Tell-tale Signs You Need to Rethink Your Fulfillment Center

Mar 27, 2013 11:09 AM  By

To put it frankly, the ecommerce boom could cause fulfillment to buckle. In the past, retailers supported bricks-and-mortar stores with a single-channel supply chain to replenish goods from a central pool of inventory.

warehouse-manager-300Now, tablet and smartphone shopping is fueling a large share of growth in the retail economy. More than 50% of retailers support physical storefronts as well as ecommerce websites, mobile shopping and social capabilities. “Click today and get tomorrow” is here to stay and centralized fulfillment no longer works as an efficient source of support.

With U.S. ecommerce sales surpassing the $200 billion mark and projections of continued double-digit growth, it is increasingly important that multichannel retailers develop a process to integrate these channels and manage fulfillment efficiently and effectively. However, many retailers are busy on the front end optimizing their websites and stores.

In trying to create a seamless experience for the shopper, retailers are missing the telltale signs that their fulfillment system is buckling, which will hamper everything from customer service, to profitability to basic operations.

The good news is there are a number of factors that, taken individually, can illuminate whether or not the fulfillment center is making the grade.

What follows is a breakdown of those telltale signs:

Trouble Adapting to Changes
In the order fulfillment industry, change is the new normal. Whether it involves a manufacturer, packager or supplier, companies must be equipped to adapt to different and modified processes on a regular basis. A rocky transition can lead to shipment problems and delays, as well as issues further down the road.

In the past, a fulfillment center could allow hours or a day before acting on incoming orders. This allowed for an efficient organization of their processing through ‘batching’ in a logical sequence.   The new buzz word for distribution centers is ‘event-driven processing.’ This is where each event, or individual incoming order, immediately triggers a sequence of events that will begin the fulfillment process, ensuring same-day shipment.

Replenishment Errors or Concerns
Since many retailers offer comparable products at similar prices, access to products and fast delivery have emerged as a major shopping decision makers. Even slim errors in replenishment oversight can lead to big problems for ecommerce retailers.

Currently, the majority of all ecommerce orders are manually picked. If an individual worker finds the wrong product in an assigned location, their entire process is brought to a halt. They must resolve what has gone wrong (wrong location, wrong item, etc.) before proceeding to complete their assigned picking path.

Delayed shipments and missing shipment times
A successful ecommerce multichannel fulfillment strategy must accommodate for demand fluctuations. In addition to scheduled pallet and case in-store deliveries, multichannel retailers must factor the fickle demands of ecommerce shoppers into their fulfillment processes. Typically, this includes split-case picking, item-level touches and multi-line item sortation. Without processes in place to accommodate for demand fluctuations, retailers will experience difficulties delivering on larger or fluctuating orders. This can compound on itself to create difficulty delivering on seasonal promotions or shipping offers, and ruin customer relations before they’re even begun.

Inventory tracking and management challenges
In larger warehouse facilities with traditional operations in place, order pickers may walk more than 15 miles over the course of a shift.  Even in smaller distribution centers, where pick-to-belt systems are installed, operators can walk up to five miles each day on hard surfaces.  These requirements can be physically taxing and lead to disgruntled employees, as well as higher rates of error and injury.

Difficulty filling multi-product orders and managing returns
A system is only as strong as its weakest link. Even with software that picks at high levels of accuracy and equipment that moves an order at rapid speeds, employees equipped with improper training or tools can disrupt the throughput of an order fulfillment system.

Return rates, especially for goods where sizing is a critical factor, can run up to 30%. Managing these returns as a simple ‘add-on’ to the receiving or replenishment process can lead to tremendous bottlenecks. It is difficult or impossible to group returns of like SKUs together, so in effect you are manually ‘piece receiving’ items one at a time.

Customer service department is swamped
Interestingly, a telltale sign that fulfillment strategy may need rethinking could be revealed in customer service department statistics. If your customer service department is reporting record numbers of dissatisfied customers and a high volume of back orders, it may be time to rethink your fulfillment strategy.

Automation: A critical component in the era of next-generation fulfillment
Successful distribution center order fulfillment is a critical factor in ensuring competitive advantage in the modern retail economy. Distribution centers must be able to ensure delivery within ever-shortening lead times and high tolerances for accuracy and speed.

As a result of these factors, more operations leaders than ever are turning to automated solutions to ensure a smooth, integrated, and well-oiled process.  Solutions that automate both the replenishment and returns process allow ecommerce retailers to optimize their picking process and ensure customer satisfaction in a cost-affordable manner.

Bill Leber is the Director of Business Development for North America at Swisslog.