I was recently having lunch with my FedEx rep who was telling me about his inability to convince other clients to invest as much as we do in our fulfillment processes. I’ve heard the same story from my UPS rep. They’ve gone in and performed studies and made recommendations and none of them are ever put into action. This is also evident when you try and look in the market for a WMS for under $100K. You’re left with very few enterprise companies in that range. Here’s the thing though, anyone who has not invested heavily in their fulfillment whether it’s personnel or software is not looking at the all important stat, I can guarantee it! Because if they were they’d easily be able to justify the expense (relative to their size). That stat is their pre-fulfillment cancellation rate.
It’s crazy how few reports have the pre-fulfillment cancellation rate included by default. You’ve spent all this money advertising to the customer over and over, then you’ve optimized your site so that the customer feels comfortable navigating it. You’ve actually managed managed to complete the sale, and that’s typically where the spending and focus stops. Not only are you losing hard earned revenue on these orders but you are usually pissing off these customers you worked so hard to acquire! What a nightmare!
I first became aware of this all important stat selling on Amazon, where they required you to have a pre-fulfillment cancellation rate lower than 2.5%. That was so hard for me since I was secretly dropshipping most of the products I was selling. I realized though that once I had an order on Amazon I couldn’t blow it since they were so hard to come by. This was the hardest of all of Amazon’s requirements for me and so this stat has been in the back of my mind for years.
You’re of course going to have cancellations due to buyers remorse, misunderstandings, and changed minds, but the faster you can ship the lower this will get. This year for Cyber Monday we were shipping through the weekend and as early as 6am that morning. We had already shipped 1000+ orders that Monday before the customer service team even got to the office! That means 0% pre-fulfilment cancellations for that batch and thousands of dollars retained that would have otherwise been lost. The whole justification for investing in shipping fast lives in this stat.
So what are you being cheap on in your warehouse? Are you hiring the cheapest labor possible? Do you have a paper based WMS? Is your space too small? Will you not invest in proper leadership? Dig into your reports and look up how many orders are cancelled prior to tracking numbers being made. What percent are you at? If you’re at 2.5% or less then congrats you run a tight ship. If you’re anything above that though find out what that percentage is in revenue a month. THAT’s what you’re leaving on the table. Is the amount you’re refusing to spend on new systems and personnel anywhere near it? I doubt it. It wasn’t even close in my case. So let the numbers drive your decisions and invest in a solid warehouse.
Am I overreacting here? Do others see more important areas to invest?