Catalog Marketing 101 (8 of 8)

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Catalog Marketing 101 - Operations & Fulfillment
If you can't take the order, ship the order, manage the inventory, and give your customers good customer service, then your catalog is going to fail. Catalog operations and fulfillment are not the sexy part of catalog marketing, but they are as necessary as breathing. It is the most important part of your catalog business. Without it, all the marketing in the world is not going to save your business. Mess it up and your customers will simply not comeback. We'd like to believe that we are the only game in town, but when it comes to products, most can be purchased somewhere else. If it's a new customer, making their first purchase, you get only one chance. This section of the Catalog Marketing 101 tutorial walks you through every step of the fulfillment process and the things you need to know to run a successful catalog operation. As a marketer, you are probably more interested in the creative side of the catalog business, but this will make or break a catalog, so you need to know what is involved even if you're not the person ultimately responsible for operations and fulfillment. This tutorial will help you do that.

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  • A cataloger should provide these services to customers to maintain good relations.
    Test your competition by calling, texting, writing, emailing, ordering and returning - - everything - - just to see what you are up against.
    You are in competition with everyone in your space and must be better than them all.
    Because there are so many sources for each product or service, companies must distinguish themselves from the herd, and superior customer service is one way to do so.
  • This is a list of the primary catalog operations in fulfillment.
    The most important factors of catalog fulfillment are speed and accuracy.
    Having the fastest service with the least amount of errors is the goal.
  • This is a list of the standard fulfillment expectations for the catalog industry. Most catalogers try to achieve these standards at a minimum.
  • All your manpower planning and staffing, scheduling and forecasting will be based on the “parameters” that follow.
  • The combination of the components of these parameters will dictate your entire operation.
  • The number of current customers as well as the availability of appropriate prospect lists will contribute to the development of the catalog circulation plan. This is explained in more detail in the Catalog Marketing 101 discussion.
    Order volume is circulation driven. Once accurate response rate and average order values can be forecasted, order volume is more easily predicted.
  • The primary goal here is to be competitive. If your primary competitors offer 24/7 order processing and customer service, you better do so as well, and be much better at the same time.
    Creating an atmosphere that makes it difficult for a customer to consider going elsewhere for their purchases requires that we are positioned competitively with our operation.
  • Your competitors will dictate what you need to do here, but the best idea is to allow customers to contact you any way they wish and then develop the infrastructure to support your decision.
  • The main factor here is “accuracy” and “completeness” of the information.
    Your order processing system should reflect “real time” inventory position and create an alert or suggest an order when any item hits a predetermined level indicating reorder is required.
  • Other parameters under order characteristics would include:
    Average order value $
    Average units per order
    Pay type (credit, cash, check, etc.)
    Gift recipients (any portion of the order being shipped to recipients other than the ordering customer)
  • There are several ways of presenting shipping charges and they are generally dictated by the merchandise being offered.
    A shipping charge for each piece of merchandise
    Use if you have broad merchandise scale and a difference in weight and insurance
    A shipping charge per number of items
    Use this if your merchandise is mostly similar in weight
    There will be a set charge for each item shipped
    You will lose on some items and come out ahead on others
    Downside – relatively inexpensive items may seem to have excessive shipping and handling charges in the customer’s mind
    Dollar value of merchandise chart on order blank
    If you merchandise is similar in price and weight, this is a relatively painless way to add on shipping charges
    Downside – you may lose money if the customer orders several or more of your least expensive items
  • Complete documentation on all procedures and guidelines are required.
    Quality control inspections of inbound merchandise should be part of the process of receiving.
    Inspect for color, size, specifications
  • Organization and function
    Executives
    Most catalog company hierarchies are represented at the executive level by finance, operations, marketing, merchandising and MIS or IT
    MIS (IT) represents all the hardware, software, and ancillary equipment that a company relies on to make the organization efficient and productive.
    The capabilities of your computer and related systems are the backbone of efficient and effective fulfillment.
    Management
    The fulfillment operation typically relies heavily on the office operations manager operating in compliment with the warehouse operations manager.
    Depending on volume, these divisions can be supported by many other management positions.
    Each management position requires a working knowledge of fulfillment techniques and an understanding of data processing support systems.
    The fulfillment function is supported by two operations areas: the office and the warehouse. In most organizations, administration supports both. It is charged with the handling of all accounting, communication, supplies management, budgeting, and personnel.
    While, the two groups interface directly or indirectly with the catalog customer, it is the charter of administration to provide the framework and materials necessary to make the other office areas fail-safe.
    Office operations
    Order processing
    Receives and enters all new orders by phone, mail, email, web or fax.
    Phone operator activity is monitored via the report capabilities of the automatic call distributor (ACD).
    In the mail/fax order area, the caging and phone order entry functions must be tracked to measure efficiency and establish productivity standards.
    Customer service
    Handles pending orders and other inquiries as well as complaints.
    Warehouse operations
    The breakdown of the warehouse functions must include:
    Receiving and quality assurance checks of new merchandise
    Returns processing of customer merchandise
    Inventory control
    Shipping of parcels to customers
    The warehouse staff is charged with maintaining the merchandise so that the orders may be processed accurately and efficiently.
  • Operations management people are responsible for the customer experience and are key factors in the creation of long term happy customers and profitability.
  • Pick/pack/ship speed and accuracy - - both necessary and accuracy is the most important.
    Instant fulfillment is no good if it the wrong item is shipped.
    Setting up pick area with high volume items easily accessed and order processing system that creates pick tickets in warehouse walk sequence allows for faster fulfillment.
    Make sure pack stations have everything necessary for packing, including any inserts and other marketing material required. While the creation and measurement of the success of package inserts, catalog bounce-backs, etc. are part of the marketing effort, the distribution of those items is the responsibility of the warehouse operations.
  • Very important to have some experience in advance of main catalog drop.
    Assuming you are already fulfilling web based orders, your current staff can be easily trained to assist customer via phone
  • Show and Tell
    When possible, have 1 of each item offered available for ands on training for each person responsible for speaking with and interacting with customers about products.
    There is no substitute for actually having held the products in your hands prior to catalog drop and live orders.
    This is true for internet chat associates as well.
  • Processes per minute and per hour analysis will be crucial for manpower planning and should be compared to the forecasted number of orders, call, returns, etc.
    Examples:
    5 minutes to process an order
    500 orders per day
    2500 minutes of work
    42 hours of work to be accomplished
    7.5 hours of productivity per associate per day
    5.55 FTE’s required
    just to process the orders
    Plus freight handling, qc, returns processing, stocking, etc., etc.
    ------------------------------------------------------------------------------------------------------
    Once base line performance numbers are developed, it is very easy to measure against the norms.
    Training is the key to reducing the error rates and inefficiencies that sap profitability as customers become less loyal with each mishap.
  • The perpetual real time information is critical to the successful operation.
    Auto replenishment purchase orders (based on pre determined stock levels)
    Auto cancel of back up orders when completion curve benchmarks are hit and additional merchandise not required
    Cycle counts
    Receiving accuracy
  • Each item in the catalog should have a substitute item assigned to it. This allows the rep to suggest something “close” to what the customer is asking about, if the original item is out of stock. This “cross-sell” opportunity is very helpful when the customer is gift shopping and something is out of stock or on back order.
  • Outsourcing the inbound telemarketing if often a good way to reduce costs while maintaining high levels of customer service and avoiding the inevitable issues associated with doing everything in house.
    Avoiding the problems of overstaffing to avoid long on hold times reduces the abandoned call rate.
    Once you know the % of total call that result in a sale - - typically 40% to 50% you can quickly calculate the lost sales.
    Example:
    In an hour there are 100 calls, and 50 of them are answered.
    50% of the unanswered 50 are sales calls (25)
    The average order value is $100 x 25 lost sales calls = $2500 lost sales that hour.
    Having an overflow vendor prepared to take those calls once the in house telephone system reaches a predetermined number of call “on hold” will help minimize the lost sales, provide better customer service and create a better opportunity for repeat business.
    Drop shipping, results in having the orders for particular items transmitted directly to the manufacturer or “source” for shipment directly to the customer.
    This reduces the amount of work and costs necessary “in house” such as
    Warehousing, pick, pack, shipping of those items.
    Buying and inventory maintenance of those items
    Disposition of residual merchandise on those items
  • Catalog Marketing 101 (8 of 8)

    1. 1. Catalog Marketing 101 Workshop By Dudley Stevenson, Mark Eubanks (651) 315-7588 Catalog Marketing 101 Workshop 1
    2. 2. Table of Contents • Part 1 – Catalog Marketing Overview & E-Commerce • • • • • • • Synergy Part 2 – Front & Back End Marketing Part 3 - Catalog Merchandising Part 4 – Catalog Creative & Design Part 5 – Catalog Copy Part 6 – Catalog Production Part 7 – Management, Financials & Analytics Part 8 – Operations & Fulfillment (651) 315-7588 Marketing Planning 101 Workshop 2
    3. 3. Catalog Marketing 101 Part 8 Operations & Fulfillment (651) 315-7588 Marketing Planning 101 Workshop 3
    4. 4. Overview • • • • • Perhaps the most important part of your business. All the marketing in the world cannot save your business if operations and fulfillment are not adequate. Your customers will simply not return if they are not having good experiences with your company. Test your competition by calling, texting, writing, emailing, ordering and returning - - everything - - just to see what you are up against. You are in competition with everyone in your space and must be better than them all. Because there are so many sources for each product or service, companies must distinguish themselves from the herd, and superior customer service is one way to do so. (651) 315-7588 Marketing Planning 101 Workshop 4
    5. 5. Customer Service • A cataloger should provide these services to customers to maintain good relations: – – – – – – – – – 24/7 operations #800 inbound phone service Well trained multi tasking agents Real time access to everything Live chat Unconditional merchandise guarantee Price uniformity across all channels Fast accurate pick/pack/ship Fast returns processing – refunds and exchanges (651) 315-7588 Marketing Planning 101 Workshop 5
    6. 6. Catalog Fulfillment • This is a list of the primary catalog operations in fulfillment: – Receiving • Quality Control – Warehousing – Pick/Pack/Ship – Returns processing • Refurbish and restock; Exchanges; Return to vendor – Order processing • Inbound telephone; Web; Mobile – Catalog request fulfillment • The most important factors of catalog fulfillment are having the fastest service with the least amounts of errors. (651) 315-7588 Marketing Planning 101 Workshop 6
    7. 7. Fulfillment Standards • The standard fulfillment expectations for the catalog industry – Orders for in-stock merchandise shipped within 48 hours – Returns processed within 72 hours of receipt – Customer service issues handled within 48 hours of receipt – 85% of all phone calls answered within 20 seconds – Average wait time for calls to be answered – less than 30 seconds – Abandon call rate of less than 3% (651) 315-7588 Marketing Planning 101 Workshop 7
    8. 8. Fulfillment Responsibilities • Key areas - Functional responsibilities are usually broken down by those handled in the warehouse and those handled in the office. • In the warehouse – – – – – – (651) 315-7588 Receiving Quality Assurance Returns Processing Inventory Control Picking and Packing Shipping • In the office – – – – – – Telemarketing Customer Service Caging Order Entry Computer System Telephone System Marketing Planning 101 Workshop 8
    9. 9. Setting Operational Parameters • This is the planning phase and it involves a series of exercises aimed at understanding your business. • The exercise involves building financial, operational, and organization models based on revenue forecasts and anticipated characteristics. • The characteristics known as parameters, represent the building blocks of the operation. • All your manpower planning and staffing, scheduling and forecasting will be based on the “parameters” that follow. (651) 315-7588 Marketing Planning 101 Workshop 9
    10. 10. Parameters List 1. Order volume 2. Hours of operation 3. Order methods 4. Merchandise information 5. Order characteristics 6. Special services (651) 315-7588 Marketing Planning 101 Workshop 10
    11. 11. Parameter – Order Volume • The availability of capital usually dictates your catalog circulation. The number of current customers as well as the availability of appropriate prospect lists will contribute to the development of the catalog circulation plan • In turn, order volume depends on circulation. • The entire fulfillment operation—size, components, maybe even location—is dependent on projected order volume. • Once you know your circulation size, you must anticipate response rates in your market and forecast volume. – e.g., if you have a circulation of 500,000 catalogs and can expect a 1.5% response rate, your projected order volume is 7,500 orders. (651) 315-7588 Marketing Planning 101 Workshop 11
    12. 12. Parameter – Hours of Operation • Many of your costs are influenced by the hours you are open for business. • The primary goal here is to be competitive. If your primary competitors offer 24/7 order processing and customer service, you better do so as well, and be much better at the same time. • Creating an atmosphere that makes it difficult for a customer to consider going elsewhere for their purchases requires that we are positioned competitively with our operation. (651) 315-7588 Marketing Planning 101 Workshop 12
    13. 13. Parameter – Order Methods • Your competitors will dictate what you need to do here, but the best idea is to allow customers to contact you any way they wish and then develop the infrastructure to support your decision. • The manner in which orders come to you—via 800 lines, toll lines, mail, web, or fax—influences your personnel and equipment requirements. • Determine which options you’re going to provide for your customers and build the associated operation procedures. • Don’t forget to include customer service calls and catalogrequest volume in consideration for personnel and phone lines. (651) 315-7588 Marketing Planning 101 Workshop 13
    14. 14. Parameter – Merchandise Information • The main factor here is “accuracy” and “completeness” of the information. • Your order processing system should reflect “real time” inventory position and create an alert or suggest an order when any item hits a predetermined level indicating reorder is required. • The number of stock-keeping units (SKUs), line items, sets, inventory turns per year, peak inventory volume, assembly requirements, and the size, stackability, and type (handing or folded, soft goods or hard goods) of your product greatly influences your warehouse space requirements. • The computer software system you select dictates your ability to manage the merchandise in the system and in the warehouse. (651) 315-7588 Marketing Planning 101 Workshop 14
    15. 15. Parameter – Order Characteristics • • • • • Knowing the percentage of orders that are drop-shipped from manufactures, the percentage of back orders, and the average number of units per order affects warehouse space needs, labor requirements, and demands on your computer system. Drop-shipped items eliminate the need for space in your warehouse. Back orders put added stress on data processing and productivity. The system must generate 30-day, 60-day, and 90-day Federal Trade Commission notices for back orders. Split shipments require duplicated effort in picking and packing time and extra shipping costs. Other parameters under order characteristics would include: – Average order value $; Average units per order; Pay type (credit, cash, check, etc.); Gift recipients (any portion of the order being shipped to recipients other than the ordering customer) (651) 315-7588 Marketing Planning 101 Workshop 15
    16. 16. Parameter –Special Services • Offering gift boxes, cards, and warp requires additional packing time, and depending on volume, additional personnel. • Customization procedures such as engraving and monogramming require extra space and special skills. You must determine how these special services will be handled. (651) 315-7588 Marketing Planning 101 Workshop 16
    17. 17. Shipping & Handling Costs • Determining shipping and handling cost is a key factor in the success or failure of a catalog. – 1st consideration – do you want to make a profit or breakeven on shipping and handling costs? • Three ways of presenting shipping charges – A shipping charge for each piece of merchandise – A shipping charge per number of items – A shipping charge based on the dollar value of merchandise ordered (651) 315-7588 Marketing Planning 101 Workshop 17
    18. 18. Order Processing Requirements • 24/7 • Qualified agents • #800 • Web site integration • Accurate data entry • Online real time access to inventory and order history • Accept all pay types (651) 315-7588 Marketing Planning 101 Workshop 18
    19. 19. Catalog Inventory Management Factors • Purchase order management – Initial order – Replenishment/backup orders • • • • • • • Accurate and complete receiving documentation Accurate demand sales information Cycle counts Back order processing Picking procedures Complete documentation on all procedures and guidelines are required. Quality control inspections of inbound merchandise should be part of the process of receiving. Inspect for color, size, specifications (651) 315-7588 Marketing Planning 101 Workshop 19
    20. 20. Organization & Function • Executive • Operations Management • Office Operations • Warehouse Operations (651) 315-7588 Marketing Planning 101 Workshop 20
    21. 21. Operations Management • • • • • • Operations management people are responsible for the customer experience and are key factors in the creation of long term happy customers and profitability. The fulfillment operation typically relies heavily on the office operations manager operating in compliment with the warehouse operations manager. Depending on volume, these divisions can be supported by many other management positions. Each management position requires a working knowledge of fulfillment techniques and an understanding of data processing support systems. The fulfillment function is supported by two operations areas: the office and the warehouse. In most organizations, administration supports both. It is charged with the handling of all accounting, communication, supplies management, budgeting, and personnel. While, the two groups interface directly or indirectly with the catalog customer, it is the charter of administration to provide the framework and materials necessary to make the other office areas fail-safe. (651) 315-7588 Marketing Planning 101 Workshop 21
    22. 22. Office Operations • • • In most companies, the office operations people are responsible for the data entry off all product information into the operating system. Order processing – Receives and enters all new orders by phone, mail, email, web or fax. – Phone operator activity is monitored via the report capabilities of the automatic call distributor (ACD). – In the mail/fax order area, the caging and phone order entry functions must be tracked to measure efficiency and establish productivity standards. Customer service – Handles pending orders and other inquiries as well as complaints. – Accurate data capture and quick responses to issues – Fast turn around on returns and refunds (651) 315-7588 Marketing Planning 101 Workshop 22
    23. 23. Warehouse Operations • The breakdown of the warehouse functions must include: – – – – Receiving and quality assurance checks of new merchandise Returns processing of customer merchandise Inventory control Shipping of parcels to customers • The warehouse staff is charged with maintaining the merchandise so that the orders may be processed accurately and efficiently. • Setting up pick area with high volume items easily accessed and order processing system that creates pick tickets in warehouse walk sequence allows for faster fulfillment. • Make sure pack stations have everything necessary for packing, including any inserts and other marketing material required. (651) 315-7588 Marketing Planning 101 Workshop 23
    24. 24. Staffing • Hiring associates – Need to find and hire the right people. – Don’t underestimate the amount of time the hiring process requires. – Match the personalities of your customer service reps with those of your customer base. (651) 315-7588 Marketing Planning 101 Workshop 24
    25. 25. Staffing • Pre-employment screening techniques – Company specific employment application and personal interviews – Written integrity tests to assess person’s character to determine if applicant is prone to violent behavior, dishonesty, or otherwise unsuitable for certain types of employment – Medically supervised physicals and drug screening – Call and voice test prospective phone reps • Make sure that even though the reps and customers speak the same language that their understanding and use of the language is similar – Match the personalities of your customer service reps with those of your customer base. • Studies show that phone reps and the customer are more comfortable if they share common interests (651) 315-7588 Marketing Planning 101 Workshop 25
    26. 26. Staffing • Start-up personnel – Plan to have most of your personnel in place 2 to 4 weeks prior to mailing the catalog – Plan an adequate amount of time for training. (651) 315-7588 Marketing Planning 101 Workshop 26
    27. 27. Staffing • Flexible associates – Because of the variable volume of orders, it is a good idea to have an organization of permanent part-time employees to compliment your full-time workforce. – The profile of the ideal permanent part-time employee is an individual who is not interested in working full-time, but is seeking a supplemental income – Look for people who require little notice to work extended hours (e.g., college students, housewives, disabled persons, retirees) – If you can afford to work with a reputable employment firm, do it to reduce the initial time to screen for certain positions. (651) 315-7588 Marketing Planning 101 Workshop 27
    28. 28. Staffing • Associate work areas – To perform the functions of their job effectively, and efficiently, each associates needs to have sufficient space, a clean environment and the necessary tools. • Ergonomic furniture and work stations • Adequate supplies, etc. (651) 315-7588 Marketing Planning 101 Workshop 28
    29. 29. Training - Procedures • To assure good customer service, every associate must be familiar with company policies and procedures, as well as receiving jobspecific training relative to their job function. • Some associates require special training and a license to operate equipment such as forklifts. • Build outside training needs, such as software classes into the process and budget. • Training takes anywhere from 3 days to 2 weeks for most entry level associates such as mail handlers, receiving and returns clerks, and other associates that cross-train to support another job function. (651) 315-7588 Marketing Planning 101 Workshop 29
    30. 30. Training - CSRs • • • • For CSRs supporting a simple and easy to understand product line, a 3 day training agenda consisting of reviewing the products, policies, and procedures 2 ½ days of working on the phone w/ a senior associate More complex products require more training and hands on experience Develop a catalog product manual for a reference guide for phone reps – Create your own product manual by removing the binding of your catalog and putting the sheets in a three-ring binder. – Behind each catalog page, provide the detail necessary to support each item displayed: e.g., dimensions, true color, weight, or other features not easily seen in the catalog photograph – Or this information can be entered into your catalog management system (651) 315-7588 Marketing Planning 101 Workshop 30
    31. 31. Training – Management Programs • There is no formal fulfillment education available, a requisite skills management training program in complement with on the job training and mentoring should be quite effective. • The classroom should emphasize – – – – – The marketing side of DM Finance Controlling and measuring fulfillment Working with hourly associates Developing and improving productivity standards • The DMA offer some course work in this area (651) 315-7588 Marketing Planning 101 Workshop 31
    32. 32. Training - Recognition • A key to guiding your associates toward achieving their peak efficiencies is to train your managers to recognize good performance. • Encourage managers to get to know their people – monitor progress, reward performance • Not only should managers be trained to recognize good performance, but upper management and owners should recognize and reward superior performance at every level. (651) 315-7588 Marketing Planning 101 Workshop 32
    33. 33. Calculating Productivity • • • • • To determine how your associates are doing, you need to gather and evaluate statistical data on productivity. To calculate productivity, 1st identify each labor task as a measurable unit. By diving the total units of output by the total labor hours associated with the activity, you have a current performance statistic for a given task Another method is to set performance standards and calculate their associated labor costs. Over time after accumulating output and cost data on each task, you can summarize the information into the total labor cost per unit of output for the fulfillment operation. Communicate the productivity standard for each task to your associate and measure individual performance against it. (651) 315-7588 Marketing Planning 101 Workshop 33
    34. 34. Inventory Control Factors • Everything that touches inventory can also mess it up. • Accuracy and standardized procedures can help, but nothing is more important than associates paying attention to what they are doing and striving for accuracy. • Inventory Management • Receiving System • Order Entry/Customer Service • Orders Out, Ship Confirmation • Product Vendors • Stock Status (651) 315-7588 • Ancillary Costs • Impact on Nonwarehouse Functions Marketing Planning 101 Workshop 34
    35. 35. Inventory Control Management System • Perpetual real time information is critical to the successful operation. • The computer system handles repetitive inventory tasks, such as counting merchandise and compiling daily demand • The system should update records instantly so that the merchandise is immediately available and orders can be filled quickly. • This provides a perpetually current listing of what and how much merchandise is in your warehouse. (651) 315-7588 Marketing Planning 101 Workshop 35
    36. 36. Inventory Control Order Entry/Customer Service • The ability to access inventory records as an online resource enhances your level of customer service • The CSR can advise the customer if the merchandise is in stock; or if a back order situation exists, when the next shipment is due • The system should also offer substitute and cross-sell opportunities from existing inventory (651) 315-7588 Marketing Planning 101 Workshop 36
    37. 37. Inventory Control Orders Out / Ship Confirmation • System controlled inventory in conjunction with bar-code technology and a manifest system can tell you exactly when the merchandise is out the door. • Emailing a shipment confirmation keeps the customer informed about the status of their orders. • When possible, a tracking number should be communicated so that customers can track their own orders. (651) 315-7588 Marketing Planning 101 Workshop 37
    38. 38. Inventory Control Product Vendors • Since each SKU originates with a purchase order and a vendor, you should maintain a complete history of all productrelated transactions with your suppliers. • To simplify the receiving process, instruct your vendors to mark inbound shipments with a purchase order number. – The PO triggers the system to call up the vendor record, a listing of all pending transactions. – Your receiver may then compare the details of the goods received with the PO and note any discrepancies. (651) 315-7588 Marketing Planning 101 Workshop 38
    39. 39. Inventory Control Receiving • • • • • When new merchandise is received, the system should assign an SKU number and select the appropriate prime or bulk storage location, taking into account such product specifics as size, weight, storage requirements, and sales forecast. Depending on demand, replenishment goods should go directly to a prime location. Backordered merchandise should bypass storage and be sent directly to the packing area so that pending orders may be immediately expedited. The SKU is an internal tracking number and the system must automatically cross-reference each SKU to one or more merchandise catalog numbers. To further assist inventory control, some systems generate identification stickers with a product description and SKU imprinted both alphanumerically and in a bar code. (651) 315-7588 Marketing Planning 101 Workshop 39
    40. 40. Inventory Control Stock Status • Some systems reconcile inventory against all SKU activity from a beginning position, weekly, monthly, or cumulative to a time fixed by the cataloger. • The system should list on the report every transaction that affects your inventory status – by SKU and reason code • Your sorting parameters should include specific activity categories such as receivable, returns, damaged, defective, outbound orders, and goods returned to vendors. • You may want to further define your stock activity in adjunct reports by volume (SKUs with the most activity listed first) and/or revenue (SKUs with the highest dollar value.) (651) 315-7588 Marketing Planning 101 Workshop 40
    41. 41. Inventory Control Ancillary Costs • Inventory costs include inputs above and beyond the price of purchased goods. • Besides handling costs, there are holding costs such as taxes, insurance, and storage space. • With better inventory control techniques, you can reduce these ancillary costs (651) 315-7588 Marketing Planning 101 Workshop 41
    42. 42. Inventory Control Impact on Nonwarehouse Functions • • • • The data associated with an inventory control system provides accurate trend and point in time information on stock availability to marketing and merchandising. As a result demand and product reception in the marketplace can be analyzed daily as well as over time to assure more accurate and timely purchasing and forecasting. They system should update the cataloger’s book inventory to subtract goods/orders shipped and add receipts and returns for the days. The daily system reconciliation process should include back orders, held orders by reason, and in the warehouse (packed and labeled but not shipped) packages. As a direct result of the inventory control process the system provides an audit trail to accurately represent a day’s revenue activity. (651) 315-7588 Marketing Planning 101 Workshop 42
    43. 43. Fulfillment Technologies • • • • • Technology has made the fulfillment function easier and almost mistake proof. With these technologies, the associate time and related expense to perform warehouse functions is reduced, thus reducing the actual number of people required to perform the activity. The customer’s order can be accommodated more quickly and accurately The selection of a core software system is one of the most important decisions you will make Determining your catalog policies and fulfillment procedures will be easier with an understanding of the system’s capabilities. (651) 315-7588 Marketing Planning 101 Workshop 43
    44. 44. Fulfillment Technology • The technologies – bar coding, computerized inventory control, electronic purchase orders, system generated pick lists and customer packing slips – Bar codes have significantly expedited the shipping process – Wanding bar code at shipping dock triggers several simultaneous things in the system • The customer record is updated to show that the merchandise has shipped • The physical inventory and book inventory are revised • An electronic data transfer (EDT) advises the credit processing company of the transaction so that the proper payment is issued to the cataloger • The shipping manifest is printed automatically (651) 315-7588 Marketing Planning 101 Workshop 44
    45. 45. Systems Support • Picking your fulfillment software system is of supreme importance – Do your homework, check with other users of the system before purchasing • The same applies to the selection of an automatic call distributor (ACD) telephone system • Make sure there are active, vendor sponsored user groups when deciding about fulfillment, telephone, or any system. These groups of active users are very valuable resources for trouble shooting. (651) 315-7588 Marketing Planning 101 Workshop 45
    46. 46. Space Requirements • Once you know your projected order volume, the number of SKUs, the average number of items per order, the peak inventory level, the number of phone vs. mail orders, the type and size of your products, you are on to determining your facility’s space requirements. • Order entry/customer service • Merchandise storage and handling (651) 315-7588 Marketing Planning 101 Workshop 46
    47. 47. Building Supplier Relations • Credit authorization – The majority of transactions today are credit card, so be sure your computer system is able to communicate electronically and transmit information back and forth to the authorization company. • Check validation – It will be more cost effective to use an outside check-verification company (651) 315-7588 Marketing Planning 101 Workshop 47
    48. 48. Building Supplier Relations (cont’d) • Transportation – You need to establish good relationships with shipping companies. – The most commonly used are USPS, UPS and FedEx in the United States – Whichever carrier you chose as your primary carries, you will need to develop a computerized manifest system to track the shipment of each order. – Perform a cost analysis to forecast your shipping costs per year. This will help you determine customer shipping & handling. – You can also save money on your inbound transportation – you should calculate your annual shipping requirements and based on these compilations, negotiate volume discounts with no less than three carriers. You may save as much as 20%. (651) 315-7588 Marketing Planning 101 Workshop 48
    49. 49. Building Supplier Relations (cont’d) • Consultants – If you need help with your fulfillment operation, seek out a consultant familiar with the direct marketing industry and the characteristics of your catalog segment. – The consultant can provide estimates on key metrics – such as % of back orders, returns, and mail vs. phone orders, based on the customers you’re targeting and the product you’re marketing (651) 315-7588 Marketing Planning 101 Workshop 49
    50. 50. Third-Party Fulfillment • Keeping up with the latest technology is expensive and time consuming, so you may want to consider third-party fulfillment as a viable alternative to running your own inhouse operation. • Economies of scale enable them to provide quality service below the cost of an in-house operation. • Choosing a third-party fulfillment operation – you will need to know all of your operating parameters and costs to compare them to the third-party supplier to aid the selection process. (651) 315-7588 Marketing Planning 101 Workshop 50
    51. 51. Partial 3rd Party Fulfillment • Outsourcing the inbound telemarketing if often a good way to reduce costs while maintaining high levels of customer service and avoiding the inevitable issues associated with doing everything in house. – Overflow – Avoid overstaffing • Drop shipping - Drop shipping, results in having the orders for particular items transmitted directly to the manufacturer or “source” for shipment directly to the customer. – This reduces the amount of work and costs necessary for all warehousing, buying, inventory management and disposal. (651) 315-7588 Marketing Planning 101 Workshop 51

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