11 Cost Reductions in e-commerce Fulfilment with 1 clever Algorithm

My mother-in-law turned eighty and she is a big fan of the Bijenkorf, a Dutch upmarket homeware store. She loves some of the tableware, so I decided to buy her a mug, well actually three of them.

I ordered through the internet I received the email notification: I could pick them up at a collection point nearby. So, I went to collect the mugs on the day of her birthday.

The collection point is in a bookshop. This bookshop is family owned, and I have been visiting them for over 20 years – we know each other. They are very committed to providing an excellent service in order to survive. Which made it all the stranger: despite how hard they looked; they could not find the small 3-mug package in their shop.

So, the following story is the result of my drive to find out what happened – where did my mother-in-law´s birthday present go?

The investigation

Due to my curiosity I worked through the possible issue at hand. As a first step of my investigation I made an overview of the steps involved between my ordering the mugs and receiving the package. The picture below shows what I determined:

The overview is based on the work we have done previously with various third-party logistics service providers, spare parts wholesale and manufacturing companies.

Such a simple thing to order, 3 mugs, so many things happening: It involves people doing activities(e.g. getting the items, wrapping them for protection and putting them in a carton), using materials (e.g. cartons and filler material) and using machinery (e.g. forklifts and delivery trucks).

What can go wrong? A customer provides an address to deliver the package to, chooses the mode of transportation (e.g. express delivery, standard mail) and the vendor knows where his products are stored. This should be straightforward.

In my drive to find out what happened, we decided to have a closer look at three process steps shown in orange in the picture below.

And what we found in our previous projects is that the choice of a shipping carton (either made by a person or by some sort of calculation) has a big impact on the total logistics process and in the end costs. Doing some tests for these projects, we found that on average 20-50 cents (for national distribution) of costs can be taken out of the three steps shown in orange. This is a direct improvement of profitability.

So, yes profits can simply be increased and through this the logistics process can be optimized One clever algorithm saves money from eleven steps!

But what went wrong?

As I got a confirmation mail the mugs should really be at the bookstore now, I went back to pick them up. In the end it turned out we should not have been looking for a small package – we should have been looking for a large package. We would have expected a much smaller package for the size of the mugs but because this was an unexpectedly large package and due to space limitations in the store, this package was stored in a different part of the shop. This is how the mugs arrived:

You´ve probably had similar experiences, as many of the people in my surroundings also have.

And what did I learn from this

The shipping carton selected has effects in the whole supply chain – choosing the optimal carton saves money and time for all parties involved. Sometimes in unexpected ways, as the time wasted in searching for these three mugs shows.

If you want to know how much cost you can drive out of your fulfilment process, please contact us.