Signs It’s Time to Rethink Your E-Commerce Fulfillment Center
By Bill Leber, Swisslog
E-commerce 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, traditional retailers are looking for more and 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, representing a compound annual growth rate (CAGR) of 16.3% for 2006 to 2010. 2010 alone had a growth rate of 17.8%.
In addition, 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 e-commerce 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.
Due to this increase in online and mobile sales, many brick-and-mortar retailers are outgrowing their traditional supply chain infrastructure. In addition to scheduled weekly store deliveries of pallets and cases, retailers must now 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 to 48 hours.
With U.S. e-commerce sales surpassing the $200 billion mark and projections of continued double-digit growth, it is increasingly important that multichannel retailers develop and adopt a process to integrate these channels and manage fulfillment effectively and efficiently.
Many retailers, in the rush to integrate online sales, 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 and 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 these telltale signs:
Difficulty adapting to changes
In the order fulfillment industry, change is common. Whether it involves a manufacturer, packager or supplier, companies must be equipped to adapt to new or 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, retailers supported brick-and-mortar stores with a single-channel supply chain to replenish goods from a central pool of inventory. A fulfillment center could allow hours or even a day before acting on incoming orders. This allowed for efficient organization of processing through ‘batching’ in a logical sequence.
The new buzz word for DCs 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, and, in turn, faster delivery.
Replenishment errors or concerns
Since many retailers offer comparable products at similar prices, access to products and fast delivery has emerged as a major shopping decision driver. Even slim errors in replenishment oversight can lead to big problems for e-commerce retailers. Currently, the majority of all e-commerce 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 e-commerce multichannel fulfillment strategy must accommodate demand fluctuations. In addition to scheduled pallet and in-store case deliveries, multichannel retailers must factor the fickle demands of e-commerce 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 the problem and lead to difficulty delivering on seasonal promotions or shipping offers, potentially ruining 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 higher rates of error and injury as well as unhappy employees.
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 improperly trained or lacking important 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 percent. Managing these returns as a simple ‘add-on’ to the receiving or replenishment process can lead to tremendous bottlenecks. Since it is often difficult or impossible to group returns of like-SKUs together, employees are manually ‘piece receiving’ items one at a time.
Interestingly, a telltale sign that fulfillment strategy may need rethinking is exposed 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 for next-generation fulfillment
Successful distribution center order fulfillment is a critical factor to ensuring a competitive advantage in today’s retail economy. Distribution centers must be able to guarantee delivery within ever-shortening lead times and with high expectations for accuracy and speed. As a result, operations leaders are turning more and more to automated solutions to confirm smooth, integrated and well-oiled processes. Solutions that automate both the replenishment and returns process allow e-commerce retailers to optimize their picking process and ensure customer satisfaction in a cost-affordable and efficient manner.
Bill Leber serves as director of business development for North America at Swisslog, a global provider of integrated logistics solutions for warehouses, distribution centers and hospitals. Its comprehensive services portfolio ranges from building complex warehouses and distribution centers to implementing Swisslog’s own software and technology to intra-company logistics solutions for hospitals. Prior to joining Swisslog, Bill worked 26 years for Ciba Specialty Chemicals in a variety of roles.
Heinz spices up senior leadership
PITTSBURGH — Following the acquisition of Heinz by Berkshire Hathaway and 3G Capital, the company has announced a new senior leadership team.
“Notably, this announcement demonstrates the power and potential of meritocracy at work here at Heinz,” said Heinz CEO Bernardo Hees. “As shown through today’s various internal promotions and appointments, the company is focused on rewarding and promoting the best and brightest talent in the organization to lead Heinz moving forward. I am thrilled that this world-class group of executives will join me in taking Heinz to new heights while elevating our iconic global brands, offering superior customer service and ensuring that we continue to work collaboratively and efficiently across our global businesses.”
Paulo Basilio will be the company’s CFO. He is a partner at 3G Capital and previously served as CEO of America Latina Logistica from 2010 to 2012, after having served as ALL’s COO, CFO, commercial officer and analyst.
Kristen Clark has been appointed SVP and chief people officer. In this role, she will direct the worldwide human resources function. Most recently, Clark served as president of Heinz Canada. Previously she was chief strategy officer at world headquarters. Formerly, Clark served as the group VP of meals and snacks for Heinz North America. Prior to joining Heinz, Kristen worked at Procter & Gamble and Johnson & Johnson in marketing and sales. Kristen joined Heinz in 2000. She will report temporarily to Hees until the open position of EVP of HR, IT and performance is named.
Brendan Foley has been appointed zone president of Heinz North America. Foley was most recently president of U.S. consumer products. While at Heinz, he has held various positions including marketing director of global ketchup and sauces, president of U.S. food service and group VP of marketing for frozen meals and snacks for U.S. consumer products. Prior to joining Heinz, he worked at General Mills in marketing for four years, and before that, he spent eight years in advertising. Foley joined Heinz in 1998.
Matt Hill has been appointed zone president of Heinz Europe. For the past year, Hill was president of Heinz U.K. and Ireland. Matt joined Heinz as CMO for the U.K. and Ireland business after spending 17 years at Unilever in a variety of U.K., European and global marketing roles. In 2011, he was promoted to chief commercial officer of the U.K. and Ireland with responsibility for day-to-day business operations. Hill joined Heinz in 2010.
Andy Keatings has been appointed chief quality officer. He will be responsible for maintaining the highest standards of food safety and quality in all of Heinz’s products globally. He will also be responsible for global risk assessment and management, ensuring consistent product performance globally and driving continuous improvement. Keatings joined Heinz in 1994. He will have a dotted-line reporting relationship to the chairman of the board of directors.
Emin Mammadov has been appointed zone president of Heinz Russia, Turkey and Middle East and Africa. Mammadov most recently served as president, Heinz Africa and Middle East, where he focused on accelerating Heinz’s growth in the emerging markets. Mammadov joined Heinz as marketing director for Heinz Russia and has since held the roles of commercial director, Heinz Russia, followed by an assignment in China as managing director, Heinz foodstar and Heinz sauces. Prior to joining Heinz, Mammadov spent more than eight years at Procter & Gamble mostly in Turkey and other emerging markets. He joined Heinz in 2006.
Michael Mullen will continue his role as SVP of corporate and government affairs. Mullen is responsible for all global internal and external communications, government affairs and corporate reputation management. He will continue to serve as the company’s chief media spokesperson and will have responsibility for the H.J. Heinz Company Foundation. Mullen joined Heinz in 1998.
Eduardo Pelleissone joins Heinz as EVP of operations following 14 years with America Latina Logistica, where he most recently served as CEO. Previously he held the roles of COO, managing director and GM of agricultural products. Before joining ALL, Pelleissone held several positions at Glencore Importadora e Exportadora SA. He will have responsibility for supply chain, procurement and operations.
Fernando Pocaterra has been appointed zone president of Heinz Latin America. Since 2005, Pocaterra has been area director of Heinz Latin America. Previously, he was president of Heinz Venezuela and COO of Heinz Italy. Prior to joining Heinz, Pocaterra worked for four years in the marketing department at Procter & Gamble in Venezuela. He is a 32-year Heinz veteran.
Hein Schumacher is appointed zone president of Heinz Asia Pacific. Schumacher has been president of Heinz China since 2011. Previously, he held positions including VP of finance for Heinz Europe, chief strategy officer for Heinz WHQ, VP of business process improvement for keystone and CFO of Heinz Continental Europe. Before Heinz, Schumacher worked across various countries for both Royal Ahold and Unilever. He joined Heinz in 2003.
Dan Shaw is appointed general counsel. Shaw has been deputy general counsel since 2009. He will be responsible for all legal affairs globally, including but not limited to mergers and acquisitions, securities law, finance transactions, litigation and general commercial and regulatory matters. Shaw is a 32-year Heinz veteran.
Exiting the company will be Ted Bobby, EVP, general counsel and corporate secretary; Dave Ciesinski, VP of transition; Steve Clark, SVP, chief people officer; Ed McMenamin, SVP, finance; David Moran, EVP, president and CEO of Heinz North America and global infant nutrition; Meg Nollen, SVP of strategy and investor relations; Bob Ostryniec, SVP, chief supply chain officer and global ERM; Chris Warmoth, EVP, Heinz Asia Pacific; Dave Woodward, EVP, president and CEO of Heinz Europe; Roel van Neerbos, president, Heinz Continental Europe; and Diane Owen, SVP, corporate audit.
“I sincerely thank these superb executives for their leadership and numerous contributions to Heinz’s growth and success, and I wish them well in the future,” added Hees.
Point B streamlines mobile commerce platform
SEATTLE — Point B, a management consulting and venture investment firm, has partnered with BusyLife Software so it can streamline its mobile commerce platform for retailers.
Point B’s retail and consumer products practice and its mobile strategy and solutions practice have been certified on QwikCart, a mobile commerce (m-commerce) platform from BusyLife Software. Point B will help retailers integrate the QwikCart m-commerce platform into their sales strategies, creating omnichannel retailing opportunities via in-store purchasing, call centers, online orders and mobile shopping.
Additionally, Point B Capital has placed a $500,000 investment in BusyLife Software to complete a $1.13 million series seed financing round for the Denver-based startup that creates point-of-sale integrated mobile applications for retailers and restaurants using its proprietary cloud-based commerce platform. The platform is a highly scalable, enterprise-to-enterprise cloud solution that enables mobile payments on all the top smartphone and tablet devices.
“The BusyLife partnership makes perfect sense for both the management consulting and venture capital businesses within Point B Inc.,” said Point B Capital managing director Brian Armstrong. “BusyLife supports real-time client inventory, security and loyalty program integration, which is a unique offering in the space, and they have tapped into an $8 billion mobile commerce market, partnering with POS, SaaS and Service Integration Providers. They also have an excellent leadership team, including established entrepreneur Chris Poelma and a leading technology innovator, Rus Rice, along with a dedicated software team.”
BusyLife represents another Point B Capital investment in a mobile-enabled technology company that provides an innovative enterprise cloud solution / SaaS offering.
“Retailers working with Point B’s management consulting team will benefit greatly from this partnership, as they will have access to an indispensable sales channel, proven to reach new demographics and deliver new consumers and sales,” added BusyLife Software’s CEO Chris Poelma. “The QwikCart mobile commerce platform integrates seamlessly with retailers’ existing sales venues, including e-commerce and brick-and-mortar stores, allowing them to expand their reach and become dynamic, modern, omnichannel businesses.”
QwikCart is a brand-customizable native code application for mobile devices that allows retailers to reach consumers in new ways, interacting directly and personally with them on their mobile devices. QwikCart facilitates consumer engagement, satisfaction and loyalty, while providing retailers business intelligence, brand customization and a competitive edge.