E-commerce has taken the world by a storm. eMarketer estimates that business-to-consumer (B2C) e-commerce sales of products and services will hit US$2.36 trillion by 2018, an increase of 91% over 2013. More than a third of the sales will be generated in Asia, as more new buyers come online.
With such tantalising prospects, how can companies ride the Internet wave and win? While having a great product and a user friendly website are necessary pre-requisites, they are not sufficient. Par excellent delivery is the key, as anyone who can place orders at the click of a mouse is unlikely to have the patience to wait days much less weeks for their orders to be delivered.
This presents aspiring B2C companies with a challenge – how can they gear up their operation to provide customers the level of service they have come to expect from e-retailers?
At the heart of this complex order fulfilment system is the warehouse. It is here that the products are stored and the orders picked and packed for delivery. Stripped to its most basic, the warehouse comprises four walls and a roof with lots of doors. But by having the right systems and solutions within the warehouse, e-retailers can ensure that customer orders placed online, whether they are clothes, cookware or collectibles, are picked, packed, sealed and delivered ASAP in exactly the right quantity, colour and size.
How do you begin? Where do you begin?
Operating with state-of-the-art facilities, online giant Amazon has honed this into an art. But doing an Amazon is probably not the best way to go for young, enterprising companies. Based on our experience, we suggest you adopt the following step approach.
You can begin by responding to the following ‘as-is information’, such as:
Number of SKUs
Number of orders
Number of order lines
Number of picks (per hour and per day)
Then, you need to look at the distribution of the products, which are the fast, medium and slow movers. The Pareto Principle applies to most things in life, including the warehouse, i.e., 80% of the inventory turnover is derived from 20% of the total number of SKUs. It is also important to remember that medium and slow movers are always growing.
Having done that, you can select the appropriate equipment, storage and picking solution, and the layout.
If time is the essence, buying proven modular off-the-shelf material handling technologies is recommended. Being standard they can be installed and brought up to speed more quickly. They are also less costly and can be scaled up quite easily, enabling e-retailers to respond to increasing demand.
Broadly there are five products groups:
Product Group 1: Racking, shelving and carton flow racks – the backbone of the warehouse storage system. Whether ground-floor or multi-level, they can be:
moved easily to a different location, and
integrated with paperless picking technologies and come with a wide range of accessories such as dividers, hangers, drawers, shelves and picking totes
Product Group 2: Vertical Lift Modules (VLMs) – automated storage and retrieval systems similar to bakers’ racks, the VLM is a low-risk, high-performance step into warehouse automation
Product Group 3: Workstations – an organised and convenient ‘island’ for materials and equipment to improve efficiency and throughput within the warehouse.
Product Group 4: Conveyor Solutions – integral to efficient warehouse operations, increasing operative productivity, they can be used for receiving and despatch to increase productivity and reduce transport turnaround times. Equally they can be integrated into order picking systems to improve productivity and expedite throughput.
Product Group 5: Automated storage systems – an alternative backbone for warehouse storage, including stacker cranes, miniloads, carousels or shuttles, provide stored goods to the workstations automatically. Modular, flexible and scalable, they can be expanded in response to increasing volume and turnover.
An integration of products from the different groups can provide you with a complete system. By seamlessly combining them, you can address even complex picking challenges.
Case Study of Integrated Solution
The case of Danish Creativ Company A/S, an up-and-coming, mid-sized online mail order company specialising in arts, crafts and educational products is illustrative. With annual double digit growth, it had become imperative for Creativ to upgrade its warehouse operation. Pick rates in its manual picking system were low and connection between the picking and shipping areas was not the best.
After making proper data analysis and after taking into consideration the resulting Pareto Curve, SSI Schaefer proposed the following using standard systems – that fast-moving items should be placed onto a carton flow rack, medium-moving items in a bank of VLM, slow-moving items on traditional industrial shelving and replenishment materials on pallet racking.
The system was rolled out as planned in less than four months, below the company’s budget of US$1.5 million. After the implementation Creativ has a more efficient layout and workflow. The stock locations between fast, medium and low movers are optimised, so too is its picking process. And there is a more efficient connection between the picking zones.
By using proven technology integrated seamlessly, Creativ has enjoyed a quantum leap in productivity enabling it to cut the number of staff employed in its warehouse as well reduce the working hours of existing staff. It is also able to pack more into the warehouse, providing more room to scale up as the company expands.
Source origin from Klaus D. Wurm, Vice President & Managing Director of Materials Handling at SSI Schaefer.