Managing High Distribution and Fulfillment Cost in UAE
It’s great news that the UAE keeps establishing itself as a hub for several business models. Investors keep coming into the UAE, from e-commerce to the traditional brick-and-mortar store model. These activities, coupled with the increasing consumer demands have kept the UAE market booming.
On the flip side, businesses find it difficult to keep up with the high cost of distribution and fulfillment to customers. The scope of fulfillment has gained more attention and increased in complexity due to the boom of ecommerce. At every counting second, orders keep rolling in, and there is a need for fulfillment. All of these play out to push up the operational cost.
The high cost could prove challenging; however, there are strategies that can help you in distribution cost optimization in UAE.
Set Up Productivity Standards
It starts from the point of productivity of every player in the supply chain. For example, there has to be a productivity standard per day for every worker in the warehouse. The standards will serve as a KPI to keep everyone in the loop and ensure each day’s target is met.
In the case where there are no productivity standards, performance will get below par as a task will have to be rolled over to a future date. In all, there are double expenses on labor costs. Work results should be recorded especially using digital formats, for easy assessment and scrutiny.
Optimize Demand Estimation and Forecast
Several brands get it wrong these days in predicting the market demand. Demand forecasts help map out plans for distribution and fulfillment. The volume of products should be in agreement with the market demand since a lot will be put into storage and fulfillment to customers.
Shortfalls in demand forecast could lead to understocking or overstocking, hence resulting in missing shipping deadlines and making customers unhappy. This will incur extra costs in re-shelving and re-fulfillment.
Embrace Automation
The advancement of technology in the supply chain has accrued several benefits, with fulfillment cost optimization in UAE being the most significant. Automation can help in several areas of warehouse operation to facilitate efficient fulfillment at a lower cost. Operations such as picking, packing, shelving, etc., can all be automated.
Automation makes operations faster and more accurate. So, automation will
- Help reduce errors or damage to products which will incur more costs
- Reduce labor cost as the number of workers will be significantly reduced.
Employ Omnichannel Distribution Solutions
In the discussion of employing omnichannel solutions, more attention is placed on customer reach and ease of distribution. However, it also plays a role in distribution cost optimization in UAE.
Depending on the business model, products and market, there are channels that are more cost-intensive compared to the other. So, it’s a good idea to seek efficient channel alternatives with much-reduced costs.
For example, you could opt for a buy online pick up in-store channel or use more traditional distribution nodes such as stores in the case they incur less cost. So omnichannel strategy gives several options to pick the best at a particular time.
Smarter Picking Process
Picking is a crucial step in fulfillment. Its relationship with fulfillment cost optimization in UAE is based on travel time. More travel time will incur more cost, and the lesser travel time will reduce cost. Optimizing picking for cost optimization can be analyzed in two ways;
Batch Picking
This involves grouping similar orders so they can be processed at once to reduce labor and travel time. If you run an in-house warehouse or a 3PL warehousing system, do well to initiate the idea of batch picking to save cost.
Slotting
This is a model of arranging inventory to minimize space, labor, and travel time. So this will help cut down on costs for inventory space as well as travel time. Slotting will do the following;
- Reduce congestion
- Place fast-moving inventories in easy-to-reach areas of the warehouse
- Aid picking efficiency for seasonal periods or peak seasons
In all, an optimized picking process will reduce labor costs, minimize multiple travel times, and cut down costs due to inventory space.
Optimize Packaging
How do you package your products? That’s a big question. Packaging has an influence on cost based on;
- Acquiring the material used for packaging- a bag or a box
- Labor- time and effort put into the process
- Shipping- the packaging method determines the space occupied by the product, which will attract appropriate shipping cost.
In a bid to minimize cost, several brands have shifted to the usage of polybags rather than boxes.
- It is understood these bags are much cheaper than boxes in terms of material acquisition costs.
- In the same vein, packaging with polybags consumes lesser time with respect to labor costs.
- Polybags attract much lower shipping costs since they consume lesser space.
Partner With A 3PL
Handling distribution and fulfillment in-house in the UAE is highly cost-intensive. This will require the brand to have all the necessary infrastructure and systems for efficient operations. However, businesses can leverage an already working system and ready-made infrastructure provided by third-party logistics companies. The 3PL companies will handle the entire operation at industry standard rates which are more cost-effective compared to running in-house.
With 3PLs, businesses do not need to own or rent a warehouse, recruit workers for the warehouse, acquire several fleets and spend on sophisticated software. An ideal 3PL like Al Sharqi has all these systems in place to ease the job at a lower cost.
Al Sharqi Can Help with Cost Optimization
Al Sharqi is your go-to 3PL company for managing high distribution and fulfillment costs in the UAE. With a massive operational network in the UAE, a great team of experts, and state-of-the-art infrastructures, you just need to pay a flat rate, and the job is done.
How will Al-Sharqi do this?
- Smart Warehousing solutions- Al Sharqi provides fully automated warehouses at a reasonable cost
- Experts team for demand estimation and forecasting
- Optimized management software to reduce error and labor
- Optimized fulfillment processes to enable efficient and on-time delivery
Our customer service team is happy to assist you with planing your next booking.
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