E-commerce and Mobile Shopping Revamps the Fulfillment Center

By Bill Leber, bill.leber@swisslog.com

E-commerce continues to be a bright spot for retailers during the Great Recession. Additionally, the rise of the smartphone is leading us into our first true mobile holiday shopping season. Historically, the majority of the world’s consumer products have been distributed to retail stores in bulk, and the most efficient method for handling this merchandise has predominantly been pallet movement and full-case selection. However, in an industry where the forklift and conveyor belt were “recent” innovations, the e-commerce boom is fundamentally changing the nature of the retail supply chain.

As online shopping continues to compete with and, in many instances, overtake brick-and-mortar retail, retailers are looking for more ways to expand their multichannel operations. According to Datamonitor’s Global Online Retail 2011, the global online retail sector had total revenues of $434.6 billion (USD) in 2010. Additionally, the recent release of iPhone 5 received two million orders in the first few hours – just think of the impact this will have on mobile shopping during the holiday season alone.

New challenges
Due to this increase in online sales and fundamental change in where and how consumers shop, many retailers are outgrowing the traditional supply chain infrastructure and rethinking fulfillment. Retailers must evaluate many new factors. In addition to scheduled weekly store deliveries of pallets and cases, they must factor in split-case picking, item-level touches and multi-line item sortation to fulfill fluctuating volumes of online orders that frequently require delivery to consumers within 24 hours.

Take these challenges and compound them with the emergence of mobile commerce, or “smartphone shopping.” The instant gratification culture that has taken over with the growth of mobile has put a greater burden on the retail supply chain to deliver more products faster, quite literally from mobile device to doorstep in a matter of hours, not days. The distribution center is now the store.

The ‘new breed’ of retail e-commerce consumer expects a lot more in addition to competitive prices. They require cross-channel services such as “click-and-collect” and “order-to-deliver” wider online SKU offerings in-store kiosks; consistent brand experience across the brick and mortar and online storefronts; order accuracy; fast and free delivery; free returns through any channel; and a mobile retail site.  

Fulfillment for e-commerce
When consumer needs are compared to the challenges of distribution in an e-commerce environment, there are significant obstacles for fulfillment. These include:

a)    Large SKU counts with a very long, slow-moving tail;
b)    High and unpredictable growth;
c)    High penalty for poor performance resulting in potential brand damage;
d)    Uncertain business terrain that demands flexible and adaptive solutions;
e)    Demand for real-time and accurate inventory visibility;
f)    Small number of orderlines per order;
g)    High returns from end customer; and
h)    Extreme peak season volumes.

The challenge with the e-commerce fulfillment process relates to having the right systems in place to dynamically process orders for e-commerce channels, versus historical store re-stocking fulfillment. Within e-commerce, where unpredictability is a constant factor, flexibility in the supply chain becomes critical. Retailers can gain flexibility by implementing the right system, one that can support the fluidity that e-commerce cross-channel services require.

Leveraging new dimensions for fulfillment
E-commerce fulfillment is fundamentally a piece-pick operation, which is historically a hands-on procedure. The right automation will minimize manual touch, resulting in more accurate orders, improved ergonomics, reduced labor costs and travel time, decreased returns and saved space by operating in a smaller footprint.

The gold standard of flexibility for any e-commerce business is to be able to easily increase fulfillment throughput and SKU density over time in a capital-efficient manner. Such an automated order fulfillment system should be able to scale seamlessly with a business year after year.

The age of data
The emerging solution for efficient and timely e-commerce order fulfillment is one based on an integrated warehouse management system driving an automated storage and retrieval system, married in the end to efficient goods-to-person piece picking technology. Systems using fast shuttle or robotic bin technology can ensure that real time inventory is always accurate so that when customers place orders, confirmations of the pick and pack process can be provided back to the consumer in less than 30 minutes. The result has been the emergence of new retail supply chains that are consumer-focused rather than product-focused.

Parting thoughts
E-commerce, and now mobile shopping, are fundamentally changing the nature of the retail supply chain. Retailers must learn how to adapt to rapidly expanding and changing e-commerce conditions. Efficiently optimizing inventory, storage space, labor, costs and time in e-retailing is required to attain not only customer satisfaction, but a profitable operation.

Bill Leber, is director of business development, North America at Swisslog, a global provider of integrated logistics solutions with a focus on the retail, food & beverage, pharma, and healthcare industries. He can be reached at bill.leber@swisslog.com.


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