December 26, 2013, 2:18 PM

How Ozbo.com keeps fulfillment costs low and inventory high

The web-only mass merchant aims to greatly expand its product selection. But Ozbo.com also wants to keep its fulfillment costs in check.

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Retailers seeking to lower fulfillment operating costs don’t have to cutback the range of products they store in warehouses and fulfill. Take Ozbo.com, a web-only mass merchant featured in an upcoming story about warehouse operations and technology in the January issue of Internet Retailer magazine.

Ozbo.com has ambitious plans to expand the number of products it offers online shoppers by 56% by the second quarter of 2014, going from 160,000 today to some 250,000, co-founder Joshua Wood says. Key to Ozbo’s SKU expansion plan is maintaining its already cost-efficient fulfillment system.

Ozbo, based in eastern-central Pennsylvania, operates a single fulfillment center that is within a three-hour drive of more than 100 of its suppliers. The location allows it to run with lean inventory while still shipping all of its own orders. Ozbo uses a home-grown warehouse management software and radio-frequency technology, which updates inventory records by scanning bar codes on products, to manage fulfillment. It ships many orders the same day it receives them if the items are in its warehouse; for items that aren’t on hand, it arranges for suppliers to deliver products to its 65,000-square-foot warehouse within a day.

To manage that quick turnaround, Ozbo operates its warehouse as a cross-dock facility, which means it receives products from suppliers and immediately moves them to fulfill outgoing customer orders. As inventory arrives, Ozbo employees scan product bar codes with radio frequency bar code scanners to check merchandise into the retailer’s inventory management system and place them on warehouse shelves. Products already assigned to customer orders are placed in temporary locations in the warehouse, where another team of workers is ready to pick them for shipping. Products not already assigned to customer orders are placed in more permanent areas to hold for new orders. Workers scan the products as they’re picked and shipped to record how they’ve been processed in the warehouse management system.

“Our number of shipments per hour is pretty amazing” Wood says. “With ten workers on a 10-hour shift, we can ship from 2,000 to 3,000 orders,” or about 20 to 30 per employee per hour, he says. That keeps its warehouse operating costs to under 35 cents per package, helping Ozbo to maintain targeted profit margins, Wood adds.

Other retailers use multiple types of warehouse management and material handling systems for receiving and stocking merchandise, then picking and packing items to fulfill orders. In addition to radio frequency, other systems include robotics and voice-driven applications that give picking instructions through headsets, with each offering advantages for particular types of inventory management, says Ian Hobkirk, founder and managing director of Commonwealth Supply Chain Advisors.

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