Customer retention rate is pivotal to the success of your online ecommerce business. Quick, efficient customer service is key to maintaining high retention rates. Adopting tactics that can help improve your order fulfilment will make your business stand out, helping you leapfrog competitors and elevating your ecommerce business.
The optimisation of order fulfilment time is critical to the perception of the customer satisfaction and subsequent loyalty shown towards your ecommerce business. The reputation of your business may suffer if customers encounter slow deliveries or a poor overall experience.
Analysing your order fulfilment cycle time (OFCT) so you can measure and reduce it where necessary is a surefire place to start and streamline the overall effectiveness of your operation.
Our blog below will take you through the process of what to consider, and how to measure and reduce your order fulfilment cycle time.
The importance of cycle time
The order fulfilment process entails many stages – including storage, organising of items, shipping, and management of inventory. This is all incorporated into the overall order fulfilment cycle time, and as customer expectations have risen in recent times, meeting deadlines and shipping delivery times alone isn’t seen as enough.
Gauging the overall efficacy of your operations using cycle time means it is a critical KPI that ecommerce businesses must monitor frequently. Demand for instantaneous deliveries and minimal waiting times means cycle times must be measured and reduced if possible, so that your ecommerce business can thrive, whilst your competitors flounder. Other important factors are also impacted by cycle time, such as on-time shipping rates and overall lead times.
Understanding order fulfilment cycle time (OFCT)
To assess and examine the effectiveness of your OFCT, you must understand the different components that contribute towards the overall determination of the cycle time. Essentially, the cycle time is referred to as the amount of time taken between a customer placing an order, and the order being received.
Once the customer order is made, that is when the cycle time has officially begun, and depending on what you stock and the location of where it is to be delivered to, OFCT can differ greatly, sometimes being days, sometimes even weeks.
External factors that cannot be controlled by you may have an adverse impact on your OFCT, like shipping delays. But detecting any supply chain or manufacturing issues in your supply chain at an early stage will minimise disruption and help you address what may be causing the cycle time to be longer than you and your customers anticipate.
Effective communication
As your business scales, running and maintaining your business will require a little more sophistication. Open communication with partners, such as a fulfilment centre, will enable you more insight into each part of the process. As order fulfilment entails various strands and stages, communicating with all relevant parties is essential for efficient supply chain management.
The four stages of order fulfilment cycle time
Various metrics can be used to ascertain your OFCT. There are four stages you can analyse to work out your cycle time, as illustrated below:
- Promised customer order cycle time: Perhaps the most important factor, this is a continuous metric that should be a rough median and constant, as it is the expected order fulfilment time that you communicate to customers. This will inform the other cycle time metrics stated below.
- Actual customer order cycle time: After a customer orders a product, this will calculate the amount of time taken from the order being placed to being received. Measuring and reducing this is the key to maintaining happy customers and reliability within your ecommerce operations.
- Cash to cash cycle time: How much time is taken from spending money on your product, materials and services to receiving the money back as a sale on goods.
- Supply chain cycle time: If you are out of stock on a product for whatever reason, this is the amount of time taken to fulfil an order from a customer, plus the time for an order or supplies to be delivered.
Calculating your Order Fulfilment Cycle Time
When measuring fulfilment in your organisation, using an order fulfilment cycle time formula can help. A helpful formula to calculate the overall total cycle time is demonstrated below.The sum of these three factors together will help ascertain the overall order fulfilment cycle time.
Total order fulfilment cycle time = Source Time + Production Time + Delivery Time
Source time: The source time refers to the time between a customer order taking place and the requisite materials and goods being delivered to the fulfilment centre to fulfil the order. The importance of having reliable suppliers is therefore crucial.
Production time: Production time relates to the preparing, picking and packing of your order ready for delivery or shipment. This is determined by how efficient your fulfilment centre is at fulfilling orders.
Delivery time: Delivery refers to the time taken for a delivery to leave the warehouse and be received by a customer.
Analyse areas within your order fulfilment, such as travel time, warehouse flow and if you haven’t already, look at integrating supply chain technology. Automating sourcing, production and delivery times guarantees to improve your cycle time than manual inventory tracking.
Efficient order fulfilment cycle time with TSP
Partnering with a well renowned fulfilment centre like TSP, you can maximise the effectiveness of your order fulfilment operations. We control the entire process, so that you can refocus efforts on scaling your business, and we can reduce the overall cycle time of your order fulfilment.
With our cloud-based management software, we can help improve your supply chain, quicken your cycle time and manage your inventories all within a single location. Integrate any and as many of your online stores and shopping channels seamlessly with our technology, which allows your fulfilment to be automated, leading to quicker delivery times and improved customer satisfaction.
For reduced cycle time and smoother order fulfilment, contact TSP today with any queries you have and get a quote today!
