How Operations Can Support Ecommerce Growth

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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If you're running an ecommerce business, you have most likely spent much of your time, attention, and money on generating sales through search engine optimization, purchase of keywords, social media, and more. What happens when the sales start registering? Your business needs to ship orders and satisfy customers or die.

The path to operational success isn't clearly marked. There are a myriad of hazards to avoid. To get expert guidance on building, refining, and expanding the operational infrastructure and day-to-day processes that support sales, I spoke with Zach Piech, CEO of ValuePetSupplies.com. His multimillion-dollar company has experienced explosive growth: year-to-date sales compared to last year's results are up 50 percent. He gave me real-world strategies for getting orders shipped on time and building long-lasting customer relationships that repeatedly generate strong sales.

Challenge: Ship orders on time.

95 percent of orders are processed immediately, which requires keeping inventory in stock and minimizing back-orders. Inventory is replenished quickly so that back-orders are typically filled within two to three days.

Actions to support timely shipment of orders:

• Maintain accurate, up-to-date inventory information. ValuePetSupplies.com uses various niche IT applications on hosted platforms, such as AaaTeX (a shopping cart integrator), to synchronize changes in inventory data with its accounting system, QuickBooks Online. Detailed inventory information is available to the distribution team, call center representatives who perform sales and customer service duties, and purchasing agents in multiple locations. Employees can access inventory information to verify product availability and make re-ordering decisions based on stock levels.
   
• Execute purchase orders daily. The company moved from monthly and weekly purchasing cycles to a more aggressive schedule to keep inventory flowing from manufacturers through its distribution center and then to customers.
   
• Eliminate drop shipments of customer orders shipped directly from manufacturers rather than ValuePetSupplies.com's facilities. Zach and his leadership team opted to cease drop shipments because of the extra administrative work involved in cutting purchase orders along with lack of control over shipping timeframes. The company either buys these items and stocks them in its distribution center or doesn't sell these items at all.
   
• Continually evaluate and restructure shipping processes. Zach has worked with his shipping partners to find operational efficiencies. He has arranged for late-in-the-day pickups so that packages can be shipped the same day they are prepared.

Challenge: Deliver exceptional customer service, every time.

When Zach was ready to delegate the customer service duties, the company outsourced the function to a US-based call center. Unfortunately, customer problems worsened during interactions with outside representatives.

Actions to support exceptional customer service:

• Hire company employees to deal with customer concerns. Provide training on company products, procedures, and policies, and impart understanding of customer psyche.
   
• Fix recurring problems. Recently, ValuePetSupplies.com decided to discontinue a product category that accounted for 50 to 60 percent of its returns but produced only 1 to 3 percent of its sales. The company also eliminated drop shipments to ensure reliable service.
   
• Implement a customer relationship management (CRM) system that stores information on customers, such as their order histories, product preferences, locations, inquiries, and complaints. As a result, sales and customer service representatives can engage customers more intelligently, avoid asking customers to provide detailed information on past problems, and make appropriate product recommendations.
   
• Be proactive in alerting customers about order status and shipment information via email.
   
• Respond quickly (within a few hours) to email inquiries.

• Introduce Live Chat as a more time-efficient method of interacting with customers compared to telephone conversations. Representatives can often handle multiple live-chat sessions and respond to emails at the same time.

Over the years, I have spoken with operations managers who offer these recommendations for supporting ecommerce and retail sales.

• Plan and make product purchases to match demand, which sounds simple but can be complex. Buy seasonal items early so that you'll have strong inventory levels before your busy season starts. Develop a steady pipeline of core basics (non-seasonal items) and replenish this inventory frequently. Talk with your vendors to make sure that you are aware of order-to-shipment lead times throughout the year.
   
• Conduct inventory counts on a regular basis. Reconcile your inventory records with actual inventory in your distribution center and any sales locations. Research discrepancies and address problems that led to inaccuracies. For example, your staff may have been too busy filling orders to record transactions. Implement processes to make sure that inventory records are updated for sales transactions, transfers, or receipts of vendor shipments; observe employees to make sure that they are following procedures.
   
• Know where products are located within your facility. Most companies will have assigned or "pick" locations within their facilities for each product type. When these locations get filled, however, employees will store extra product in "overflow" locations. Replenish pick locations on a regular basis or make sure that everyone knows where extra product is stored. Otherwise, you'll be scrambling to find products and process orders on your busiest days.