This article originally appeared in the 2018 September/October issue of PARCEL.
With consumers migrating away from traditional brick and mortar retail options, companies continue to increase their online presence and e-commerce offerings in order to stay relevant and profitable.
Average annual e-commerce order growth is in the double digits, and distribution centers (DCs) struggle to meet consumer demand. Competitive drivers increase consumer expectations, which only adds to the challenges of the traditional DC/fulfillment center.
Each e-commerce order typically contains different and varying sized product(s). This creates a significant bottleneck in the fulfillment process, specifically the physical packing and shipping preparation.
In many cases, the choice becomes expansion vs automation. The common response seems simple, right? Automation is what most people would choose. Before that decision can be made, however, each company must analyze their key challenges that they hope to solve. Six of the most common reasons automation is considered are:
1. Labor: The challenges associated with acquiring, retaining, and managing a large fulfillment labor pool can be daunting. With unemployment rates in the four percent range, available labor is limited, causing labor costs to increase.
2. Facility Space Constraints: Year after year of continual growth causes fulfillment DCs to find themselves at maximum capacity. Without automating certain processes, adding the additional necessary footprint to accommodate manual fulfillment facility expansion may be the only option available.
3. Shipping Volume and Rising Costs: When dealing with manual fulfillment workflow, the product is too often packed in an oversized box or package and requires dunnage, generating greater than necessary shipping volume. Exaggerated shipping volume presents a multifaceted challenge. First, greater volume creates greater DIM shipping charges. The USPS noted that 63% of all packages are billed by DIM weight vs actual weight. Secondly, from a logistical standpoint, larger volume boxes limit order shipping capacity per truck/ plane.
4. Order Volume: Most companies are working to manage today’s peak and non-peak order volume while concurrently anticipating and planning for continued unprecedented growth.
5. Order Processing time: Consumer expectation of same or next-day shipping adds increased stress on existing fulfillment processes, workflow, and resources.
6. Free Shipping: Competitive positioning has placed a consumer expectation of free shipping. Studies have shown that 44% of consumers will abandon an online order if shipping costs are too high. Fulfillment can represent over 20% of the cost of sales, solidifying the saying that “There is no such thing as free.”
So now that we understand our challenges, what does an automated packing and shipping fulfillment process look like for us? The answer can vary for each DC based on all the items above… and more.
The first thing to do is perform an analysis of your packing and shipping preparation fulfillment operation that includes: current processes and workflows; shipment packaging types/sizes/volumes; order processing/shipping times and requirements; order volumes/anticipated growth; and current labor requirements/anticipated future labor needs.
Now it’s time to consider the automated workflow. It’s important to understand that even in a highly automated workflow, a portion of your orders will likely continue to be processed manually.
In an automated workflow, the order is transported from picking to the appropriate packing and shipping prep area. In most cases, the order would continue into full automation. Here, the product(s) would be scanned and the package would be dynamically created, perfectly sized to the dimensions of the product(s). The package is then automatically formed around the product(s) where it is sealed, weighted, and labeled. Shipping invoices would be dynamically printed and included inside the package with your marketing messages or logo printed on the outside.
Perfectly sized boxes eliminate the need for void filler and dunnage. In addition to the physical automation, interfacing directly with existing WMS/ERP/shipping software is a critical component of the automation workflow. Shipping destination sorting or transporting the ship-ready order completes the workflow.
It is always good to bring the internal team and thought leadership together during the course of the project. Mapping out the automation process and comparing it to the initial analysis and current manual workflow will help keep transition pains to a minimum.
Justification is obviously the go/no-go for any business change. Some things to consider are: financial, operational, business roadmap, customer demand, and competitive positioning. With fully automated fulfillment on the rise, knowing when it is right for your business to automate can take you to the next level, promoting consumer loyalty and retention.
If fulfillment automation has been a topic for internal discussion, and you would like to talk about it or learn more, I look forward to talking at the PARCEL Forum session. If you won’t be at PARCEL Forum, I can be found on LinkedIn and would be happy to talk.
Tim Dunskis is Executive Director, National Parcel Solutions, Bell and Howell. He can be reached at Tim.Dunskis@bhemail.com.