Chain of Thought

E-Commerce is Raising the Bar. Ready to Jump?

The products you ship are only as good as their handling and packaging. That's an old truism, but shippers who forget it will suffer for it—like those who jump into e-commerce fulfillment without rethinking their packaging operations.

Judging from Commerce Dept. numbers, there are bound to be plenty of those shippers. Total e-commerce sales for 2011 were estimated at $194.3 billion, an increase of 16.1 percent from 2010. Those sales accounted for 4.6 percent of total retail sales. At that growth rate, it will be hard for even the most stubborn hold-outs to avoid jumping into e-commerce.

If you're a small company in that situation, you may have already started investing in technologies like a warehouse management system that enables rapid picking of small orders. But Ian Hobkirk says that's not good enough. Ian is CEO of Commonwealth Supply Chain Advisors and he says the efficiencies afforded by such a WMS don't carry over into the packaging and shipping areas.

I spoke with Ian the other day about an e-commerce whitepaper he's working on and one of the points he makes in it is that smaller companies may need to focus on process changes and automation in their packing areas to reduce labor costs and increase throughput.

Even larger companies that have made a huge investment in conveyors, sorters and automated storage systems may face challenges if these systems are geared toward processing huge batches of orders.

“When a small number of high-priority orders need to ship out quickly,” he says, “it can be very hard to insert these into the workflow before the batch is complete. As a result, these companies are forced to have artificially early cutoff times and service levels suffer.”

In this case he recommends improved wave management technology that will enable faster processing of higher-priority orders.

If you're a supplier to retailers and still trying to avoiding e-commerce, you may not be able to hold-out for long. Hobkirk says more and more retailers are asking their suppliers to fulfill these orders for them—which may be difficult if those suppliers are more geared to pallet-size shipments.

Retailers are making other demands too—like aisle- and shelf-ready shipments. This again requires the ability to handle eaches. You may be used to picking 30 items into a tote and shipping it to a store for them to sort out, but the next level of service is picking five or six items destined for a specific aisle in a store. If you ship to several stores that means several store configurations. Your storage strategy may have to change from family groupings to SKU affinities. So if coffee is one of the retailer's hot sellers you'll have to strategize on slotting the affinities like sugar and stir sticks somewhere nearby to optimize labor.

This doesn't have to require a complete revamp of your material handling systems, according to Chris Arnold, vice president of operations and solutions development for Intelligrated. He told me it's possible to leverage existing technologies for this brave new world.

“You might have a break pack module flanked by gravity conveyor where you can set your totes down and begin picking,” he told me. “The new technology might be a simple addition of a pick to light that allows the batching of four orders at one time, picking them simultaneously as you make your path through your current layout.”

Another way to leverage an older idea and bring it forward is to use pick and pass. “With aisle-ready I can use zone routing to take the tote that starts in my zone for a couple picks and if I batched a couple totes together where I'm picking four or five of those, utilize the conveyor to go downstream and divert each of those totes to the appropriate zone for the next picks. That way I've created aisle-ready with a very simple proven technology and I'm leveraging pick-to-light, picking more than one order at a time. We're just taking stuff we know works and expanding on the capabilities it has by adding a few functionalities.”

Sounds akin to teaching an old dog new tricks. Appropriate analogy for shippers whose customers are asking them to jump through hoops.

Related Editorial:

Keeping Up with E-Giants

Retailers Pursue Multichannel Strategies for their Supply Chains

Conveyors in Distribution: Ready for Change

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