Companies like Google, Amazon, eBay, and Uber are operating and expanding services that allow shoppers to order something online and have it that same day, without ever leaving home.
In today’s instant gratification culture, it’s not surprising that retailers and distributors are focused on reducing the time it takes to get an order into the hands of a customer. With more companies following Amazon’s lead in offering same-day delivery and free shipping, customers now expect shorter order to delivery cycles which requires faster order fulfillment from the distribution center. And companies are looking at compressing fulfillment time as a way to compress their “cash to cash” cycle. Faster delivery to the customer often means
Faster payment, and ultimately, an opportunity to get paid before the invoice comes due on that inventory. In a recent customer experience study, 48% of customers stated they are not willing to wait more than five days for a purchase and more than 40% of online shoppers indicated they have abandoned their shopping cart because of an issue with the estimated delivery date. Depending on where your customers are in relation to your distribution centers, this may mean compressing fulfillment time to hours or minutes instead of one day. In addition to meeting customer demand for faster order processing, same-day fulfillment holds the potential for several other benefits.
Accelerating fulfillment often results in revenue growth and increased market share. The first to get the product to the customer gets the sale. Ask yourself, does being first have an advantage for your business? One automotive parts retailer uses same-day delivery from its Distribution Centers to its stores as a competitive difference. With hundreds of thousands of SKUs in inventory, it’s impossible to stock them all at each of its stores. But having the right part available at the right time is important to customers, especially for mechanics working on repairs. So the company makes a number of same-day deliveries from its DCs to its retail stores to ensure that any part in its inventory is available when the customer needs it. In some industries, it is not uncommon for a customer to order the same product from more than one company, with the intention of keeping the first one delivered and returning any later arrivals.
Later cut-off times combined with same-day fulfillment can be differentiated and leads to larger Orders. By extending its customer service cut-off times to 8 pm, the latest cut-off times in its industry, MSC Industrial Supply Company found that customers place larger orders. Knowing that MSC also backs its next-day delivery promise with a financial guarantee, provides its customers confidence that they can hold orders until late in the day and still get next-day delivery. MSC’s service promise is unique in its industry and has become a competitive advantage for the company.
Lower inventory costs
Companies benefit from lower inventory costs when they allow stores to offer a broader inventory assortment without carrying as much safety stock. Companies that consistently deliver on the promise of same-day fulfillment can eliminate excess safety stock, which reduces capital expense. A distribution network that can deliver any SKU any day to the retail store frees its stores from the burden of keeping high levels of inventory as a buffer against the slow replenishment of out of stocks by the DC.
Time-sensitivity can mean less price-sensitivity. Simply put, when a customer is in a hurry and needs something delivered the next day they are less sensitive to cost. One industrial parts distributor earns better margins on unplanned purchases (such as critical parts needed for repairs) than on planned purchases (work gloves) because its fulfillment network supports same-day fulfillment and next-day delivery.
Lower shipping costs
Less reliance on expedited shipping opens the possibility of less expensive shipping options. Retailers that fulfill orders quickly increase, their transit time window and can therefore use less expensive shipment options to meet their committed delivery dates. In addition, when orders can consistently be fulfilled same-day, it eliminates the need for expedited shipping costs to meet service requirements.