Why Is eComm Order Flow Data So Important?
eComm has so greatly disrupted the supply chain that it has essentially uncoupled the chain. This new ecosystem is much more like a node-connected web than a sequentially-linked chain. Orders can be filled from anywhere in system. This suggests to me that the most complex part of developing a sustainable eComm solution is figuring out where to locate inventory and optimize inventory policies.
And that’s why order flow data is so important. It provides a quick look into whether inventory is properly placed, and whether policies are aligned with environmental – and financial - sustainability.
To help explain, here’s an interesting case. Several years ago, a large retailer spent about $100M building a new fulfillment center to increase capacity, get closer to customers, reduce delivery costs, and reduce emissions. The average parcel delivery zone was expected to drop from about 3.2 to 2.8 (as in golf, lower numbers are better; the lower the zone number, the closer, faster, and less expensive the shipment). However, post implementation, the audit showed average parcel zone increased from 3.2 to 4.3. After all that, they were actually further away from customers.
How could this be, with more facilities physically located closer to customers? Because the rules dictating eComm inventory location can be complex, or sometimes not well thought through. The lesson is closer facilities may not always get assigned for many reasons.
No one knows exactly why zone efficiency got worse in this case. (Hint: with order-flow visibility they would quickly know and probably quickly solve).
Now, for clarity we should draw a distinction between order flow and package flow. Package data is easy to find. Carriers provide it weekly. Order data not so much, because it’s multi-functional (carrier data and order data). Yet orders and merchandise are what customers want, and hence the more important to measure.
Packages are a subset of orders. (We always see more package data than order data).
Package data tends to be more analyzed because of so much attention to last-mile complexity, speed and cost.
But most last mile analysis almost always focuses on package flow, cost, and speed. Package data doesn’t address the package contents, it’s just about the package.
Package data is mandatory for working with your carriers (and negotiated properly can save 10%-20% of your parcel spend - if you haven’t used an expert for this you should)
But package data simply isn’t enough information to understand the underlying ecosystem, that is, if inventory is properly located and how order sourcing rules generally behave.
Order flow data on the other hand, tells you how well your customers are being served, whether your inventory is well placed, where your sustainability issues are, and even whether you’re making money with eComm (most are not). Only order flow data provides information on the orders and items you are shipping.
From a sheer tactical perspective, line-item visibility from order data allows analysts to quickly isolate on what parcel experts call the cost-killers of eComm. We should note these are also big sustainability-killers:
SKUs that are out of inventory balance, resulting in “split package orders” (multi-line orders shipped from multiple locations resulting in multiple packages instead of one)
SKUs with poor package utilization (where item cube is significantly less than package cube)
SKUs with high cube factors that produce dimensional weight charges (and more sustainably picked up in store)
SKUs that are located far from end customer demand, driving higher zone charges
SKUs or order types that drive high expedited shipping charges
On a completely different front, order flow data can reveal the path taken from beginning to end. Whether a vendor successfully drop-ships (or possibly should have), whether the customer picks up at home (vs more sustainably at a store or a high-density locker), the entire end-to-end path from vendor to consumer (where strategically placed hubs can make a sustainability difference).
Granted, truly optimizing your eComm solution requires much more strategic analysis than isolating these tactical issues, and for most this is simply a first step.
My point is that this type of information is essential in getting your arms around understanding how well your current system is aligned with demand, and how much change may be needed.
I’m certain that if you hired a consultant to solve eComm they would ask for this information, or the pieces of it so they could create it.
The reason I share this as a first and foundational point about sustainable eComm is because unfortunately order flow information is vastly unknown yet tremendously needed. In the past 6 years I’ve worked with dozens of retailers on eComm solutions and almost none had this information available. And it’s relatively affordable and quick to obtain…positive outcomes should be expected within 4-6 weeks and generating benefits that quickly exceed the expense.
If this seems like a possible need, here are some questions to consider further:
Can your analyst see eComm line item cost performance within a few clicks? Rank SKUs from high cost to low? By different order types or customer segments?
Can they quickly identify which SKUs are causing split orders, have poor zone-efficiencies, or poor package utilization?
Can they report on your eComm emissions results, and see if it’s getting better as revenue grows?
Can your analyst determine what order-types are most costly? Most profitable?
Is this type of information available to your merchants to create more profitable offerings?
Do you know if eComm is operating at a profit, or a loss?
Order flow visibility is not very difficult. Call me if you’d like to know more and I can help you understand its viability and introduce appropriate partners.