By Eric Lamphier, Senior Director, Product Management, Manhattan Associates.
Modern supply chain and logistics professionals are grappling with the most challenging environment that they have ever faced, especially as one focuses to end point of retail commerce and consumption.
Retailers have to operate sophisticated omni-channel distribution centres (DCs) that strive to satisfy around-the-clock customer demands. In the face of these pressures, DC managers are focused on streamlining processes, boosting productivity, and expediting order fulfilment. A new approach to processing orders can help them.
The strategic criticality of the e-commerce channel and e-commerce orders has truly changed the game for DCs. Instead of just simply shipping in bulk to retail DCs and/ or retail stores, today's DCs also ship directly to customers, giving them a direct connection to the shopper – every order has a face. Delivering orders accurately and on time means a higher likelihood of a repeat order. Conversely, failing to meet or exceed customer expectations could lead to a lost customer for life. While DCs have not traditionally been considered integral to customer retention, in today's world they play a significant role in delivering a satisfying experience that keeps customers coming back.
Hence, rapid and efficient e-commerce order fulfilment is a top priority in today's omni-channel retail landscape. Consumers expect it, shippers promise it, parcel carriers work to deliver the goods, and market innovators work hard to develop and deploy new solutions. Speed is vital, but order accuracy can't be sacrificed, and the supply chain operation must be tailored to maximise efficiency and profitability. In order to compete, distribution centres are being transformed, thereby giving birth to new requirements, new workflows, new solutions, and new opportunities.
Key components in the DC
For DC managers, there are four key 'natural resources' that must be constantly monitored: labour, equipment, orders, and inventory. Not enough or too much of any of these individual resources and the DC has a problem on their hands. On the labour and equipment side, balance is needed between automation and human labour to ensure that things flow while avoiding costly under-utilisation. On the inventory side, achieving equilibrium between stock and order levels is critical to meet demand without experiencing a crippling surplus or shortage.
To avoid negative outcomes and to ensure proper balance, the DC managers and supply chain teams leverage specific tools, notably purpose-built software systems including an enterprise resource planning system (ERP) to capture and transmit orders, a warehouse control system (WCS) to drive automated equipment, and a warehouse management system (WMS) which orchestrates interdependent inventory, orders and labour decisions. These systems must work together in harmony for a successful, efficient and balanced DC. Failure to align the systems and natural resources could result in costly setbacks, including longer cycle times, inventory shortages, and unfulfilled orders. In fact, no matter how balance is lost, the result is either money wasted or unhappy customers – sometimes both.
A new approach
Efficient fulfilment procedures are critical for addressing the challenges associated with e-commerce orders. The traditional order fulfilment approach in the DC, known as wave processing, involves processing orders in large batches. As each batch of orders nears completion, the next batch is started, and this approach is known as a 'push model', meaning orders are 'pushed' into the DC operation for processing in batches. While wave/batch processing does deliver specific efficiencies for other channels, it can create peaks and valleys as one tracks the utilisation of labour and automated equipment in an e-commerce operation. Underutilised assets reduce overall fulfilment capacity which is not a desired outcome in an e-commerce distribution centre where orders stream in all day, every day, 24x7. Customers increasingly place orders via streamlined apps and mobile experiences and in turn, their expectation is that their order will be fulfilled and delivered rapidly. In other words, real-time order fulfilment and speed is as critical as it as has ever been.
Dealing with a massive amount of relatively small orders, with just a few items per order, demands a different kind of fulfilment approach. Order streaming, a form of waveless picking, reimagines traditional order fulfilment logic and produces a more flexible, e-commerce centric fulfilment method. Rather than batching orders and dropping them into the DC operation in waves, Order Streaming continuously evaluates the order pool and offers ways to optimise those orders as they are being driven through their required DC workflows. Unlike the wave push model, order streaming operates under a 'pull model', meaning that as soon as there is capacity in the fulfilment operation, new orders are pulled into the workflow to the available asset(s).
This results in more immediate action orders are not held until they can fit into the next batch; as soon as an order can be addressed, it is pulled in and processing begins. This approach to fulfilling e-commerce orders ensures real-time alignment between labour and equipment availability and helps maximise efficiency to enable DCs to strike a better overall balance of resources. Additionally, the dynamic assembly and assignment of tasks when they can be actioned versus waiting to batch means that fulfilment decisions can be delayed and more specific. Instead of queuing up a batch of orders with different needs or priorities, orders can be dealt with in real-time on a more individual level, and ultimately decisions can be made based on the most recent and best data.
E-commerce has shaken up the retail world in numerous ways – stores, technology, employees, and processes are evolving to accommodate retail's new world order, and DCs are no different. Order Streaming enables DCs to more efficiently process the constant influx of small orders that are characteristic of e-commerce shopping and ensure speedy fulfilment and a positive experience for the consumer. E-commerce shopping will only become more dominant and more complicated in the years to come, and brands that are ready and willing to adapt their fulfilment processes to strike the right balance across labour, equipment, orders and inventory will be the ones that prosper and stand out from the competition.