The Rise of Subscription Commerce and its Impact on Warehouse Management

Growing consumer demand for subscription box retail is forcing change in the supply chain—specifically in the warehouse.

Kirk Anderson 5888c3ff7bd0f

Subscription box retail has grown nearly 3,000 percent in the past three years, according to Internet Retailer. In other words, it’s one of the fastest growing sectors of e-commerce.

Why the popularity? Convenience. The idea of boxes filled with items you need or want arriving on your doorstep once a month really appeals to the busy young professional. It also taps into the Amazon effect, which is leading many consumers to expect everything their heart desires shipped to them precisely when they need it.

Indulgence also plays a factor. Who doesn’t like the idea of unwrapping a box of delights hand-picked to cater to their own specific tastes and preferences every month?

As the subscription commerce sector grows, two models are emerging: curation and continuity. Curation provides a selection of the latest styles/deals/surprises of the month. Continuity, on the other hand, provides the subscriber with a monthly shipment of products they want or need, and can cut out the retail store as the middleman. These are typically maintenance-type products, i.e., bag of dog food or package of razors.

All in all, the growing consumer demand for both is forcing change in the supply chain—specifically in the warehouse—to keep up.

Convenience for Consumers Can Bring Complications for Warehouse Management

Depending on the type of subscription model—curation versus continuity—the company must satisfy several different fulfillment models, which can put stress on the warehouse.

In instances in which specific discrete orders must be fulfilled separately, the warehouse must carry and process a wide range of SKUs each month. In instances in which all subscribers receive the same box, high-volume shipping must occur during a short window of the month to ensure everyone receives their box—often including surprise items—on the same day.

Companies offering a continuity program are especially seeing average order sizes growing. This requires these companies to stock more volume of products, as well as provide a wider range of products—increasing the complexity and space requirements of the warehouse.

These complexities tend to overwhelm many subscription commerce companies. Most are startups lacking supply chain experience, so they think leaving the fulfillment of their products to third-party logistics (3PL) companies will be more efficient than handling it in house. In reality, 3PLs can be more expensive and attention to detail may suffer.

To successfully take on warehouse management in house, subscription commerce companies need to revisit their strategies, and invest in better technology to optimize inventory and fulfillment processes in the year ahead.

Handling Fulfillment In House Is Manageable with the Right Resources

Using software for warehouse management to effectively manage the warehouse seems like a no-brainer, but many organizations try to use add-on inventory management modules within their existing enterprise resource planning (ERP) systems. Typically, they find that these modules are not robust enough to handle high-volume subscription commerce.

These types of solutions also lack the visibility subscription commerce companies require to keep tabs on current and previous inventory. Old inventory then piles up in the warehouse as months go by, leading to space issues.

The right cloud-based warehouse management system puts a stop to ineffective procedures, error-prone spreadsheets, access databases and lack of scalability. It certainly worked for one growing direct-to-consumer curated wine club.

To maintain its leadership position in the market, the company needed a cloud warehouse management system (WMS) partner that could provide a low cost of ownership, movement away from paper to radio frequency (RF)-directed processes, as well as real-time management of inventory to order fulfillment.

Since implementing the cloud WMS, the company has grown by 800 percent. At the same time:

  • Cost per order was reduced by $0.05.
  • Error rates were reduced by 5 percent to near perfect.
  • Ghost orders, i.e., shipped orders for which the company had no record of origin, dropped below 2 percent.

Furthermore, thanks to efficiencies driven by the WMS software, the company was also able to stay in the same facility—saving an estimated $150,000.

Warehouse managers for subscription commerce companies can use advanced WMS technology to set up strategies of bulk, replenishment and forward-pick locations where the warehouse space could be underutilized. It can also facilitate batch picking multiple orders at a time using RF. This is the most efficient model as it allows multiple orders to be picked via one picker/pick path.

Attention to Improving the Warehouse Will Pay Off

As consumers continue to gravitate toward this type of commerce, attention to detail in the warehouse is needed now more than ever. Ultimately, getting control of warehouse operations with a comprehensive WMS can help subscription commerce companies utilize their investment money more effectively toward building the business and keeping consumers happy.