3 Ways Retailers Can Avoid Warehouse Scalability Problems
Although growing quickly may seem like the ideal scenario, it can cause operational issues for retailers who are ill equipped to scale effectively. A rapid uptick in demand carries several added expenses that tax resources, cash flow and working capital. It requires financing to pay for more inventory, new staff, shipping and packaging costs, and any additional supplies or capital necessary to fulfill orders.
Without proper planning to ensure you can scale your online business, you can face cash flow and fulfillment problems that can be detrimental to your business. Even if you have enough financing or capital to meet a surge in demand, you can still face logistical and capacity issues.
In such a competitive online retail market, companies that fail to meet customer expectations and demand will fail. There's a delicate balance retailers must strike to achieve positive, sustainable growth and prepare their warehouse to scale to changing demand without compromising customer demand.
At Dotcom Distribution, we support clients with year-over-year growth rates of 50 percent or more. We've helped Birchbox scale from 40,000 sample boxes to 600,000 sample boxes per month, and Fab.com from 500 orders a day to 10,000 orders a day. We've found there are three surefire ways you can prepare to scale your business:
1. Define scalability needs ahead of time. Companies must define scalability requirements for their particular business. Retailers with consistent volume throughout the year that experience huge spikes during the holidays need to understand the options available to cope with short-term demand. Expanding shifts and outsourcing may be better alternatives than capital investment in equipment that's idle most of the year. Return on investment may never be achieved in the latter scenario.
For nonseasonal retailers that are coping with a fast-growing operation, there are a number of options in terms of material handling equipment, sortation solutions and automated packing equipment that may return the best ROI and provide the ability to scale for years to come. The key is to understand your company's need to scale, striking the right balance between maximizing your capital investments and cash flow while meeting customer demand.
Maria is CEO and co-founder of Dotcom Distribution, where she has played an integral role in developing and defining all aspects of the operation, including sales and marketing, operations, finance and IT. Her strategic leadership helps the Board and senior management to establish long-range goals, strategies, plans, and policies. Maria has developed the systemic and procedural infrastructure necessary to provide timely and accurate analysis of budgets, financial reports and financial trends in order to assist the Board, senior executives and clients in performing their responsibilities. Maria holds a CPA. Prior to founding Dotcom, she began her career as an Auditor at Arthur Andersen and was the CFO of GoodTimes Home Video.