One of the funnier (and more truthful) bumper stickers I’ve seen lately has been on the backs of tractor trailers traveling the highways. It reads: Don’t like trucks? Stop buying stuff. Problem solved.
This consumer joke hits home to those of us who spend a lot of time in fulfillment centers, especially during holiday peak season, which heats up mid-November and lasts through early January. As more purchases are made online, there’s more trouble brewing inside fulfillment centers that still aren’t prepared for the onslaught of e-commerce holiday orders each year.
And e-commerce shows no signs of slowing. According to Internet Retailer magazine, U.S. shoppers will spend $119.99 billion with online retailers for their holiday shopping. This is a 15.5 percent increase over 2017 online spending during this time of the year.
Our desire for commerce on demand has created a fulfillment quagmire – not just during the holidays, but all year long. It takes only seconds for our wants and needs to become clicks and purchases that are on the way to our front door. And we’re not placing hefty orders just once a month. Instead we’re shopping constantly, requesting small, one-off orders that are often delivered within two days and for free with services such as Amazon Prime. Convenience, as always, is king.
But for fulfillment operations, this convenience comes at a cost.
Double, Double Toil and Trouble
When an e-retailer is only fulfilling 500 orders a month, there is time to develop and follow a decent process. But during peak season when that number can jump to 10,000 orders a day, that retailer’s normal process is quickly rendered obsolete and there’s no methodology for handling the increase in volume.
The mistake many companies make is not consulting with fulfillment operation planning experts until it’s too late and too much money has been sunk into the operation to start anew. When this happens, companies will make tweaks here and there. Fires of the day are put out but what should be happening is the creation of a technology road map and the development of a plan for how to scale up to a level that’s affordable.
Each year, I see the same peak season trouble spots in fulfillment operations:
- New and temporary hires: When operating procedures have not been standardized, productivity will drop as companies hire more people to handle the peak season work load.
- Batch picking: During batch picking, groups of orders are picked at the same time and transported to pack stations via carts. This method invariably causes a spike throughout the process that leads to labor inefficiencies as volumes increase.
- Low labor utilization: In problematic systems, you will see a pattern of extreme activity and then complete idleness, which wastes time. When the process is balanced, there’s material flowing all the time and everyone works to the same beat.
There are simple solutions to fixing those trouble spots:
- Standardize operations: There’s no reason why everyone should have a different method of packing, picking, scanning, etc. Standardize all operations to the best practices.
- Minimize wasteful activities: Time is wasted most often through excessive material handling and traveling. If products are carried around the warehouse, time is wasted. That task can be mechanized, automated or conveyed.
- Create a balanced process at every step: If any one part of the process doesn’t meet the throughput requirement, it’s probably your bottleneck and that’s the weakest link in the chain. The tasks that take the longest time need to be broken down and distributed upstream and downstream of the fulfillment process.
A lot of people in e-commerce fulfillment are running out of breath. They think they need to work faster to be more productive. But what they really need to do is work smarter.
Don’t Just Plug and Play
As fulfillment centers have a harder time finding and retaining labor during peak season, more companies, whether its brand owners or third-party logistics providers, are considering automation. But, they are weary of making the investment just for peak season.
Because e-commerce forecasts aren’t reliable, companies have a hard time knowing how to add automation and what the return on investment will be. I’ve had customers say they wished there was a Consumer Reports for fulfillment automation. I feel their pain. The fulfillment industry is in flux, the market is segmented and there’s nowhere to go to understand the hype from reality when it comes to automated fulfillment systems. Without guidance, companies end up buying a piece of technology to see how it works and then it doesn’t deliver on its promise because the company didn’t account for the complexity in its order fulfillment, for example.
The answer to this problem is implementing semi-automated pack stations before making the leap to full scale automation. Many e-commerce orders can be placed in mailers and bags instead of traditional corrugated boxes. Then, smaller, semi-automated solutions can be used to speed up the manual process, which will result in productivity gains close to full-scale automation.
The key to making full-scale automation successful is having a holistic view of the fulfillment process before implementation. I see many companies with a sub-optimal process that want to jump into automation but there are steps to take before getting there:
- Standardize the operation
- Re-organize the process
- Implement work-cell technology
- Add full-scale automation when needed
Companies are missing this kind of road map. Today, when most customers need automation they go to YouTube or Google, type “fulfillment automation” in the search boxes and contact whatever vendors pop up. But how will that machine they just ordered fit into their whole process? It won’t.
I’m still surprised by how little companies know about their data. They’ve got digital systems that collect information about their operation yet they don’t know their overall labor productivity, or units shipped per man hours. Most don’t know their packing productivity by families of orders (singles, multi-item, fragile, gift wrapped) or their picking productivity by batching or order picking. Some don’t know what percentage of all orders get shipped out the same day or the average lead time to process open orders.
“Fast” and “free” are the keywords driving e-commerce fulfillment so knowing metrics about speed and cost would help to manage the order queue and set realistic goals for the day. In their defense, however, lots of warehouse management systems are not used as tools to report out metrics. These systems are often poorly integrated or not the right kind of system for the operation.
To handle peak season pressures, fulfillment operators may soon be considering automation as a service similar to the software-as-a service subscription-based model where the software is hosted in the cloud and accessed via the internet.
This method would allow companies to use automation as a service and less as an investment with a much shorter implementation lead time. When a number of fulfillment operations need an extra boost during peak season, wouldn’t it make more sense for all to get the service of automation?
For companies that face seasonal spikes in order volume and don’t have the capital or capability to expand, there’s also warehouse as a service. Multichannel Merchant reports XPO Logistics launched a shared-space distribution network of warehouses and last-mile hubs earlier this year.
However companies chose to addresses peak season fulfillment, the growing issues cannot be ignored. What every e-commerce business has in common, no matter what region of the world or what condition, is its lack of time. Things have to happen fast in e-commerce. You can’t study operations to death. You have to quickly figure out how to line up the right process with the right systems and the right people.