Every fulfillment business, regardless of size, faces the same daily pressure to meet service levels making ‘Dock to Stock’ the battle cry of every receiving department. For best-in-class companies, the Dock-to-Stock turnaround time to receive, check-in, inspect and put away stock is two hours (sources: F. Curtis Barry & Company client studies and Warehouse Education and Research Council reports). Vendor compliance policies and EDI are essential to meeting these high-performance requirements.
In comparison, many small to moderate-sized businesses dock-to-stock may average 24-48 hours, or longer, to clear receipts. Turnaround time is only one factor. Some receipts will sit for days awaiting resolution by the buyer and the vendor or some necessary rework in the warehouse. All this time merchandise is not available for sale. There is a very real cost your company absorbs in the warehouse, accounting, and purchasing (or buying) departments from these trading partner problems.
Before discussing the Dock-to-Stock solutions, let’s look at the transportation cost. Inbound freight expense in our experience typically ranges from 3% to more than 5% of a company’s annual net sales. These costs are part of the product cost in the cost of goods sold calculation. What is your inbound freight cost as a percent of net sales? Read 10 Ways to reduce inbound transportation expense.
Most e-commerce merchants should set a goal to clear the dock and staging areas in the same shift. This assumes limited quality assurance (QA) tasks which may require fabric inspection and measurements. However, if QA is needed, the dock and staging areas should be cleared within 24 hours.
Read our blog, How To Assess Your Ecommerce Warehouse Dock-to-Stock Efficiency, to learn steps that are necessary to assess the process and develop an improvement plan.
Here are 11 ways to improve Dock to Stock processes, reduce costs and improve efficiency:
1. Set Vendor Compliance Policies (VCP)
These policies will help speed up the processing of inbound receipts. A VCP typically includes several criteria:
- Agreed to technology formats: Have vendors commit to a standard set of technology including Advanced Shipping Notifications, Barcodes, and Electronic Data Interchange (more about EDI below).
- Designated freight carriers: Do not leave carrier selection up to the vendor. Vendors typically have little concern about cost or service and might be making a profit on shipping.
- Packaging specifications: Be sure to include outer box specifications that protect from damage or act as a ship alone container.
- External carton labeling: Require purchase order number, SKU number, description, your company information (name and address), number of cartons (identified as 1 of X, 2 of X, etc.).
- Product specification sheet: Streamline quality assurance by requiring product specifications in a standard format.
- Procedures and practices: Set standard practices in order to quickly address quantity variances, damages, and any other specifications when not met. These may include chargeback policies as well.
- Return to vendor procedures: Hold merchandise for buyer and vendor approval and process vendor credit and inventory transactions.
2. Adopt Advanced Shipping Notifications (ASN)
ASNs are used to notify a customer/vendor of incoming shipment of product to their facility. They can be paper or electronic notifications and typically include PO numbers, item numbers, quantity, etc. This can be done without full EDI deployment. This is one of the most beneficial process changes you can make.
Using ASN data about the scheduled arrival dates for inbound freight you can plan labor for the dock, staging and quality inspection functions, and material handling equipment (MHE) resources. Larger facilities require carriers to either call for an appointment or have regularly scheduled daily deliveries such as small parcel carriers.
3. Identify Returns From Other Receipts
Use barcodes or pre-print “return” on return labels to quickly sort packages that should be sent to returns processing. This helps clear the receiving dock and staging area.
4. Expand Receiving System Data
The receiving process either uses a receiving document or an online display of critical information, such as SKU number, item, description, quantity ordered, quantity received and product/vendor comments. Consider expanding your receiving data to include available bulk and pick locations (quantity in primary, reserve locations) and backorder quantity. This facilitates put away from the dock to the reserve and pick slots and the consolidation of product in storage locations. Consider directed put away functionality.
5. Improve Quality Assurance (QA) and Inspection
QA processes vary widely between retailers from proprietary or exclusive product and case received products with little inspection. For exclusive and proprietary product, specification sheets should be attached to the purchase order and used by QA to inspect incoming products.
Consider varying your inspection process based on each vendor’s compliance, quality, and accuracy history. Vendors that are consistently reliable would have fewer products inspected which reduce cost and processing time.
6. Set Up Cross-Docking
For back-ordered products, cross-docking eliminates product handling labor by moving checked-in products directly to pack stations. This system bypasses the put-away and replenishment steps, speeding up order fulfillment. In order for this to be successful, the receiving system must prompt the receiving staff of back-ordered items.
7. Implement Barcode Receiving
A barcode-based receiving process for all containers, pallets, and cartons is much faster and accurate. It also allows you to gain total warehouse inventory control with real-time product tracking, to reduce “lost” inventory and reduce warehouse costs.
8. Use Third-Party Logistics (3PL)
There are advantages to using 3PL for inbound transportation including:
- Logistics or traffic departments that are expert in working with agents on international shipments and customs;
- Can consolidate shipments into full truck loads with your receipts with other customers;
- Experience with developing and implementing vendor compliance policies;
- EDI deployment for your business if they provide EDI services to other larger retail clients;
Read more about the benefits of 3PL fulfillment.
9. Transportation Management System (TMS)
Benefits of TMS include:
- Execution of the physical movement of product;
- Real time tracking of all in-transit shipments;
- Track drivers/carriers and product inventory;
- Reduction in transportation spend;
- KPI dashboards and analytical reports;
- Improves on-time delivery; and
- Improves warehouse efficiency and productivity.
10. Electronic Data Interchange (EDI)
Larger e-commerce companies, retailers, and multichannel merchants generally implement EDI technology solutions and vendor compliance policies. This dramatically reduces manual effort, paperwork errors and achieves faster put away. Because EDI integrates to the ERP and accounting back-office systems, it provides a transparent system of record rather than different views of data in different systems. This allows merchant companies to work on problems on an exception basis. The real-time processes reduce communication lag time and problems between purchasing and vendors. All this greatly reduces the total cost to companies.
EDI documents and transactions vary based on trading partner requirements. Adherence to the retailers’ EDI specifications enforces 100% EDI compliance. Vendor and retailer communicate through portals. The most common retail EDI transactions include:
- EDI 810 - Invoice
- EDI 846 - Inventory Inquiry/ Advice
- EDI 850 - Purchase Order
- EDI 855 - Purchase Order Acknowledgement
- EDI 856 - Advance Shipment Notice
- EDI 860- Purchase Order Change Request – Buyer Initiated
11. Develop A Vendor Scorecard
A vendor scorecard is a great way to get a holistic view of vendor performance and a comparison to all other vendors. Your scorecard should be updated through a periodic formal evaluation and assessment of the financial and service impacts vendors have on your business. A great time to review performance is alongside an order placement. Leverage the purchase order to gain new commitments from a vendor.
Transportation costs, warehouse efficiency, and inventory accuracy start with efficient and accurate receiving. Make improving inbound transportation and these processes a priority.