Direct-to-Consumer Distribution Can Be a Whole New World

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This case study shares how LIDD’s supply chain consultants helped a traditional retailer optimize its new and growing direct-to-consumer distribution operation.

The Situation – A consumer products manufacturer has 100+ years of experience distributing to the top retailers in the nation. Increasingly, many of their clients have been asking them to take on direct-to-consumer fulfillment for orders placed on the retailers’ websites. In addition, the company had a series of niche products they wanted to market and sell directly to consumers. In the early days, they had set up their own B2C fulfillment operation but as volumes grew, they realized they needed expert advice to help get the operation under control and costs in line with their expectations. They called LIDD.

Issues & Decisions – Direct-to-consumer fulfillment has distinct differences from traditional wholesale or business-to-business distribution, and three differences in particular deserve highlighting:

1.The typical order has very few lines relative to B2B distribution

  • In the case of this consumer packaged goods manufacturer, where retailers placed orders that had 30 – 50 lines, 90% of direct to consumer orders had a single line
  • This means that in a traditional picker-to-goods picking operation, most of the picker travel occurs between orders and not between order lines

2. Direct-to-consumer shipping patterns have different peaks both within the week (e.g., Mondays can be peak shipping days) and over the year (between Thanksgiving and Christmas, many operations see volumes quadruple)

3. Direct-to-consumer fulfillment has an intense packaging component that will consume a significant portion of direct labor costs and will be a constant focus of continuous improvement

For mature companies entering the direct-to-consumer field, one significant issue becomes the lack of IT functionality to support this unique animal. Order processing and warehouse management are set up for B2B distribution and adapting the existing technologies to the new B2C environment can lead to painful inefficiencies.

The Results – We developed a simple, scalable direct-to-consumer fulfillment operation. We defined a series of WMS and order processing technology enhancements that were needed to continue to support the rapid growth of this business. We also provided an activity-based costing model to help the company’s sales team develop sustainable pricing for this service as they negotiate with their retail partners.

Is your organization going through a similar change? LIDD’s eBook How to Integrate E-Commerce Distribution into your Existing Operations goes into more detail on the differences to consider when adding direct-to-consumer distribution to a traditional wholesale operation.

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