The age of e-commerce presents manufacturers, distributors and retailers with a raft of issues — especially with respect to technology and human relations, says Jeff Potts, director of e-commerce fulfillment for Sealed Air.
SCB: What are the big customer challenges in e-commerce fulfillment today?
Potts: Things are changing so fast in e-commerce. What we've seen is a shift from brick and mortar to the e-commerce distribution of packages. What that's led to is the fact that people touch packages 20 times more often than they used to. Full pallets were shipped to a big-box store, things were put on the shelf, and that was it. But now you have to package them, we have to get them to the customer, and that whole fulfillment process has changed the supply chain.
One of the biggest challenges is labor — the lack of labor, and the cost of it. The second-biggest challenge is the cost of delivery when it comes to freight. Freight costs are constantly rising, and rightfully so because freight companies are in the courier business and have to deliver to people's homes now, which is more expensive. They need to have a higher average selling price because of their cost of goods.
There are also concerns around warehouse space savings — the amount of material that needs to be in the packaging environment, and the need to maximize and optimize your warehouse when you're a fulfillment business for e-commerce.
SCB: Start with the facility itself. In the world of the omnichannel, many facilities are being required to perform all types of fulfillment within the same four walls. How are customers addressing that?
Potts: What companies need to work on is moving away from traditional ways of packaging, and finding ways to do it faster. They need automated solutions to adapt to all of the additional volume that’s taking place in the omnichannel distribution center.
SCB: You have to become more efficient in order to do different types of tasks within the same four walls.
Potts: Right. Along with the ability to be versatile when it comes to branding, and fulfilling orders for different brand owners. When companies can implement custom branding in an omnichannel environment, it ultimately serves that brand owner better.
SCB: There’s an extreme shortage of warehouse labor right now. Finding and keeping the right workers is a big challenge. Is automation the answer?
Potts: It’s a complicated situation. For one customer that we were working with, getting labor to show up the next morning or even after lunch was such a challenge that at the end of the work day, they rewarded everybody with a $20 bill on their way out the door. I've seen another company actually put a lottery together, and if you showed up 30 days in a row, they awarded a vehicle to somebody who was randomly drawn. That's how desperate they are to make sure people show up.
That's where investment in automation is making a difference in our business today. With an automated solution, one or two people can do what it normally took 10, 20 or 30 do.
SCB: What about the skillset of those workers? You don't have to have sophisticated IT or computer skills to work in a warehouse, right? It seems like a lot of the automation coming online is fairly intuitive.
Potts: Some of our automated systems are entry-level — just a heat sealer rather than a peel-and-seal type of an adhesive. When you introduce something like that, you can do it twice as fast, and it takes about two or three minutes to learn. But if you've got a fully integrated in-line system that's going to optimize parcel and eliminate boxes, it might take a few hours to a few days, or even a few weeks, to get really good at it.
SCB: What about the software side — artificial intelligence and the like? How does that help with packaging?
Potts: A.I. helps in a big way, primarily because when we're automating we need to be able to gather customer ID information and order numbers, and take that to the warehouse management system. With the WMS, we have to deploy a shipping label or manifest. That process has to happen very fast — sometimes one or two seconds.
At the same time, with new rules on freight and dimensional/weight pricing models, it's important to be able to dimensionalize the package. The DIM weight is a mathematical formula that represents a hypothetical cubic, or volume metric weight. You capture the physical weight and actual weight, and then the higher of those two is the billable weight. That’s what you need to capture in an automated setting.
SCB: What about looking at the future? Are there some really exciting things coming down the pike in these distribution centers that we don't even know about yet?
Potts: It's going to continue to evolve for sure. Everybody's taking baby steps in their own manner. Either you're going from a totally labor-intensive legacy type system, or you did that two years ago and you've gone to some kind of a vertical bagging system that's semi-automatic. It was wonderfully powerful in terms of paying for itself and improving your throughput. But now you need more. You've grown, and instead of processing 10 a minute, you might need to do 30. Maybe you end up in a horizontal setting that's a little bit faster. I think we’re going to see those changes as labor continues to be a challenge, especially here in North America.
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