I use the term WMS (Warehouse Management System) in the title, but I’ll use FMS (Fulfillment Management System) going forward. WMS is a common industry term and why it’s used in the title of this post. Direct To Consumer order fulfillment is very different than a “warehouse” and has its own unique set of needs.
Once the orders start rolling in, and inventory levels begin to grow, it’s critical to choose the right order fulfillment strategy. Most startups have three options.
- Keep order fulfillment in-house and develop your FMS (Fulfillment Management System).
- Keep order fulfillment in-house and purchase a third party FMS.
- Outsource order fulfillment operations (using 3PL’s FMS).
My choice? Option 1, and here’s why.
Your business is a rocket, and you’re still figuring things out. Developing your FMS in-house will allow you to create the appropriate tools for each stage of your growth.
I can use an off-the-shelf system – not so fast! Your business is unique and will require features that off the shelf systems don’t offer. You can pay for the “go live” modifications (mods), but be prepared to keep paying, and paying, and paying some more.
The speed and flexibility of designing your system can never be matched by working with a vendor.
WMS/FMS vendors speak poorly of “legacy” systems (systems designed in-house). If your business is growing, you will undoubtedly outgrow the processes in your current FMS. That’s why it’s critical to treat your FMS as a product where you’ll continue to invest. Companies that are innovative and are disrupting their industry were committed to developing operations tech early on.
Why not use a 3PL?
You can use a 3PL to get started, but I would strongly encourage having an understanding of what it takes e to bring your operation in-house. There are valuable lessons in “eating your dog food, ” and it will only make you a better 3PL partner.
2.) Real-Time Inventory:
Developing your FMS in-house will ensure the inventory in your FC and on your storefront are always in-sync. It’s critical that inventory adjustments are updated on the website in real-time. I’ve seen hundreds of thousands of dollars in orders canceled due to inventory discrepancies. You can show inventory on the books when received, but I would recommend not making it eligible for sale until the item is in a pickable location (pickable location – a location you can reach without assistance)
But what about reserve inventory? Stay away from it! If needed, having your FMS will allow you to develop a process to eliminate replenishment. Direct-to-consumer order fulfillment is very different than order processing in a distribution center.
Building your WMS internally, will allow you to create a process that has quality checks, built-in. You will have control over how to correct errors and other exceptions.
Exception processes are an inventory “black hole” for many off the shelf systems.
Inventory control modules in a third party system seldom meet the needs of a direct to consumer operation. You may be forced to use a storage medium not appropriate for your process because putaway and cycle counting tools only support one storage type.
Oh.. If you’re still doing a physical inventory, consider developing a quarterly cycle count program that your auditors will approve. Physical inventories are a thing of the past and will eventually have an adverse impact on your ability to serve your customers.
Your operation is unique and needs more visibility than “canned reports” will provide. Standard reporting will give you 80% of what you need, but the last 20% allows you to provide the extraordinary service that sets you apart from competitors
5.) Continuous Order Flow To The FC:
If your operation has a goal of same-day processing, it’s critical that the FC receives orders immediately. A continuous workflow will increase your operations capacity and reduce the need for material handling equipment and other forms of automation ($$).