Not So Fast: Rethinking Multi-Item Orders
In the name of speed and satisfaction, many retailers think they're doing the right thing by delivering products to customers as quickly as possible, shipping partial orders, but that isn't always the case.
High on the list of shopper frustrations is placing a multi-item order online only to have it arrive in multiple shipments over several days. It's possible to delight convenience-seeking shoppers while still guaranteeing logistical efficiency, and it starts by assessing your retail shipments to orders ratio, or RSO.
RSO measures order fulfilment efficiency by calculating the number of packages a retailer ships for every digital order. The ideal RSO is 1.00—for every order received, only one package is shipped to the customer. Order routing business rules can affect RSO, and so can demand planning and forecasting accuracy, among other business strategies.
A growing number of digital orders are placed online via a variety of devices. Now add the complexity of merchandise spread across store locations or distribution centers around a continent. The RSO metric is important because you want to avoid excessive shipping costs and materials that hit your bottom line, while still delivering on promises made to customers.
There is a linear relationship between the out-of-stock (OOS) ratio and RSO. Out-of-stocks increase the number of shipments for any given order.
For example, with a retail OOS rate of 8 percent, you can expect the RSO to be 1.33. In this scenario, for every digital order received, the retailer sends 1.33 packages due to out-of-stocks. When OOS is at 0, you can achieve an RSO of 1.00. That means the location from which orders are fulfilled has a zero percent probability of being out of stock, resulting in each order being fulfilled in a single package.
Rather than single-rule order routing—routing all orders from a distribution center—omni-channel retailers can use multiple fulfillment options. A ship-from-store strategy can push inventory out of the DC and into more stores as localized inventory hubs. Using stores to fulfill orders can speed inventory turnover within a given store.
However, this can also unintentionally increase your RSO, if done without an order management system that can consolidate orders.
To keep RSO in check, route the order to the best fulfillment location. Determining that location will be the result of business rules you set up in your system.
If you focus on driving a ship-from-store strategy, more orders will flow to your stores. Then, switch on your consolidation engine to bring in inventory to the ship-from location, allowing that fulfillment hub to consolidate the order into one shipment.
Consolidating orders relies on the fact that most retailer internal delivery services cost far less than last-mile delivery charges. Get your ducks in a row before the box is sealed and sent along to its final destination, and you'll realize the cost-saving benefits.
Regularly check in on the health of your order fulfillment efficiency. Shoppers want their whole order fulfilled, not partial deliveries.