1/7/2020 Maximizing Productivity in E-commerce Warehousing and Distribution Operations - Inbound Logistics

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cc=editor@inboundlogist Building a Smarter Warehouse
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1/7/2020 Maximizing Productivity in E-commerce Warehousing and Distribution Operations - Inbound Logistics
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Because of the digital nature of e-commerce, its infrastructure permits integration of

systems that help unify information across multi-channel inventory, order management,
promotions, merchandising, and distribution systems. The most advanced 3PLs operating
within e-commerce provide this capability.

These systems allow 3PLs to record the relevant details of each item and parcel being
shipped. Parcel shipments can be tracked, and proof of delivery quickly confirmed. A Visit Our Sponsors
customer's transportation costs and performance can be analyzed, thus helping 3PLs to
negotiate rates and improve service.

Integrated ordering and parcel tracking is made possible through the 3PL's WMS, which is
an ideal system for the precise and efficient tracking of products. The WMS—
communicating with the ERP, along with sensors in the pick-and-pack systems and
conveying equipment—is capable of monitoring individual SKUs as they are stored and
moved through the facility.

3PLs now also have the opportunity to record every customer transaction, and track
consumer behavior and sentiment. Forwarded to their clients, this data makes possible the
ability for retailers to analyze millions of pieces of data, resulting in a real understanding
of what its consumers are purchasing, how to get into their online carts, and how to
become part of their repeat purchase cycle.

This level of supply chain analytics allows 3PLs to maintain precise control of products
through every stage of supply chain handling, from receipt of products to storage and
picking, through shipping.

PICK, PACK, AND SHIP

E-commerce fulfillment is basically a piece-pick operation, which is historically a hands-
on procedure. The right automation facilitates the minimization of manual touch,
resulting in more accurate orders, improved ergonomics, lower labor costs and worker
travel time, fewer returns, and space saved by operating in a smaller footprint.

Much of the recent investment in automation by e-commerce 3PLs has been driven by a
desire to improve order picking, packing, and shipping processes, with a focus on picking.
And the most basic form of automation for e-commerce in 3PLs is the augmentation of
manual order picking with IT support, such as pick-to-light, hands-free voice systems,
zone routing, or dynamic slotting.

In most distribution centers, picking is the most labor-intensive DC function, and usually
can provide the most cost-savings when automated. IT-based picking options exist that
have significantly lowered capitalization costs, and can exert a sizable positive impact on a
DC's throughput efficiency, while reducing operating costs. For many distribution centers
—and especially for e-commerce 3PLs—IT-based picking options can provide the ideal
automation solution to streamline their throughput cost-effectively, while realizing a
short-term ROI.

E-commerce 3PLs are finding that their clients are progressively requiring shorter-term
contracts—where once five-year and 10-year contracts were typical, now three-year to five-
year contracts have become the standard. 3PLs need to factor their automation investment
for a much shorter ROI, which makes heavily capitalized equipment a poor option.

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For dynamic e-commerce picking, highly automated robotic and shuttle-based systems
provide accurate and rapid goods-to-person solutions. These systems can achieve
performance levels of many hundreds of order lines per hour with precision accuracy. For
e-commerce fulfillment within 3PLs, however, it is difficult for these organizations to
factor the capital equipment ROI over such a short three-to-five-year span.

Equally important is the scalability of the automation as a 3PL's client needs increase or
decrease, and the flexibility to move the automation for use in a new location, when and if
the contract does terminate. This is further pointed up by the fact that e-commerce
retailers can fluctuate in their use of 3PLs. Having retained a 3PL to handle their e-
commerce fulfillment for several years, a retailer can pull the fulfillment back in-house,
then several years later put the fulfillment back out for 3PL bid consideration again. From
the perspective of the 3PL operator, the more flexible and scalable the pick, pack, and ship
equipment, the better the possibility of achieving their return on investment on that
equipment.

The focus on automation for any e-commerce 3PL should be to easily increase fulfillment
throughput and SKU density over time. Such a system should enable e-commerce 3PLs to
pick, pack, and ship orders and handle returns quickly and accurately, while reducing
labor costs and shipping errors, and realize equipment ROI over the life of the contract.

ASSESSING 3PL CAPABILITIES FOR E-COMMERCE

Within e-commerce, unpredictability is a constant factor. Flexibility in the 3PL supply
chain, therefore, becomes critical. This can be derived from implementing the right
software and automated systems that can support the fluidity that e-commerce requires.

3PLs under consideration for handling a retailer's e-commerce fulfillment should be

assessed against the following criteria as to their performance capability. These points
represent potential trouble areas in e-commerce fulfillment:

Large SKU counts, with a high percentage of slow movers.

Small number of pieces per order.

Extreme peak season volumes.

Under-stocking due to unpredictable changes in market demand.

Front-end order processing.

Fast 24 to 48 hour delivery.

High volume of returns from end consumers.

High potential for brand damage from poor fulfillment performance.

Real-time, accurate inventory and order visibility.

These points can best be addressed in concert with an independent logistics consultant,
who can provide considerable value to logistics executives at both the retailer and 3PL.

The methodology of independent logistics consultants permits an objective examination of

all e-commerce options, helping both parties determine underlying costs and design for
facilities, automation, and labor within the 3PL. Consultants size the facility based on the
retailer's requirements, the anticipated level of operator cost, and what the 3PL plans to
invest, factoring in the optimum level of automation.

Independent consultants draw on solutions from many e-commerce 3PL options used in
different applications, thus providing a broad perspective on potential solutions that might
otherwise not be considered. This depth of experience can make the critical difference in
selecting the right 3PL and equipment that will meet retailers' requirements for
throughput and efficiency, and the 3PL's need for minimized capital outlay that will
deliver the expected return on investment.

264

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1/7/2020 Maximizing Productivity in E-commerce Warehousing and Distribution Operations - Inbound Logistics

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