DTC market has seen significant growth in recent years and is expected to continue on this trajectory. Many brands are recognizing the potential of DTC as a profitable sales channel and are shifting their focus in that direction. However, simply having an online presence is no longer enough to succeed in the DTC space. Customer expectations have evolved, driven by industry leaders such as Amazon, and now demand faster and more accurate order fulfillment. What was once a competitive advantage is now a basic necessity? To remain competitive, brands must create and execute a strong DTC fulfillment strategy that meets these new standards and the increasing demands of consumers.

What is DTC Order Fulfilment?

Direct-to-consumer (DTC) order fulfillment is when a company takes charge of the entire logistics process to deliver products directly to customers without involving traditional retail middlemen. This approach includes receiving orders from multiple sales channels, such as webstores, marketplaces, and social media platforms, processing them efficiently, and ensuring prompt delivery to the customer's home.

Difference between DTC order Fulfilment and Traditional Retail Fulfilment

Direct-to-consumer (DTC) order fulfillment and traditional retail fulfillment are two distinct approaches when it comes to delivering products to consumers. They vary in multiple aspects, which we will breakdown for you below:

Sales Channels

• Direct-to-Consumer (DTC) Fulfillment: The brand sells products directly to consumers through its own e-commerce platforms, as well as marketplaces like Amazon and Walmart, social channels, offline stores, and more.
• Traditional Retail Fulfillment: Products are sold to retailers, who in turn sell them to end consumers through physical stores or their own online platforms.

Customer Experience

• DTC Fulfillment: Brands that handle fulfillment in-house have greater control over the delivery and returns process, allowing them to offer a more personalized experience for customers. This includes customizing packages, timely communication, and easy returns.
• Traditional Retail Fulfillment: By relying on the retailer for fulfillment, brands have less influence over the customer's delivery and return experience. This limits their ability to build strong, individualized relationships with customers.

Inventory Management

• DTC Fulfillment: In DTC fulfillment, inventory is stored dynamically in response to demand, optimizing space and enhancing picking efficiency. Items are organized in bins and totes for quick access, while warehouses are segmented into zones to minimize picker movement, thereby expediting the overall process.
• Traditional Retail Fulfillment: Products are stored in bulk, typically on pallets, to accommodate substantial shipments to retail sites. Items are assigned fixed storage locations for streamlined management of large quantities and simplified stocking procedures. Warehouses utilize pallet racking systems to vertically store products, maximizing space and enabling high-volume storage.

Shipping

• DTC Fulfillment: In DTC fulfillment, shipping entails partnerships with various carriers to ensure timely delivery for customers, including same-day or next-day options. These partnerships are crucial for offering flexible and cost-effective shipping choices to customers and reaching a wider geographic area.
• Traditional Retail Fulfillment: Shipping in traditional retail fulfillment usually consists of sending larger freight shipments—FTL and LTL—on a regular basis to retail locations for inventory replenishment.

Key KPIs for DTC Order Fulfillment and Methods for Measurement

It is crucial to monitor key performance indicators (KPIs) for the optimization of DTC (Direct-to-Consumer) order fulfillment. Below are some important DTC order fulfillment KPIs that should be tracked:

On-Time Shipment Rate

The calculation for on-time shipment rate is finding the percentage of orders that were shipped on or before the promised shipping date. Maintaining a high on-time shipment rate is crucial for improving customer satisfaction and building trust in the brand.

To calculate the on-time shipment rate, use the formula: (Total On-Time Shipments / Total Orders) * 100. On-time shipments refer to all shipments where the order cycle time is less than the promised delivery SLA.

Order Cycle Time

The order cycle time is defined as the duration between when a customer places an order through a sales channel to when the order is delivered. A shorter order cycle time signifies more effective fulfillment procedures and enhances customer satisfaction by ensuring quicker deliveries. In the B2C e-commerce sector, the standard benchmark for order cycle time is typically between 3 to 5 days.

To calculate the order cycle time, you can use the formula: Delivery Date minus Order Date divided by Total Orders Shipped.

Order Fulfilment Throughput

The order fulfillment throughput refers to the quantity of orders processed and shipped within a given time frame, whether per hour or per day. A higher throughput signifies streamlined order processing and shipping operations, resulting in enhanced customer satisfaction.

To calculate this metric, simply divide the total number of orders shipped by the designated time period, whether in hours or days.

Perfect Order Rate

The perfect order rate is the proportion of orders that are completed accurately, with correct items, quantities, and delivered on time. A higher perfect order rate contributes to improved efficiency in order fulfillment, faster deliveries, greater customer loyalty, and higher profits.

To calculate it, divide the number of perfect orders by the total number of orders and multiply by 100.

Average Shipping Cost per Order

The shipping cost per order is the average expense associated with delivering a single order to a customer. In the e-commerce industry, shipping expenses typically represent 10-15% of the overall order value. By reducing shipping costs, you can enhance profit margins and offer competitive pricing to customers.

To calculate this, divide the total shipping costs by the total number of orders.

Order Picking Accuracy

The metric assesses the precision of selecting and packaging items accurately for customer orders. Established brands typically achieve an order picking accuracy ranging from 95% to 98%. A high order picking accuracy leads to a decrease in errors, returns, and related expenses, as well as an improvement in customer satisfaction.

To calculate this metric, use the formula: Number of Correctly Picked Orders divided by the Total Number of Orders Picked.

Return Rate

To determine the return rate, calculate the percentage of orders returned by customers due to various reasons such as damage, dissatisfaction, incorrect order, change of mind, or other factors.

To calculate this metric, use the formula: Number of orders returned / Total number of orders shipped.

Through meticulous measurement and analysis of these key performance indicators (KPIs), organizations can pinpoint areas of opportunity for enhancement, optimize operational effectiveness, and ultimately deliver an improved customer experience within their direct-to-consumer (DTC) order fulfillment procedures.

Key Components of a Successful DTC Fulfilment Strategy

In order to meet customer expectations and stay ahead of the competition, it is crucial to establish a successful Direct-to-Consumer (DTC) fulfillment strategy. Here are the key areas to prioritize for a smooth DTC fulfillment process:

Accurate Inventory Management

Effective inventory management plays a crucial role in balancing supply and demand for businesses. In order to optimize their direct-to-consumer operations, many brands are opting to invest in sophisticated inventory management software or warehouse management systems. These systems provide real-time monitoring of stock levels and offer detailed visibility into each product, SKU, and inventory to prevent both overstocking and stockouts. By maintaining accurate inventory levels, companies can enhance product availability, reduce holding costs, and elevate customer satisfaction. Furthermore, these systems automatically update inventory counts following sales, returns, and restocking activities, while also supplying valuable insights into stock movements. This is particularly advantageous for businesses operating across multiple sales channels, such as their website, third-party marketplaces like Amazon or Flipkart, and physical retail outlets, where maintaining synchronized inventory levels is essential.

Efficient Order Processing

Effective order processing is vital for minimizing order cycle time in the competitive DTC sector. To achieve this, brands must focus on optimizing picking, packing, and shipping operations to minimize errors and delays. Utilizing automated order picking, packing, and shipping processes can significantly decrease human error and enhance order processing speed. Implementing batch and zone-picking strategies can further streamline the picking process, especially for high-volume orders. Establishing checks and balances at various stages of the process is crucial for ensuring order accuracy and packaging quality. This leads to increased customer satisfaction and lower return rates, guaranteeing that each product is shipped correctly and in optimal condition every time.

Right Technology and Seamless Integration

Utilizing the appropriate technology, such as Warehouse Management Systems (WMS) and Order Management Systems (OMS), is crucial for optimizing DTC fulfillment operations. By implementing a sophisticated WMS, each stage of the fulfillment process can be made more efficient and precise. From order capture to order processing and shipping, a WMS can provide intelligent guidance with minimal human involvement. This automation enables faster and more accurate order fulfillment, allowing for increased productivity within a shorter timeframe. Efficient DTC order fulfillment workflows rely heavily on seamless integration among systems. It is imperative that your WMS or OMS seamlessly connect with ERP software, CRM systems, and shipping carriers to ensure a streamlined operation. This integrated approach allows for a holistic view of the entire supply chain, encompassing inventory levels, customer orders, and shipping status in a cohesive manner.

Shipping and Delivery

Shipping plays a crucial role in the overall customer journey, serving as a key determinant of the customer experience. Amazon revolutionized the e-commerce delivery landscape by introducing same-day, one-day, and two-day shipping options, setting a new standard for expedited delivery services. To ensure a seamless shipping process, businesses should carefully select carriers based on factors such as reliability, delivery speed, and cost-effectiveness. Employing shipping software or leveraging the shipping module within a WMS can streamline operations by comparing rates, automating label printing, and tracking shipments. Effectively managing shipping costs involves negotiating favorable rates with carriers, consolidating shipments, and integrating multiple shipping providers to optimize efficiency.

​​Warehousing

Selecting the appropriate warehousing solution is a crucial aspect of a direct-to-consumer (DTC) fulfillment strategy. Operating an in-house warehouse provides complete control over inventory and fulfillment procedures; however, it necessitates a significant investment in infrastructure, technology, and workforce management. On the contrary, partnering with third-party logistics providers (3PLs) can offer valuable benefits, including scalability, flexibility, and access to advanced logistics technology and expertise. With 3PLs handling warehousing, fulfillment, and returns management, businesses can concentrate on core functions such as product development and marketing. Determining whether to opt for an in-house or 3PL solution hinges on factors such as the company's size, growth prospects, and specific operational requirements.

Importance of Investing in WMS for DTC Fulfilment

Investing in an advanced Warehouse Management System (WMS) can provide brands with a range of advantages, including accelerated delivery times, decreased operational expenses, improved scalability, and enhanced customer satisfaction. This makes implementing a WMS a strategic decision for Direct-to-Consumer (DTC) fulfilment.

Deliver faster with reduced costs

Implementing a WMS for order fulfillment can significantly reduce the need for manual intervention in the fulfillment process, leading to fewer errors and improved efficiency. Let's take order capturing as an example. In DTC, orders come in from various sources. Without an integrated system, manually entering order data can lead to inaccuracies and inventory discrepancies. This is where a WMS proves beneficial. When a WMS is integrated with multiple channels (such as ERP and sales platforms), it automatically captures and enters order data, eliminating the need for manual input. It also streamlines inventory management by syncing various sales channels with a centralized system. Moreover, a WMS streamlines the picking process by generating smart picklists and providing guidance to associates, ultimately enhancing productivity and accuracy in each pick.

Greater inventory visibility and analytics for decision-making

Modern Warehouse Management Systems (WMS) provide accurate, real-time visibility of inventory levels. Real-time data access enables ongoing monitoring of stock levels, guaranteeing timely replenishment that aligns with actual demand. This proactive approach minimizes the risk of stock shortages, ensuring products are readily available for customers. It also prevents excess inventory that can tie up capital and result in unnecessary holding costs. Maintaining optimal inventory levels helps reduce storage expenses, minimize waste, improve cash flow, and ultimately enhance customer satisfaction.

Enhance customer experience

Achieving optimal customer satisfaction relies on the prompt and precise delivery of orders. To enhance accuracy and efficiency in the fulfillment process, the implementation of a Warehouse Management System (WMS) is highly recommended. By utilizing the automated workflows offered by WMS, you can streamline operations, reduce turnaround times, and expedite order delivery. The system's checks and balances guarantee that customers receive the correct products in impeccable packaging and condition. Furthermore, WMS integration with shipping carriers enables customers to track their orders in real-time, promoting transparency and satisfaction. By efficiently managing reverse logistics, WMS simplifies the returns process, ensuring a seamless post-purchase experience that fosters customer trust and loyalty.

Nirmalya Enterprise Platform for efficient DTC Order Fulfilment

Nirmalya Enterprise Platform enables Direct-to-Consumer (DTC) companies to take full command of their orders and inventory across multiple channels, improving accuracy and speed in their fulfillment operations. Discover some of the groundbreaking features that Smart WMS provides for DTC brands:

• Centralize management of all sales channels (online and offline) on a single platform and synchronize orders, returns, and inventory data in real-time.
• Streamline the entire order fulfillment process with intuitive and intelligent workflows.
• Gain access to robust real-time analytics to monitor fulfillment efficiency, channel performance, lead times, and more.

Nirmalya Enterprise Platform offers a comprehensive solution designed to streamline modern order fulfillment and manage all aspects of a business on a single unified platform. Our platform is equipped to handle various enterprise needs including HCM, SCM, unified portal, order management, logistics, CRM, analytics, and command and control systems. Our goal is to provide enterprises with everything they need to enhance their operations without the hassle of acquiring solutions from multiple vendors and dealing with integration challenges.

Contact us to learn more about how Nirmalya Enterprise Platform can enhance your omnichannel fulfillment strategy, improving efficiency and accuracy across all aspects of your ecommerce operations.