For a multichannel B2B client with sales of $150 million annually doing ecommerce and wholesale, we performed an operational assessment to determine how it could make its two East coast facilities more efficient.
The business has an average order value over $400 and about nine packages shipped per order. The strategic plan was to add a West coast facility and select a new ERP to replace its 20-year-old legacy system.
The company has effective cost controls and expense reporting. Its controller produces an elaborate historical management report summarizing transactions, AOV and fulfillment expenses, called the “green book.” While the company has years of data, analysis did not reveal actionable areas to investigate and improve. One of the longer-term objectives is to detail report work by department and employee when the new ERP is installed.
This is how we helped this B2B company research and establish initial benchmarks to measure fulfillment center productivity, and the process steps used to collect and analyze the initial data:
Metrics to Analyze
Establish study group
The study group was made up of the CEO and vice president of operations to select and implementing metrics; the controller to summarize expenses and hours worked from payroll; and an IT/analytics person to understand data availability and sources and prepare the new analysis.
We initially focused on 14 fulfillment metrics every ecommerce company should monitor, as outlined in a previous blog post. If you’re starting to measure ecommerce productivity, this is a good place to start. Once you have these in place you can drill down to find ways to increase productivity with new procedures, processes and layout.
The chart below shows some of the basic differences in the level of detail between the existing management analysis (green book) and the new analysis to be developed (red book).
|Data Comparison: Two Analytical Approaches|
|Total fulfillment costs (incl freight, profit sharing, benefits, taxes)||x||x|
Map Expense Data to Analysis
In the prior blog we defined what expense centers in the P&L statement should be included in each metric. The controller then mapped the data from the expense system to the new analysis. For example, the facilities expense category was made up of lease costs, utilities and amortization/depreciation of material handling equipment.
Start by looking at 12 months of data. When you’re confident of the accuracy and have the reporting…