Live Chat

High-Performance Fulfillment: The 5-Point Guide to HPF Strategy

High Performance Fulfillment Banner by ModusLink.

Today’s brands are up against increasingly steep consumer expectations for immediacy. Companies need to get products in the hands of customers faster, more consistently and without incident (like a missing part)—lest their brand reputation suffer.

To meet these demands and stay competitive in their categories, companies are looking to supply chain innovation to optimize fulfillment.

In the minds of many companies, investing in supply chain solutions that support high-performance fulfillment (HPF) should be the key to unlock the service and speed they need to satisfy customers.

However, this is not quite the case. HPF is a strategy, rather than a one-size-fits-all solution for business. It is not the panacea for a company’s supply chain challenges.

That said, HPF is important, and increasingly necessary.

  • 67% of customers say their standards for good experiences are higher than ever1
  • 27% of companies think one of the largest upcoming challenges of the supply chain will be adapting to changing customer expectations2

Before organizations invest in HPF, they need to understand exactly what it is, what it does and the strategy behind it. They also need to ask a few questions about their business.

Here is a guide to HPF to help organizations deliver the consistency consumers expect.

 

Infographic: is HPF right for you?

High-performance fulfillment might be overkill for some businesses, even those that rely heavily on a solid supply chain.

HPF is perfect for some scenarios—but not all.

Take a look—

High Performance Fulfillment Infographic by ModusLink.

 

Lesson 1: What is High-Performance Fulfillment—Really?

Many organizations see HPF as a means to meet consumer expectations for fast delivery. But it’s important to know that HPF is not about shipping speed:

It’s about warehouse management.

Organizations can invest in an infrastructure for fast delivery all they want, but if it takes ages to process an order, customers are still left waiting.

HPF focuses on demand planning. Forecasting is extremely difficult, but its accuracy is critical. The better a business can forecast demand, the more strategically it can invest in its product.

To get the most accurate forecasts, organizations need 3 ingredients:

  • Quality, clean data
  • Capable data scientists who work in house and can build prediction models based on that data
  • A knowledge of the variables that impact the business’ demand

With the ability to forecast accurately, organizations will be better able to deal with spikes in demand.

 

Lesson 2: What does true HPF look like?

HPF equips organizations to fulfill orders with consistency, despite demand volatility. Spikes in demand can occur organically, or they may occur from businesses running promotions or big markdowns on price.

That said, despite increased traffic, consumers will still expect fulfillment to be “business as usual,” and brands need to be prepared to deliver.

While there will always be a ceiling for the volume of orders they can handle, that ceiling will be higher with HPF.

For example:

If consumers order a product on Black Friday, and the brand’s website guarantees two-day shipping, they will expect their product to ship in two days, even with the knowledge that Black Friday is the busiest commercial day of the year.

If an organization did not forecast accurately and can only push out 50 percent of its orders within two days of Black Friday, they have let down 50 percent of those customers.

What do consumers care about?

52% of shoppers prioritized guaranteed delivery dates over free shipping.4

When asked to choose the most important delivery factor during the holiday season, 29% reported a desire for a specific promise date and another 23% reported a delivery date range.4

Ultimately, organizations need to ensure that their supply chain isn’t holding them back from pursuing business opportunities. Fulfillment should not be the obstacle hindering business growth or standing in the way of customer satisfaction.

HPF equips organizations to capitalize on successful campaigns, products and promotions.

What might HPF look like for your company?

The key to making HPF work for a business is not fixating on extremely short turnaround times for fulfillment. It’s crucial for businesses to set their own goals—whether that’s 24-hour or two-week shipping times—and be consistent in meeting that standard despite fluctuating order volume.

HPF looks at what companies expect to sell and determines what infrastructure can facilitate the fulfillment of those orders.

This should include a full omnichannel strategy that accounts for brick and mortar as well.

Customers are 3.7 times more likely to view seamless transitions between channels as important versus unimportant.5

Having a comprehensive, reinforced omnichannel strategy is increasingly important as more consumers want the option to order products online and pick them up in-store.

Brands with a better understanding of inventory can ensure that their products are always in stock in stores, so they won’t miss out on potential sales.

What will HPF look like to the customer?

Unlike other supply chain tech, consumers may not notice the direct benefits of HPF.

Whereas other fulfillment solutions are geared toward impressing the consumer—from tracking numbers to two-day delivery to text updates—HPF keeps things running smoothly behind the scenes.

Customers can rely on their brand to complete orders on time and within the set expectations.

Are YOU ready for HPF?

Download our FREE ebook to discover how to prepare your supply chain for HPF.

Discover High-Performance Fulfillment

Grab your free ebook

Fill out the form below to receive your free ebook and discover the path toward HPF.

 

Lesson 3: How to know if HPF is right for you

HPF can be subjective, given it is based on the fulfillment standards a business sets for itself. For this, it is crucial for businesses to set their goals before developing an HPF strategy.

There are a few questions every organizations should run through:

1) What’s the goal?

Organizations need to ask themselves what they want to achieve with HPF. Do they want to reach any consumer in Europe within 24 hours? What does 24 hours mean?

Is it 24 hours until the product ships or until it arrives in the hands of customers? It’s important to articulate the difference, because those supply chain infrastructures look quite different.

Brands must also determine how much they realistically want logistics to make up their operating budget.

For most companies, logistics take up around 7% of the budget. For a large, highly e-commerce-centric company, it takes up to 25%.

This is why those organizations are able to build larger-than-life supply chain infrastructures.

However, if logistics is not a part of a company’s core business, it may not be wise to allocate such a significant portion of resources to the supply chain.

2) What do you sell?

Product type definitely impacts the speed of HPF. If a company sells large tractor tires, 24-hour fulfillment probably isn’t realistic.

However, fast-moving consumer goods, which are typically a maximum of 20 kgs and easy to handle, make it more feasible.

In considering its products, companies should look at:

  • Weight
  • Packaging ability (Are you shipping air? Is there a way to optimize your packaging?)
  • Ease of handling

3) What’s your expected growth?

As organizations set an HPF strategy—and implement supply chain solutions to fuel it—they need to align investments with their projected growth.

For example, how many products do they want to offer and what baseline do they need to hit? Do they plan to move into new markets?

Without a crystal ball, this task can be a major challenge for companies.

4) What are your biggest challenges?

Building an HPF infrastructure is expensive, which is why many companies opt to use one that is already established. If a company chooses to build out its own HPF infrastructure—and the goal is to guarantee 24-hour delivery in Europe, for example—they will need seven to eight fulfillment centers in that region.

They will also need to maintain enough inventory to be held in those warehouses, which requires significant incremental revenue.

Companies can partner with service providers to set up an HPF infrastructure without the financial investment, keeping money in the core business.

With a service provider, companies can tap into their partner’s network rather than having to worry about buying or renting warehouses.

Without the burden of real estate investment, brands can focus on placing the optimal levels of inventory across the right number of warehouses.

For example: Instead of 24-hour deliveries, companies can opt for a 48-hour lead time for all of Europe. This option delivers value to the brand’s customers while keeping inventory low, making it safer, smarter and simpler to grow business.

HPF is a tool that enables companies to open the consumer market without having any real investment tied to it.

 

Lesson 4: How to build an HPF strategy

HPF requires a sophisticated environment to work, but does not require sophisticated IT solutions. These are the essential building blocks needed to achieve HPF:

1) Front-end solution

HPF won’t deliver true value to businesses unless there is a front-end solution in place.

Think of HPF as a physical execution of the consumer’s experience on the front-end—it shares order data, calculates the weight and measurements of the product and ships it out.

Customer experience, as impacted by fulfillment, begins on a brand’s website; brands must make it easy and intuitive for customers to place orders with them.

2) Enterprise Resource Planning (ERP)

An ERP system is the foundation of core business processes and the relevant data that brands produce and leverage. It tracks business resources, from cash, raw materials and production capacity to purchase orders and more.

ERP facilitates information flow between all business functions by sharing data across various departments (manufacturing, purchasing, sales). This exchange is crucial to enhancing brands’ visibility into their business.

In supply chain management, ERPs track:

  • Supply chain planning
  • Supplier scheduling
  • Product configuration
  • Order-to-cash
  • Purchasing
  • Inventory

A WMS uses a database to support warehouse operations and keep track of the following elements:

  • Individual SKUs that are handled and stored
  • Warehouse storage locations
  • Dock doors
  • Expected labor productivity rates

3) Warehouse Management System

A warehouse management system (WMS) is the layer between the ERP and the warehouse control system.

It is designed to support and optimize warehouse functionality—moving and storing materials in and out of the warehouse—and distribution center management.

The WMS receives orders from the ERP system, manages these in a database and supplies them to the connected conveyor control systems.

It typically manages the following daily functions

  • Planning—finalizing the daily plan for receiving dock activity, selecting the orders to be processed that day and calculating an estimate of the labor and vehicles required to pick and ship the orders.
  • Organizing—sequencing the orders to be picked.
  • Staffing—assigning staff to work function and areas.
  • Directing—ensuring the processes and procedures are embedded in the WMS.

Most important, WMS allows brands to set up demand-based replenishments internally and in detail.

Demand-Driven Replenishment is crucial for HPF. It helps brands plan and manage the supply chain based on customer demand, rather than through traditional MRP procedures.

This is made possible by strategically decoupling material flows and by protecting the flow through dynamically-managed buffer (stock) levels for relevant products—helping brands to become less vulnerable to disruptions in the supply chain.

Supply Chain Management Strategy Lessons

Let’s look at a list of lessons HPF Supply Chain Management strategy:

Review the business.

Organizations need an honest review of their business. How did previous market entry go? Were they over or under forecast?

It’s important for a business not to oversell itself. The vision, solution and data need to be accurate, because those involved in this process will work with what is provided to them.

Don’t over- or under-engineer.

The company with the “biggest” supply chain solution does not always win. It’s important to invest wisely.

Get accurate data.

In order for the ERP and WMS solutions to deliver their optimal value, organizations need to ensure that they are inputting clean, quality data.

Item data accuracy is particularly vital in being able to manage any operations efficiently.

Consider whether the supply chain is part of the core business.

Rather than investing blindly, brands should think about the role the supply chain plays in their business.

For some companies, it’s a means to get their products in the hands of customers. For others, it’s a way to build brand loyalty and customer experience. Based on that answer, the company must choose where its resources go.

Determine your customer experience.

Businesses can’t have it all—quick lead times, low costs, higher margins, market penetration and guaranteed 12-hour delivery.

Brands need to decide what their customer experience looks like and what its value is, then figure out how to deliver it consistently.

 

Lesson 5: HPF-ready

HPF not only helps organizations optimize inventory investments—minimizing shortages or excess—but it also helps to grow brand loyalty.

Through developing a comprehensive HPF strategy, organizations are forced to consider exactly how their supply chain maps to their business goals, from general logistics to customer experience.

With the certainty that they can fulfill orders despite fluctuation in demand, organizations will be able to capitalize on business opportunities that come their way.

Further Reading

  1. https://www.salesforce.com/research/customer-expectations/
  2. https://geodis.com/au/newsroom/press-releases/geodis-unveils-its-2017-supply-chain-worldwide-survey
  3. https://www.getconvey.com/resource/infographic-shoppers-share-keys-to-customer-delivery/
  4. https://www.getconvey.com/wp-content/uploads/2017/11/convey-consumer-expectations-whitepaper.pdf
  5. https://www.salesforce.com/research/customer-expectations/

 

Are YOU ready for HPF?

Download our FREE ebook to discover how to prepare your supply chain for HPF.

Discover High-Performance Fulfillment

Grab your free ebook

Fill out the form below to receive your free ebook and discover the path toward HPF.