With Black Friday just around the corner, e-commerce retailers are squarely focused on preparing for the holiday rush, and for good reason.
In 2020, e-commerce spending in the U.S. was in overdrive, with the pandemic boosting online sales by $183 billion — the equivalent of an extra holiday season in the same year — according to the 2021 Adobe Digital Economy Index. Looking ahead to this year’s holiday shopping forecasts, eMarketer predicts that e-commerce sales will not only rise 11% to more than $206 billion, but will account for a record 18.9% of total holiday season retail sales.
This optimistic forecast has e-commerce vendors scrambling to ensure that their warehouse operations are up to the task. In 2020, with the unprecedented surge in holiday sales, more than a million gifts ordered online didn’t arrive in time for Christmas, resulting in many unhappy customers and potential brand reputation disasters. No retailer wants a repeat of last year’s chaos or the accompanying stress, delays, and operational pain points.
The holiday season goal for online vendors for 2021 is to get orders out the door to customers — with speed, accuracy, and as few headaches as possible — all the way from the onset of the Black Friday frenzy through the mayhem of January sales. And the secret to a smooth and stress-free holiday season lies on the warehouse floor.
A critical step for meeting order fulfillment targets and boosting operational efficiency and team productivity is to optimize the pick-pack-ship process. Consider the five following best practices.
Digital put-away. Put-away is often overlooked when optimizing warehouse operations, but it’s a crucial step to keeping goods moving. The aim of the put-away process is to transition goods, both new products and returned items, from the receiving dock to the most optimal location in the warehouse, as efficiently as possible.
By scanning and putting away items (both deliveries and returns) before outbound orders ship, especially if late deliveries are expected, e-commerce vendors can swiftly and accurately ensure that stock is available for sale.
Digitization of the receiving and put-away process, including reconciliation of delivered versus ordered items, eliminates the human error inherent in manual stock counting. In addition, by implementing a system-guided put-away that identifies the nearest empty bin locations, retailers can enhance the productivity of the warehouse team.
Dynamic storage. Warehouse capacity is a common issue for online merchants coping with thousands of SKUs, as consumers clamor for more styles, sizes, and colors. While retailers dealing with warehouses filled to the brim often consider expanding into a second warehouse, they may have more space than they realize in their facility.
In order to maximize the picking area and accelerate order fulfillment, e-commerce merchants might consider implementing an ABC classification of inventory. A warehouse management system (WMS) will automatically classify items according to their turnover:
The objective of this inventory classification method is to reduce travel distance and minimize the time spent searching for goods and moving them around the warehouse. By locating ‘A’ items in the most accessible area of the warehouse and close to the packing area, vendors can reduce put-away time and minimize walking time during picking, ensuring that \orders are processed without delay.
Dynamic storage (also known as chaotic storage) is an alternative warehousing approach that maximizes storage capacity by storing goods wherever there is space. Different items can be stored in the same bin to save space, without compromising the ability of pickers to locate items.
This “Amazon-like” model makes use of barcodes, handheld scanners (many warehouse teams use smartphones) and an intelligent WMS to enable online vendors to accommodate up to 30% more inventory in the warehouse. In addition, dynamic storage increases put-away and picking efficiency while dramatically reducing inventory errors to improve stock integrity—important factors in making sure customers quickly get the exact item they ordered.
Regardless of which storage model is used, inventory replenishment plays an indispensable role in keeping the supply chain moving. Both chaotic storage and ABC classification help merchants minimize the size of their replenishment area, with the aim of maximizing the pick area and pick face to increase capacity.
Best practices dictate that sellers should avoid replenishment during operational hours and, in rare times when there isn’t enough inventory in the picking area to process all incoming orders on the same day, retailers should consider making the replenishment area pickable to accelerate order processing.
Fine-tuned layout. Warehouse layout is a key factor impacting order processing productivity and capacity. If the layout isn’t designed with efficiency, e-commerce retailers are not only wasting precious time and resources, but they’re also compromising their ability to serve customers with fast and accurate shipments. By fine-tuning the warehouse layout to use space more efficiently, merchants can maximize the picking area and streamline the picking process to boost operational efficiency and capacity.
As a general rule when structuring the warehouse, retailers should pay attention to some basic physical layout details that impact operational efficiency but can be easily overlooked: selecting bin locations to support optimal walking paths; ensuring enough space between racks to allow picking carts to move freely without causing bottlenecks (critical during busy periods); and making additional picking carts and packing benches available if the need to scale rapidly arises, as is likely during the holiday rush.
Retailers may choose to structure their warehouse racks and alleys, packing benches, and shipping stations by creating “one-way streets” to organize the flow of workers, or by grouping pick faces into zones. Creating zones for products of different sizes or types (for example, hanging versus folded; textiles versus shoes, and mall, medium and large) can increase picking efficiency. Similarly, if multiple mezzanine levels are installed in the warehouse, creating zones for different levels helps improve the flow. Analyzing the most common orders to determine optimal picking strategies can further inform layout decisions.
Productive picking. Order picking is typically the most labor-intensive task within the warehouse, accounting for 55% of warehouse operating costs. As a result, maximizing picking productivity is a primary operational objective. By creating pick zones and assigning pickers to each zone, retailers can reduce travel time within the warehouse, and limit the area that pickers have to walk.
Another tactic for increasing picking efficiency is to implement warehouse technology that provides the option of picking single or multiple sales orders by item, or picking multiple sales orders at once, grouped by order. Indeed, by prioritizing and grouping similar orders into batches, e-commerce merchants can save order processing time. Aimed at reducing foot travel inside the warehouse, multi-order batch picking groups items in batches, based on the size of goods and items per order, to increase picking rates and reduce the average time to fulfill an order.
For additional efficiency gains, splitting single-item and multi-item orders enables the warehouse team to process single orders faster. Single-item orders can be scanned after picking to trigger the dispatch process, instantly generating shipping documents, updating stock levels, and syncing order status with the e-commerce platform in a single step.
Online vendors can also choose to allocate orders for picking and packing based on specific variables: country (for example, domestic versus international), courier (say, FedEx orders picked up at 1:00 versus USPS picked up at 6:00), delivery timeline (prioritize “same day” orders), sales channel (such as prioritizing Amazon Prime orders), or item size (such as large, bulky items versus easy-to-pick small products).
User-friendly tech. In addition to implementing a WMS that prioritizes intelligent pick routing and brings efficient picking strategies to life, e-commerce vendors can streamline the picking process through smartphone applications. Pickers can refer to product images on their phone or pick by color to find items faster. The smartphone app can also be used to scan during picking to improve accuracy, removing the need for additional quality control staff at the end of the process to confirm quantities.
Many retailers depend on seasonal workers to carry the order fulfillment load during the holiday rush. For that reason, simplifying the training process is essential for helping new pickers hit the ground running. Given the ubiquity of mobile phones today, using a smartphone app to facilitate the picking process makes it easy to scale and onboard temporary staff.
Optimizing warehouse operations for speed, efficiency, and accuracy should be top of mind for brands, to ensure a smooth flow of goods and prepare to navigate this year’s holiday peak season. By using one or more of these tactics to streamline and accelerate order processing, e-commerce retailers will be able to ship more orders each day and ensure that customers get the right item in a timely fashion, even during the surging demand of the holiday season. As an added benefit, these operational tweaks translate into a first-class customer experience, which builds brand loyalty, drives positive customer reviews, helps merchants grow their business, and improves the bottom line long after the holiday rush has passed.
Johannes Panzer is head of industry solutions for e-commerce at Descartes.
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