5 Tips for Enhancing E-Commerce Fulfillment Capabilities

Tips for winning the e-commerce fulfillment war

For many people, the term “e-commerce fulfillment” may bring thoughts of Amazon Prime or Amazon FBA. Online shopping, whether ordering from a vendor that specializes in drop shipping from Hong Kong or a 3PL fulfilling subscription boxes from a warehouse in Newark, is now complex and highly reliant on cutting edge technology.

The competition for supply chain partners involved with e-commerce is intense.  Part of the stress of dealing with the new and evolving e-commerce fulfillment challenges involves the stressful nature of having to continually make changes to operations and work ever-faster.  Rather than deal with a steady flow of pallet-based orders in and out, today’s warehouse fulfills a much higher volume of smaller orders directly to consumers.  This can put enormous pressure on a 3PL or distribution operation that provides ecommerce fulfillment services.  Add to that the need to keep costs in check, ensure quality control measures are effective, zero errors and near perfect order fulfillment rates and the stress becomes astronomical.

From real estate challenges and modern retail to technology in the warehouse, here are a few ideas that may help your e-commerce warehouse improve its operations and capabilities.  To be successful in the supply chain industry today, businesses require flexibility.  Being able to meet changing needs, requirements and expectations can make the difference between success and failure.

1. Consider Flexible Warehouse Strategies: On-Demand Warehousing

Do you remember seeing temporary retail kiosks set up in shopping malls during the holiday season?  Hickory Farms is one such retailer.  Retailers have expanded this concept of “pop-up retail” to meet other supply chain challenges, largely to notable success.  From endless aisle kiosks to self-check-out kiosks, customer loyalty kiosks and now smart locker kiosks, retailers have found the concept of pop-ups irresistible and cost-effective, a new tool in their arsenal to help solve the immediate order fulfillment puzzle for impatient consumers.  

Short-term retail space has demonstrated the benefits of pop-up retail space year after year.

As consumers impatiently await the next step in the delivery wars, the move to one day delivery, the supply chain is poised to undergo more change to accommodate the new standard.  “Pop-up” supply chains and warehouses have risen in popularity as retailers and distributors struggle to find warehouse and distribution space close to urban centers.   With low vacancy rates in and around urban areas, companies are challenged to obtain warehouse space close to population centers, key to being able to fulfill one day order delivery needs.

Pop-up supply chains have become common.  Retail supply chains have changed.  Retail supply chains now often consist of an online shopping component in addition to brick and mortar stores.  Retail supply chains must be efficient, flexible, nimble and have the support of the latest supply chain technology and organizational agility.  To do this, companies are acquiring space via short-term leases and sometimes in non-traditional spaces.

Pop-up supply chains enable companies to make a shorter-term financial commitment to a location for space and provide the benefit of enabling cost-effective response to seasonal demand spikes in addition to facilitating immediate fulfillment in highly populated zones.  Pop-up supply chains take advantage of existing network assets and frequently leverage help from third party logistics providers, outsourced 3PL networks and dropshipping models.

The increase in omnichannel online shopping and the push by major players including Amazon to reduce shipping time has fueled these trends.  Smaller retailers tend to find unpredictable forecasting to be highly problematic and can find it challenging to consistently hit the minimum order requirements imposed by larger 3PLs.  Implementing a strategy that leverages on demand warehouses can make all the difference.

Using pop-up warehouses and distribution centers, retailers can adapt to order fulfillment peaks and valleys more readily, without the costly long-term commitment requirements of typical warehouse space, and avoid storage fees.  On-demand warehousing also helps companies save money by only paying for the space they actually use, enabling them to scale up or down as needed.

At the heart of on-demand warehousing is a very simple concept:  the system depends upon the successful match up of companies that have excess warehouse space with companies that have short-term excess inventory.  Much of the excess available space is at 3PL locations.  The on-demand warehousing arrangement enables 3PLs and others with excess space to offer it to whoever needs it-NOW.  This may be due to seasonal fluctuations, new production launches, retail closures, warehouse consolidations and for other reasons.

One of the keys to successful, immediate delivery is positioning warehouses and distribution centers in optimal locations near transportation routes for fast, easy access.  Building in flexibility in technology, both hardware and software can accommodate the need to move goods faster and at a higher rate of throughput. 

In addition, this can aid in returns processing and reverse logistics, especially important with ecommerce businesses as return rates tend to top 30%.

What Are the Benefits of On-Demand Warehousing?

  • No or very low start-up costs
  • Reduced implementation lead times of 3-4 weeks
  • Flexibility: pay for short term usage rather than being tied to a long-term contract

 

Need pop-up warehousing?  Reach out to one of the following for help:

 

2. Consider Flexible Alternative Warehouse Locations:  Micro-Fulfillment Centers/Micro-Warehousing

Another innovative idea that has taken hold is “micro warehousing”.  In this model, retailers position small distribution centers adjacent to major population centers.  These small distribution centers are used to house a limited selection of the most popular SKUs to help speed up ecommerce order fulfillment

In 2018, retailers including Target, Amazon and Kroger pumped an enormous amount of capital into e-commerce to slake the consumer e-commerce craving for food and groceries.  According to research conducted in 2015 by CommonSense Robotics (CSR), retailers lose $5 to $15 on every manually picked online grocery order.  As the number of online orders increases, so does the loss and amount of inefficiency and ineffectiveness.  Getting orders to consumers quickly is one of the foremost challenges in the supply chain industry today.

Micro-fulfillment centers come in all shapes and sizes and can even be personal garages rented out for company storage space.  Because warehouses are typically situated outside the city limits, using these small spaces can give companies a leg up by bringing warehouses closer to the end consumer.  Reaching consumers quickly is vital to the success of ecommerce last mile delivery.  The strategy of micro-fulfillment unites the sharing economy with warehousing and logistics operations.

3. Use a Flexible WMS to Automate Picking E-Commerce Orders 

Across the supply chain, in warehouses where goods are stored and shipped, 3PLs and shippers rely on WMS technology to ensure visibility and proper inventory management and well as quality control to help ensure customer satisfaction.  Keeping warehouse and freight costs down is a vital part of making sure that 3PL customers can affordably ship to consumers. 

Consider which picking strategies would work best for your operation:

Pick and Pass

In this scenario, a picker remains in a relatively small, well-defined area.  The order moves from zone to zone as additional SKUs are picked and added to the order until it has been completed.  Often a conveyor is used to transport a tote box to each zone and another conveyor is used to move the completed picked orders to the packing station.  Tip:  this picking strategy works well for a limited number of SKUs and orders, with only a few lines per order.

Batch Pick and Sort

In this strategy, orders are grouped so that they can be picked in SKU order but are not sorted during picking to speed up the process so that more orders can be picked at once.  Once picked, the goods are taken to sorting tables and sorted by customer order.  This strategy usually is more advantageous for larger operations which utilize automated sortation solutions.

Zone Pick and Combine

A variation of the Batch Pick and Sort strategy, this strategy involves having two or more pickers work on the same orders at the same time in one zone.  Once picked, the orders take selected SKUs to the sorting area where the orders are combined to complete the order.

“Hot Pick” Zone

One zone is established to house the top selling SKUs and is positioned in an area that is optimal for facilitating picking for transfer to the packing station.  Hot pick zones can change frequently based the changing orders for each SKU.  By positioning all the fast-moving SKUs in close proximity to each other and the packing station, transit times are reduced.

Cluster Picking

Cluster picking is accomplished by picking into multiple order containers such as totes.  This strategy facilitates the picking of multiple orders simultaneously using one large cart that can accommodate several totes or boxes.

4. Rely on a Flexible WMS to Automate Goods-to-Person (GTP) Processes.

 Traditionally, order fulfillment has been done via the Person-to-Goods fulfillment (PTG) strategy, meaning that warehouse workers travel to various zones to locate products that matched the required SKUs.  Inefficient in terms of time and labor, PTG also tends to be rife with errors.  Person-to-goods picking models have been used for decades in traditional distribution facilities.  With the escalating number of SKUs, number of individual D2C orders escalating exponentially, the dynamic nature of orders, and consumer demand for fast, low cost shipping, 3PL warehouses and distribution centers need new strategies and flexible technologies to meet rapidly changing requirements. 

In recent years, Goods-to-Person (GTP) strategies have become more popular in fulfillment operations. 

How Does GTP Work? 

  • Incoming goods are removed from pallets
  • Cartons and/or pieces are positioned in totes and appropriately sized containers for storage in high density AS/RS carousels or robotic systems
  • To process orders, SKUs are automatically retrieved from storage and positioned near the picker, such as a pick station or palletizing station.
  • Pick stations and palletizing stations are optimized for ergonomics and top productivity
  • GTP can involve high-density storage systems, carousels, robots, vertical lift modules, pallet-based systems or tote/carton-based systems.
  • GTP can be combined with voice-enabled systems or light-enabled systems

Goods are moved directly to the warehouse worker, enabling the worker to pick what is needed to fulfill orders.  This increases the accuracy and efficiency of the picking process.  Another benefit of the goods-to-person fulfillment strategy is that is uses less warehouse space.  

Using a GTP strategy with WMS, warehouse workers can be assigned to one zone, reducing both human and equipment traffic.  Goods-to-person fulfillment reduces errors, boosts efficiency and workforce productivity.  Used with AS/RS (automated storage and retrieval systems), workers retrieve picked items that the AS/RS has picked from shelves and placed in the required workstation.  

Medium and low SKU moving products tend to be the best candidates for goods-to-person automated systems.  In a traditional person-to-goods strategy, these types of products require that warehouse workers walk multiple aisles between picks.  Evolving to a goods-to-person strategy eliminates the time and labor associated with this significant walk, producing time and labor savings.

5. Select Flexible Ecommerce Fulfillment WMS Software That is Workflow-Driven

Using an e-commerce fulfillment warehouse management system that is designed to be highly reliable and to handle a huge volume of individual D2C orders is essential.  Here are some other requirements you should consider when selecting a new WMS:

Workflow-driven processes including:

  • Pick and pack
  • Returns processing/reverse logistics
  • Kitting and assembly
  • Custom packaging and labeling
  • Automated cartonization with pack and ship process

Essential functionality:

  • Real time information visibility
    • Reporting and dashboards that can be tailored to provide insight into ecommerce business
    • Real time shopping for shipping rates with a variety of shipping options
    • Tracking of products shipped
    • Integration ready: TMS, shipping carriers, material handling, ERP, etc.
    • For third party logistics providers, select a 3PL WMS with 3PL billing

Conclusion

Whether you are an online seller working with a 3PL partner or a global ecommerce shipper, having a well-considered e-commerce fulfillment strategy is essential to the success of your business.  Thinking through the optimal locations where your goods should be stored and shipped to reduce the costs of shipping may involve giving due consideration to alternate locations such as on-demand warehousing and micro-fulfillment centers.  Positioning goods in facilities where they can be packed and shipped to reach consumers within a day helps to reduce ground shipping costs and transit time, crucial in ensuring customer satisfaction rates remain high. 

Evaluating fulfillment models, fulfillment processes and fulfillment partners is also crucial.  Flexibility is essential. Cutting down transit time in warehouse processes can help maximize labor productivity, the largest expense in warehouse operations, especially as it involves order picking. 

Is your ecommerce business using the optimal warehouse management system for your operation?  Using a workflow-driven WMS built to handle high volume operations can optimize operational processes, create efficiencies and enhance productivity, helping you keep warehouse operating costs under control. 

Finally, introducing automation and robotics and moving to a goods-to-person strategy can reduce the burden on labor resources.  As there is a pronounced shortage of warehouse labor and turnover rates remain high, using automation and material handling solutions can help ensure that your fulfillment warehouse or distribution center remains running smoothly.

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