What Does Faster Order to Delivery Cycle Time Mean for Revenues?

July 26, 2017 | Pam Heydinger

Customers are demanding faster order fulfillment. A recent Fortna customer experience study showed that 48% of customers indicated they are not willing to wait more than five days for delivery of their order.

In response to this need for faster turnaround of products, companies are looking at ways to reduce the order to delivery cycle time, which includes the time it takes to fulfill the order and to ship it to the customer. Having the right inventory in the right place helps to aid in faster order fulfillment, which in turn leads to increased revenue.

Distribution centers are striving to reduce the number of touches and to fulfill orders in an hour or less. In the retail industry, faster fulfillment leads to less safety stock as stores don’t have to carry as much inventory knowing they can replenish it quickly. Instead of stocking a large quantity of a few products, retailers may choose to stock a smaller amount of a larger variety of products, providing opportunities for cross-sell/upsell and ultimately increased revenue.

Wal-Mart responded to the need for faster fulfillment by building a new fulfillment complex dedicated to e-commerce with state-of-the-art automation and warehousing systems. The new fulfillment center enables them to deliver orders faster and at a lower cost. Wal-Mart can fulfill orders for their most popular products within one to two days, depending on shipping method. This is a significant improvement from five years ago when it took Wal-Mart a week to fulfill an order. In an effort to keep the shipping cost per item in check while meeting customer demands for fast turnaround, Wal-Mart offers free two-day shipping on orders of $35 or more, which often drives the customer to add extra unplanned items to their cart. In response, Amazon reduced its minimum shopping cart size to get free shipping from $49 to $35 for non-prime members.

Another way that companies are reducing order to delivery cycle time is later shipping cutoff times. The benefit to this is not only to reduce the need for expensive expedited shipping, but also to capture more orders in a day and give customers more time to add items to their order, which increases revenue.

By extending order cutoff times and fulfilling orders more quickly, companies have a competitive advantage leading to increased revenue and improved profitability.

Posted in Other Topics, KPI, Key Performance Indicator

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