Subscription services are everywhere. Whether it's automatic fulfillment of basic needs like toiletries or pet food, or high-end curated items like wine, coffee, or clothing, companies large and small are joining the trend.
In warehousing, subscriptions can take some of the guesswork out of fulfillment since goods ship according to a preset calendar. But customer expectations are heightened, making timing and inventory management more important than ever. Warehouse managers dealing with subscriptions need to understand this market segment’s unique challenges in order to meet them head-on.
Subscriptions typically fall into the categories of replenishment (sometimes called continuity) or curation, or a combination of the two.
Dollar Shave Club put replenishment subscriptions on the map with their affordable razor blades. Customers get a consistent, predictable delivery of a frequently used product so they never run out. From a warehousing perspective, handling products like these is fairly easy, even though volume can be high.
The item is small, uniform, non-perishable, and inexpensive to ship. And there are a huge number of orders that are exactly the same, making automation possible. (The company has branched out to include other grooming products, too; while this makes order fulfillment a bit more complicated than it once was, it is still a somewhat straightforward process.)
Curated subscriptions are on the other end of the spectrum, personalizing each shipment for the customer. Clothing subscription company Stitch Fix might be the most personalized. Stylists choose items based on individual subscribers’ preferences and sizes. It is extremely unlikely that two people will ever get the same set of items. Thus, the warehouse must stock a huge array of SKUs in various sizes. Products also come from any number of vendors, unlike replenishment items that may be sourced from just one manufacturer.
In between these two extremes are subscription services that combine replenishment and curation. A cosmetic subscription service, for example, might have a monthly box that contains two skincare products and two makeup items. There could be only a few different versions of the box based on customer skin type or color preferences.
Food preparation boxes are another popular item. Subscribers might get to choose from a handful of meals for any particular week. In the warehouse, the ingredients change frequently and have added complications like expiration dates and temperature control requirements.
Companies that decide to offer subscriptions can handle them in their own facility, or choose to use a 3PL for their fulfillment. In general, the more “hands-on” the process, the more they will benefit from keeping it in-house. For example, a 3PL might be fine for a uniform product with simple packaging. But high-end, personalized products with special packaging including a hand-written thank you note are harder to automate. Companies might want to keep closer control of these subscriptions.
That is not to say that 3PLs that offer “white glove” fulfillment do not exist. They do. Monthly wine and spirit subscriptions, for example, might be handled by a wine and beverage fulfillment company. But the extra time and care required for these special deliveries comes at a price. Companies that can afford to outsource will need to find a 3PL that they trust to meet the high standards their customers expect before turning the fulfillment process over to them.
Both 3PLs and private warehouses need to be prepared for the spikes in demand that come with subscriptions. A lot will depend on whether customers receive their products according to a uniform drop date or the anniversary of their sign up. In other words, will the warehouse staff rush to get everything out within a short window of time each month, or will orders be spread out? The best choice depends on the overall volume.
Either way, a preset schedule allows warehouse managers to prepare for the ship day. This means ensuring there is enough product on the shelves in time to pick, pack, and ship orders on time, and to schedule staff accordingly. 3PLs have the added worry of late shipments from their clients, forcing them to accelerate the fulfillment process to meet subscription deadlines. Getting product too early can be a problem too, as the 3PL must have the space to store the excess until it ships.
Forecasting for subscription orders is not as easy as it might seem. The company will presumably add some new subscribers and lose others with each cycle, making exact inventory and staff predictions tricky. And there will certainly be a spike every holiday season with an influx of new gift subscriptions.
Precise inventory management is the only way to keep track of subscription items. This is especially true for a company who might also have a brick and mortar store and an online shop in addition to its subscription service. Managers must be able to keep track of the inventory allocated for each of these sales channels and make adjustments as needed. Fulfilling a prepaid subscription order will most likely take precedence over a one-time online purchase. But ideally, backorders would be avoided for all customers.
Subscription services often include kitting and special handling. In a curated box, for example, products might be boxed together in a specific configuration using branded packing materials. This means that, in addition to inventory management for the products themselves, special attention must be paid to the packing supplies too. The warehouse can not ship 100 bags of specially selected coffee beans on a specific day if there are only 75 branded shipping boxes on the shelf.
The timing of supplies arriving at the warehouse is just as important as the product itself. And the more elaborate the packing process (branded tissue paper, stickers, inserts, etc.) the more crucial it is to monitor this inventory.
Companies in the subscription service sector pay special attention to the customer experience. Picking accuracy and quality control are extremely important. Products must fit the preferences specified by the customer. If someone places an online order for lipstick they might return it if they do not care for the color. But if a subscribed customer has specifically indicated their color palette preference, deviations from that could make them cancel their subscription.
Unboxing, the trend of opening a curated package for a social media audience has amped up the need for white-glove kitting. It is not enough for packaging to be functional: It must be artfully executed, too.
Quality control and order verification are even more important for food subscriptions . Everything must be correct and well packaged, but also must arrive fresh for both customer satisfaction and safety reasons.
Finally, companies must have effective lines of communication with their subscription customers. They should inform the customer, for example, if a shipment is delayed or if it will contain a substitute item. Wineries, for example, might put their shipments on a weather hold if high temperatures might damage the product. Most customers would rather receive their shipment a few days late than have it arrive spoiled. But communicating these things in a timely manner is best for customer relations and retention.
Just as with any inventory management, warehouse managers must know how they will handle returns and overstocks for subscription products. For 3PLs, part of this is making sure their clients do not continually send too much inventory. If this happens, will they offer a discount? Include the excess as a “bonus” in future subscription boxes? Send it back to the supplier? Whatever they decide, they need to avoid having it pile up in the warehouse.
Food and beverages have the added complication of disposal. Government regulations determine how warehouses must dispose of some products. Beer, for example, can not simply be dumped down the drain. And there is special compliance documentation needed to return it to the brewery.
Any eCommerce store selling these products faces the same obstacles. But subscription services must have a plan in place before committing to fulfill monthly orders for customers locking in for a quarter or a year at a time.
The predictability of ongoing subscriptions might seem easy to manage. But the ease of forecasting is often balanced out by more complicated inventory and labor management issues.
A warehouse management system is a must for the volume and complexity of a subscription service, particularly if subscriptions are one of multiple sales channels.
Subscription services have proven to be an effective way for companies to see a steady stream of income for their products. Understanding the challenges of this type of selling is essential to making it work. By integrating a robust WMS into the supply chain, managers can master warehousing and fulfillment and keep subscribers coming back year after year.
Whether you are considering adding a subscription element to your business, or if you already have loyal subscribers, contact us for a demo of Infoplus software. We can help set you up for success, or enhance what you are already offering.
