay data on problematic products, company meetings and the like. Using online features for company policies provides easy and fast access for agents.
5. Monitor CSRs' calls and provide regular feedback — these are essential tasks that can help you maintain optimum performance in your contact center. They also provide opportunities for supervisors to hear what customers are saying and how agents interact with them. Call monitoring also is helpful in determining agents' strengths, weaknesses and overall efficiency. Monitoring feedback by the supervisor can be used for performance reviews to increase productivity. And having your managers and merchants perform monthly call monitoring can be a great way to stay in tune with your customer base.
6. Use universal agents. CSRs who can take orders, respond to e-mails and handle customer service functions are assets to your organization. These CSRs are capable of switching tasks as the workload requires, thus maximizing productivity. Using universal agents, particularly at off-peak times, reduces your need for so many dedicated agents.
We've found that a mix of universal and dedicated agents within a contact center provides a balanced workforce that reduces costs and increases efficiency. Remember, though, that using universal agents makes it tough to track actual work performed and costs associated with each duty — tracking you may want to do for benchmarking purposes.
7. Reduce backorders. Backorders not only cost customer service the time to answer the inquiry "Where's my order?", they also cost to ship the product once it arrives in your distribution center. With backorder costs typically ranging from $7 to $12 per unit, it doesn't take long for expenses to add up. And those costs come right off your bottom line.
Analyze backorders to improve the accuracy of your inventory forecasting. For a more advanced forecasting system, the ROI usually occurs in 12 to 18 months, based on your reduction in backorders and improved turnover.
Takeaway tip: Review your customer order fill rate; you don't want to be out of stock or overstocked. Here's an example of backorder costs: A typical catalog with a 20 percent backorder rate averaging two items per order, processed 200,000 orders for a total of 400,000 units of merchandise. But with 20 percent backorders, 40,000 customer orders were on backorder. Estimating backorder costs on the low end at $7.37 per order, the catalog would have to absorb $294,800 to make up for those backorders.
Distribution Center (DC)
8. Determine the correct picking slot locations for your merchandise. Focus on product velocity (sales) and size (cube) in placing products in the pick line. Have in storage at least one week's (average) unit movement in the pick slot, and
provide various slot sizes.
9. Reduce picking time. You have many picking methodologies to choose from: batch, zone, pick and pass, pick to cart, and pick to box, to name a few. Analyze the type of products and orders (e.g., single vs. multiple) you get, then devise the most efficient pick-path processing to reduce staff travel time. Separating fast-moving items from slow-movers and establishing a "hot pick" area for extremely fast-sellers is a great idea. (FYI: Picking rates can range from 115 units per hour to as high as 180.)
10. Streamline the packing process. If your DC staff isn't doing pick to box, can your system determine the appropriate box size for the packers? Is the pack station clean and ergonomically safe? Is the appropriate dunnage inserted into each box? Where is the pack-verify process performed? These are just a few of the questions to answer when analyzing your pack area. Remember, presentation to the customer is as important as quickly getting the shipment out the door. (FYI: Average packing rates are 35 to 40 per hour.)
11. Manage inbound freight. Multichannel merchants often spend 2 percent to 4 percent of gross sales on inbound freight. Yet this area is one of the most overlooked for significant cost reduction in many companies. Most successful companies that have paid attention to inbound freight view it as controlling inventory in transit. Since inventory is, in many cases, your largest asset, managing it well is critical to your success.
Takeaway tip: Periodically get competitive bids on your inbound freight business. Tracking inbound freight receipts and scheduling frees up your dockyard and provides the chance to schedule receiving personnel when needed.
12. Manage outbound freight. With carrier cost hikes of 3 percent to 5 percent annually, and outbound freight rates of 8 percent to 12 percent of net sales, such expenses often comprise the first area to get questioned when cost reductions are needed.
Takeaway Tip: Get competitive bids on outbound freight to ensure the best pricing. Combining inbound and outbound freight with one carrier may offer savings. Many multichannel marketers use shipping and handling charges to offset the cost of outbound freight and package handling. Some have grown dangerously close to 20 percent of net sales.
13. Focus on replenishment tactics. If items aren't available for pickers, orders are set aside for resolution, which creates inefficiencies and lost productivity. Takeaway tip: To ensure that sufficient merchandise is available when pickers need it, employ a combination of scheduled replenishment of the primary pick slot using the min-max and demand-replenishment concepts. These will increase the likelihood that products are available when needed.
14. Develop a vendor-compliance program. Every function — from receiving to shipping — is impacted in some way by your vendors. Hence, a detailed and enforced vendor-compliance program will do as much to improve your DC operations as any one thing you can do. Vendor compliance means products arrive from a vendor as they should — in proper condition and delivered in the agreed-upon manner.
In addition to product quality, compliance standards that vendors must meet could include:
- packaging and shipping requirements;
- advanced shipping notices;
- master case and inner case, case labeling, product packaging and polybag specifications;
- accounting and paperwork requirements;
- logistics requirements and routing guides; and
- scheduling and statistical sampling requirements.
Benchmarking — KPIs
15. Develop benchmarks. By developing a set of consistent and measurable key performance indicators (KPIs), you can measure costs, productivity and efficiency. Once you've completed and analyzed your existing operation, compare it to accepted industry benchmarks. Avoid using general industry averages; they won't be specific to your business in product type, size and customers. Many companies are using management reporting online for critical KPIs for contact center and fulfillment. Remember: You can't improve what hasn't been measured.
Curt Barry is president of F. Curtis Barry & Co., a Richmond, Va.-based firm that specializes in multichannel operations and fulfillment consulting for catalog, e-commerce and retail companies. He wrote this article at the request of Catalog Success editors. Contact him at (804) 740-8743 or by e-mail at email@example.com. Or visit the company Web site at www.fcbco.com.