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Growth calendar    Jan 17, 2023

Logistics & order prioritization: how to do it right?

Enjoy another post in the Logistics category - this time we have gathered the key information and useful tips on order prioritisation for you!

If you are at the beginning of your eCommerce journey order prioritization may seem straightforward and unproblematic; however, as your business grows and thus you gain more orders (and more revenue) the subject of prioritization becomes a little more complicated.

To ensure that customer satisfaction remains at the highest level, many companies choose to outsource their inventory management or use dedicated software programs to facilitate this work. Whichever solution you choose, you need to know which key performance indicators to look out for and which prioritization strategy to adopt.

This is where our article comes in - read it carefully and find out how to prioritize orders correctly and how order fulfillment can help you in this area!

Order priority rules: the comprehensive guide

From the customer's point of view, once the product has been paid for in the shopping basket, the purchasing process is virtually over - it is just a matter of waiting patiently for delivery.

However, as Shakespeare wrote in the play Hamlet: Someone does not sleep, so that someone else may sleep. The moment when our customers can relax is also the moment when the hard work of arranging a priority list begins.

Sticking to the promise date of delivery is really important - we all know that meeting the sometimes really high expectations of customers is vital, affecting their loyalty and the perception of your brand. And let's be honest - the bar is set high. We all know how fierce the competition is in the online retail sector and how the expected delivery time is shrinking (I refer to the mythical next-day delivery and increasingly - even the same day).

If you don't believe me about the role of fast delivery - believe the statistics compiled by the consultancy McKinsey and Company:

mckinsey-chart

Of course, everything is fine in principle - but giving higher priority to one order means nothing more than... unavoidable deprioritization of others. Of course, you can say that everything is urgent - but this attitude will not help you take even one step towards a working solution.

So how should we approach the subject - and what really influences making the priority rankings? Mainly two elements: your business lifecycle and your ecommerce type.

As I mentioned at the beginning of this post, the longer you are in ecommerce business, the more successful you will be in sales - so let's face it, with increased order volumes you need to consider other, more advanced inventory management methods.

Secondly, and perhaps most obviously, not all online shops are the same in terms of their product range. Therefore, there is no single strategy for prioritizing orders that always works. Below you will find a list of prioritization methods - we believe you will find the one most suitable for your business:

  1. FIFO - First In, First Out

This acronym speaks for itself and is in fact the most popular method of order management. It means exactly that the highest priority is given to those products that were ordered first, and the whole subsequent mechanism follows this order. It is also the most basic method of order management, which is particularly suitable for small orders and stores just starting.

  1. Earliest Due Date

If you have promised important customers an early delivery date, you may want to prioritize it. However, remember that this should be updated as new orders arrive and this priority group should be the exception rather than the rule.

  1. FEFO - First Expired, First Out

This method, which is extremely popular in the food and cosmetics industries, is based on the well-known notion that the products with the shortest expiry date should be the first to leave the warehouse with the highest priority.

  1. The matter of order availability

A situation in which all the requested products are in stock is an extremely desirable option. However, sometimes this is not the case and when prioritizing orders, it is important to bear in mind that some deliveries will have to wait and will leave the warehouse at a later date.

The issue of operations management is not as simple as it first appears. It requires putting the focus on many factors simultaneously while maintaining as fewest steps as possible throughout the sequence. But no one promised it would be easy - running a business requires a lot of work, including logistics. Considering that you have to take care of sales, marketing, and product development as well as the UX of your online shop at the same time, it makes sense to put the logistics and order management in the hands of true industry professionals, i.e. fulfillment services company.

Screenshot 2022-07-11 at 11.50.41

They will take care of each and every one of your customers and their orders and, if necessary, also take care of returns. They will take on the challenges of these operations and hope for a high priority for the right orders; they will also ship orders on your behalf.

The balance of prioritizing elements: ship date and shipping costs

Not every order is a top priority. Not too many orders get the highest priority. We hope that once you have familiarized yourself with the basic rules of sales order management, you will be able to determine which sales orders must go out immediately and which can wait in the queue, e.g. seven days. At the end of the day, it's your job to maintain the whole process fluently.

That is why it's so important to gather demand data (almost) in real-time, update resource availability, and complete new orders as well. Prioritize orders wisely and identify customers' needs smoothly, especially in the delivery time topic. Most people buying online choose those ecommerce sites that deliver parcels as quickly as possible. This is why it is so important to take care of order prioritisation and rapid shipment. Online retail experts also pay attention to the costs involved (pro tip: the lower cost the better, and even better: offer customers free shipping for a certain order amount. This way you will benefit financially from the higher value of the products added to the cart).

Start working on keeping your stock updated and make an investment in inventory management system implementation. We're keeping our fingers firmly crossed for your planning - and continued business growth!

Head of Marketing at Linker Cloud who gained experience in the insurance and tech industry. She also has a marketing agency perspective.

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