Considering all the challenges facing today’s ecommerce fulfillment center operations, how should you go about conducting an assessment, and what are the objectives?
While it’s okay to have some general objectives like reduce fulfillment costs, many companies’ assessments have more specific objectives. For example, your fulfillment expenses have increased without incremental productivity gains. How can you gain more usable space to store product? How can you reduce picking errors? What can be done to reduce order throughput times?
The assessment process we perform with our clients identifies areas where you can improve operational performance. The 5 basic components are:
- Gathering data and metrics to determine productivity, service levels and error rates
- A walkthrough and observations of the operations and processes
- Interviews with key staff
- Development of options
- Development of an action plan
Below are 12 key aspects of a complete ecommerce fulfillment center assessment that will help make your operations more productive and efficient.
Note: you can find a helpful infographic version of these tips by clicking here
Operational Metrics
What operational metrics do you regularly report on and what do these indicate about your fulfillment performance? Your assessment should compare your desired standards of service and productivity with your actual performance.
Space Utilization
How are you looking to make the most of available space? Are there opportunities to add tiered pallet racking? How about use of space over doors and on the outer walls? In some cases, we have found pallet racking is installed in the wrong direction in a facility. However, taking it down and reinstalling it while a center remains operational has many challenges.
Eyeball your bulk space. Is it honeycombed in terms of partial pallets? Does your WMS aid you with directed putaway and managing space?
In forward picking, are you using the same size pick faces for every product or do you use a variety of storage media? Do you store up to a week’s projected demand to reduce replenishment runs? Are there opportunities for better managing available space?
Keep 10% of locations open and available to allow for inventory movement. This may not be possible all the time but having space available to store inventory in picking and reserve locations is a key factor.
Labor Use
Direct and indirect labor represents more than 50% of your facility costs, excluding shipping. This blog gives you 9 key points to help you manage labor more efficiently.
Layout and Workflow
How well does your fulfillment center’s layout serve the processes of storage, inbound receipt processing and putaway, as well as all the steps of order and returns processing? One of the best ways is to diagram inbound product and order flow. How can you make the layout more productive?
Inventory Systems
You need to strike the tricky balance between having a SKU in stock when the order hits and not being overstocked. Most centers can process in-stock orders in a day or less. What can management and merchants do to optimize inventory availability? This blog has 6 major recommendations.
The other aspect is, inventory accuracy and being able to track usage and location throughout the fulfillment center. If a picker can’t locate an item, it goes into backorder purgatory and you risk losing the customer.
With fully barcoded product, locations and processes, inventory accuracy can be as high as 99.98%. This is the function of the inventory system, be it a WMS, ERP or OMS. Consider applications to reduce labor and improve efficiency where appropriate.
Slotting Procedures
Maintaining slotting procedures is critical to an efficient operation. Try to provide primary pick space for one week’s average unit sales for each SKU. Implement hot pick locations to reduce picker walk time. Focus on the top 10% of fast-moving SKUs to ensure they’re properly slotted. Finally, make sure you have a dynamic, ongoing slotting process.
Picking Productivity
Picking and packing are two major expenses in an ecommerce fulfillment center. Here are ways to improve picking productivity and accuracy essential to order throughput.
Packing Function
In ecommerce companies, packing labor is a major expense. Here are 7 areas to assess that involve packing process, materials, automation and branding.
Productivity Reporting
Most companies have not improved productivity significantly to offset costs in over 10 years. And employees want to know what’s expected of them and how they’re measuring up. Measuring and reporting on ecommerce fulfillment center productivity will help you improve performance.
Set Goals, Report Results
Is this the appropriate time to take productivity measurement to the department level? Here are some departmental productivity measurements most companies have not implemented.
Warehouse Management System
When you have assessed your operations, are the solutions being considered dependent on higher functionality from your existing systems or do they require a new WMS? Learn more here about WMS and automation synergies.
From Assessment to Action
Once you’ve gathered and analyzed all the information, patterns will emerge and you’ll have a quantifiable picture of what you do well and what needs to be improved. Develop an action plan for this year. Where can you get the biggest improvements from the smallest number of changes?
Keep all the observations and conclusions organized so you can review at any time, especially when assessing your continuous improvement cycle the following year.
Brian Barry is President of F. Curtis Barry & Company