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July 01, 2016

Working Smart

Fulfillment for Direct Selling Companies

by Vin Gulisano


Click here to order the July 2016 issue in which this article appeared or click here to download it to your mobile device.


5 Core Capabilities to Look For in a Warehousing and Fulfillment Partner

It’s a month after your annual conference and you’re on a high. Your company introduced two new products during the conference and your independent contractors across the country left excited and ready to sell. In fact, new orders are pouring in.

But an email from your warehouse fulfillment company stops you dead in your tracks. New orders are severely backlogged and they are looking for approval on a $25,000 overtime bill to cut into the logjam.

You’ve got no choice but to approve, but shouldn’t they have anticipated the increased volume?

Fulfillment companies unfamiliar with direct selling businesses may struggle with some of the unique requirements to serve this market, including order surges that often occurs after a successful conference. Following are five keys to success in fulfillment operations for direct sellers that help identify what to look for in a fulfillment partner. 

1. Scalable Infrastructure

As a direct seller, you could be one good Instagram post from a big demand spike or one product launch from exponential growth. Look for the following capabilities in your partner to determine if they can scale with your demand:

  • Nationwide locations. As you build traction in the market, you’ll want the ability to add locations to reduce transportation costs and delivery times.
  • Engineering and design expertise. Your warehouse layout, processes and automation must adapt to changing order profiles and increasing volumes. Choose a provider that can deploy systems and automation in a modular fashion, as your volume dictates.
  • Full-featured warehouse management system (WMS). Base WMS systems can handle basic operations. But what happens if you need your system to scale from 100,000 orders a month to 500,000? Will that require a major, unplanned capital investment? A full-featured WMS can handle the jump.
  • Real-world experience. It’s one thing to say, “We can handle it,” but it’s another to see proof of your provider’s ability to rapidly scale operations in response to a customer’s growth. Ask for customer recommendations to back up their claims.
  • 2. Flexibility to Handle Unpredictable Volumes

    In direct selling, there can be great variability in order volumes, day to day. BOGOs and other month-end promotions can potentially double volumes. That requires a fulfillment partner that can effortlessly flex its operations to absorb this added volume and then quickly ratchet down space and labor. In this way, fulfillment costs parallel your revenue stream.

    Key requirements include:

    • A multi-client warehouse where staff are cross-trained on the requirements of multiple accounts
    • Flexible contracts where you pay only for the space and labor you use in a given month
    • A knowledgeable management team that can collaboratively forecast based on a promotion schedule, history and experience with similar organizations.

    3. Flexible Systems with Real-Time Visibility throughout the Order Process

    Systems that can’t adapt to your requirements can bring your business to its knees. Proper vetting of providers in this area is critical.

    First, you’ll want a high level of confidence that orders will flow seamlessly between your direct selling platform and your fulfillment partner’s WMS. Look for partners that serve companies using top commerce platforms. You don’t want to be the guinea pig. Many fulfillment companies talk about data integration like it’s no big deal, but lack the systems expertise to build the required application program interfaces (APIs).

    It’s vital, too, that your partner’s system can meet some of the unique order processing requirements of direct sellers. For instance, many individual orders may go through party planners, who then arrange the final delivery. This requires a system that receives orders using a “parent-child” protocol, where the party planner is the parent. The system creates a pack slip for each individual order and these are added to a master case to ship to the planner.

    4. Packaging Excellence for Brand Consistency

    Customers of direct selling companies are not buying a commodity from the lowest cost supplier. They are making a lifestyle choice. As such, the relationship with the brand
    is critical.

    That’s why direct sellers want a high-quality presentation at delivery with a package that has their logo (not Amazon’s). They want the paper inside to be folded just so, and the product to be positioned a certain way in a box that may contain a personal note to the buyer. Basically, they want the package to arrive looking like a Christmas present.

    Your fulfillment partner must be capable of delivering this level of packaging customization, and they must do it as part of a high-volume, rapid-turn warehouse operation.

    5. Experience in the Direct Selling Channel

    Direct selling is a channel full of companies founded by entrepreneurs. For these companies, it’s not about beating the competition as much as achieving personal success. So there is liberal sharing of information among companies—on software systems, on sales strategies and, yes, even on fulfillment operations.

    Direct selling companies benefit from working with fulfillment partners that have experience with multiple direct sellers and can bring best practices to the table.

    Play an Active Role in Outsourced Fulfillment Partnerships

    In addition to the five core capabilities mentioned above, finding the right fulfillment provider for your direct selling company is just a first step. You’ll want to actively manage the relationship. Here are three suggestions for getting the most value from your fulfillment partner.

    Cultivate a true partnership.

    I know, that sounds trite. But isn’t it the goal? Don’t you want your fulfillment partner to think and act like an extension of your own team? Think about it; your fulfillment company’s associates are the last people to touch your product before it’s delivered. Everything can go right to that point, but if the order is wrong, or the presentation is shoddy, your brand’s reputation suffers. You want your fulfillment team to have a sense of ownership of the brand experience and an understanding of the key role they play.

    Achieving that goal takes time. While some direct selling companies may see fulfillment companies as replaceable vendors providing a service, there is greater potential for mutual success if they are treated instead as collaborative partners. Your best result won’t come from micro-management and constant price pressure; it will come from establishing, with your fulfillment partners, a joint culture of excellence, with the shared goal of delighting customers.

    Support KPI management.

    Key performance indicators (KPIs) are operational success measures. Typical fulfillment metrics look at order accuracy, on-time performance, and labor and space efficiency. KPIs should not be something you look at once a week when the report arrives from your fulfillment provider. Direct selling companies need to be actively involved in setting, measuring and evaluating KPIs, working hand in hand with your provider. One of your key roles is to report errors. Your provider will examine these errors over time and look for patterns. For example, let’s say mis-ships occur regularly for SKUs that are almost identical. A root cause analysis could indicate that the two products are too close together on the pick line and workers have mistakenly grabbed the wrong one. For the time you invest in KPI reporting, you should expect a corrective action plan on persistent issues. Regular communication is critical to the success of outsourced fulfillment operations, but too often communication happens when it happens. There is no established schedule to calibrate and coordinate with fulfillment providers. This offhand approach leads to surprises, and not the good kind. Let’s face it, direct selling is anything but predictable. Volumes rise and fall with promotions, seasons, new product introductions, sales meetings and other triggers. The more your partners know about volume dips and spikes, the better they can prepare by having just the right labor on hand to get the job done and control costs.  Your meeting schedule should not be limited to day-to-day tactical management. Quarterly Business Reviews (QBRs) are a great forum to examine performance trends, over time, and determine appropriate strategies to continuously improve. QBRs also should include a discussion of the future. For instance, if sales projections call for 30 percent growth in the next year, plans can be initiated to introduce labor saving automation to speed processing.

    Experience Is the Key

    Warehousing and fulfillment services are not all the same. For direct selling companies, complex inventory management, unexpected volume spikes, and custom packaging requirements are business-as-usual challenges that must be managed. Does your fulfillment provider have what it takes?  Once you find the right provider, the last thing you want is a hands-off approach. Work hard to create a close, collaborative partnership. That investment of time will pay off in better performance, lower costs and, most importantly, happy customers.
    Vin GulisanoVin Gulisano is CEO of Amware Logistics, a fulfillment company that helps e-tailers and direct sellers scale fulfillment operations through every stage of their growth cycle.