The growth in e-commerce has transformed warehouse and distribution centers to mega fulfillment centers. The global shift toward e-commerce is changing how the retail and logistics industries operate. This trend affects all aspects of the retail industry including the strategic location of fulfillment centers and total real estate footprint.
As e-commerce retailers seek to drive profitability, to differentiate their offerings and to improve time to market, logistics facilities are increasingly viewed as revenue drivers. As e-commerce logistics models develop, they will drive huge changes in physical distribution networks comparable in many respects to previous changes generated by the rise of global sourcing, or the earlier centralization of deliveries to retail stores via retailer-controlled distribution centers. This will give rise to a new class of logistics and distribution properties including mega e-fulfillment centers, parcel hubs, delivery centers, local urban logistics depots for rapid order fulfillment, and returns processing centers.
The operational requirements behind a successful fulfillment center are also different than for a distribution center, it is the business and operations strategy that drives the order fulfillment network. The capabilities needed for each company’s e-commerce strategy are customized and include developing flexible solutions for shorter time horizons, understanding the balance between automation and constraints, and properly sizing the packing operation. Peak shipping times are more intense in fulfillment centers, orders sizes are smaller, but volume is very high.
- 1 Strategy 1: Embrace “Chaotic” eCommerce Warehousing.
- 2 Strategy 2: Build Touch-Plan Strategies for Different Order Types.
- 3 Strategy 3: Use Batch Pick to Carts.
- 4 Strategy 4: Proactively Pull Orders as They Come In.
- 5 Strategy 5: Optimize Transportation Requirements During Picking.
- 6 Strategy 6: Implement Adaptable Pack Zones or Stations.
- 7 Strategy 7: Target Two-Day Shipping.
- 8 Strategy 8: Managing returns.
- 9 Conclusion
Strategy 1: Embrace “Chaotic” eCommerce Warehousing.
Chaotic storage and ecommerce warehousing is a means of storing products that was developed by Amazon. Chaotic storage does not follow any logical process. Instead, it focuses on using any available shelf space for incoming storage, and the location of the items are logged into the warehouse management system (WMS). While it seems illogical, it does reduce time spent in trying to find new, ideal places for products.
Strategy 2: Build Touch-Plan Strategies for Different Order Types.
Smaller orders should have fewer touch points. However, large orders of the same item should also have minimal touch points. These facts imply a touch-point strategy should be in places for different types of orders placed, including e-commerce orders.
For example, single-item orders should only have one touch point, but multi-item orders for a store should have at least two touch points. An indicator or alert label should be used to help pickers, packers and loaders identify these shipments easily.
Strategy 3: Use Batch Pick to Carts.
Warehouses had grown accustomed to picking orders individually, but the demand created by e-commerce requires faster picking of many different orders. Consequently, warehouses must create a strategy for picking different types of orders faster, such as zone pick-and-pass or multi-order pick to tote. Ultimately, this helps get more accomplished sooner. Mobile technology, such as radio frequency scanners, can help to ensure all picks are accurate by verifying the items’ specifications against orders automatically.
Strategy 4: Proactively Pull Orders as They Come In.
E-Commerce warehouses are processing more orders than ever before. As a result, a single eCommerce warehouse may actually be responsible for processing groceries, fresh fruits and vegetables, beauty supplies, apparel and practically any other type of product. Shippers need to proactively pull orders as they come in, but the key to making this practice successful is prioritizing order picking to meet the demands of the consumers.
Strategy 5: Optimize Transportation Requirements During Picking.
Aside from the labor costs of having staff members physically pick products, the cost of transporting a shipment to the customer represents one of the highest costs in the supply chain. While many small orders may come in, the warehouse should proactively work to reduce the transportation costs by picking and packaging products for intermodal transportation, asserts Art Eldred and Tony Hollis of Supply Chain 24/7. As a result, shippers can reduce transit times and fuel costs, which promotes faster, on-time delivery.
ECommerce shows no signs of slowing, and those who refuse to enhance warehouse and shipping processes will lose their competitive advantages and fail. However, the future for eCommerce is filled with opportunity. If shippers and warehouses can leverage the power of insurmountable demand to improve the processes during order fulfillment and shipping, they can become the industry profiteers of tomorrow.
Strategy 6: Implement Adaptable Pack Zones or Stations.
Rigidity in warehousing is incompatible with e-commerce. All plans and strategies need to adapt to real-time data regarding demand fluctuations, forecasts and changes in how consumers are ordering. Rather than devoting additional resources to the construction of new warehouses for peak seasons, existing areas can be converted to pack zones or stations, allowing pickers to complete the order packing process faster, promoting faster delivery and fewer touch points.
Strategy 7: Target Two-Day Shipping.
Major online and big-box retailers, including Amazon, Target and Walmart, are targeting two-day delivery times, if not same day shipping or pickup. Therefore, all smaller e-commerce warehouse solutions need to strive toward this same goal. Otherwise, consumers will go to their competitors.
Strategy 8: Managing returns.
Returns can be annoying, but successful manufacturers and virtual merchants are embracing them because it’s critical to give consumers options. The retail landscape is a battle of low pricing and convenience, and easy returns are a key part of that.
When you can make the returns process quick and easy, you maintain your customer’s trust. Have a system in place that can handle your returns accurately, cost-effectively, and keep your customer experience at the top of the game.
Returns, not simply a nuance for shippers. Unfortunately, consumers are far less likely to complete an online purchase if return policies are non-existent or too expensive, and many consumers will simply forgo purchasing your products if it can be obtained with a returns’ guarantee from another eCommerce solution. In other words, shippers need to be prepared to take on the costs of free return shipping, assistance when printing shipping labels, and processing returns as they come in.
These are some of the most common and implementable strategies to achieve better efficiencies. However, these are by no means the only ones. Organizations should experiment where possible, between different options to find the most efficient methods and options for them. Organizations should also continue to evaluate their chosen methods on regular basis. New tools and techniques come up regularly which can help organization in improving their distribution operations.
E-commerce is only going to grow larger in the coming years. Traditional means of warehouse management are obsolescent, and omnichannel orders mean your organization needs to be ready with the right product on-hand, at the right time and ship it almost simultaneously with the customer’s “checkout.”
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