E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
How online merchants can turn delivery into a differentiator.
Whether it's warehouse automation, making inventory data widely available or adding a thank-you note to a parcel, there's plenty e-retailers can do to make their deliveries special.
Online shoppers demand more than ever before from web retailers' fulfillment operations. Their expectations have been raised as more retailers offer free shipping, same-day shipping, order tracking and other services. E-retailers that don't meet these rising expectations will lose business to those that do.
To satisfy consumers' heightened expectations for fulfillment and delivery, retailers need to examine each step of their fulfillment processes. They must make their picking and packing procedures as efficient as possible, ensure orders are accurate, get packages out the door to meet promised delivery dates and make returns as easy as possible.
Retailers need to pay attention to how they communicate to shoppers if a problem arises that may delay shipping an order or that might require shipping part of the order at a later date. They also have to make certain customers can track the status of their orders right up to the moment they arrive at their destination.
"Speed is no longer enough when it comes to order fulfillment, because consumer expectations for fulfillment of online orders are rivaling the seamless fulfillment experience they get when making in-store purchases," says Robert Toner, chief operating officer for global fulfillment solutions provider Innotrac.
When it comes to fulfillment, consumers expect online retailers to ship them their complete order, deliver the goods intact, provide an accurate invoice and deliver the package on the date promised, Toner says. "Retailers need to constantly evaluate their performance in order to meet consumers' expectations in these areas."
For most retailers, improving order fulfillment begins in the warehouse. That's where they can achieve the greatest efficiency gains via automation. Advanced order technologies, such as robotic shelves controlled by software that bring products to packing stations, can substantially reduce the time it takes to pick and pack an order by eliminating the need for a picker to locate each item and bring it to the packing station.
To make such a system work, a retailer must send information from its order management system to the software that controls the robotic shelves. The software, which knows where each piece of inventory in the warehouse is located, identifies an available packing station and then directs the shelves containing the items in the order to that station.
"The goal is to increase the amount of throughput in the warehouse for each dollar spent on labor," says Peter Blair, senior director of marketing of Kiva Systems LLC, a subsidiary of Amazon.com Inc. "Small orders can be just as time-consuming to pick and pack as large orders, depending on where the items are located in the warehouse. By bringing the items ordered directly to a picker, less time is spent gathering items, which increases operating efficiency and reduces labor costs."
Kiva's robotic drive units move goods to workers. As orders are electronically fed into the system, the robotic drive units navigate their way to mobile inventory shelves containing the desired product by following a grid of two-dimensional bar codes stickered to the floor. When the robotic drive unit reaches the shelf, it positions itself underneath, lifts it up and transports it to the workstation. Pick-to-light and put-to-light technology helps ensure the orders are accurate. A laser pointer illuminates the location on the shelf where the item to be picked sits, ensuring accurate and quick picking by a worker. A computer screen at the work station displays the quantity of each item to be picked and the item's bar code can be scanned to validate it belongs in the order. Put-to-light technology designates the case or tote where each item in the order is to be placed. The system allows multiple orders to be picked simultaneously.
Another way to speed up the work flow is by order batching, the process of scanning orders as they arrive in the warehouse to identify popular items, then periodically picking those items at one time to avoid multiple trips to the same section of the warehouse.
For instance, a footwear retailer can program its order management system to batch orders each hour for a specific style, color and size, such as size 10 men's black loafers. Once an hour a picker gathers all the size-10 black loafers ordered during that time period and delivers them to a packing station. Packers then assign each item in the lot to the corresponding orders received from the order management system.
"Picking orders independently or utilizing a travel path for a single item is time-consuming, inefficient and costly," says Perry Belcastro, vice president of fulfillment services for Saddle Creek Logistics Services, a provider of warehousing, transportation, packaging and fulfillment services. "Order batching improves the work flow of the warehouse, because one person is filling multiple orders at once using the most efficient process."
To further speed up the process retailers can position inventory throughout the warehouse based on popularity. Best sellers and seasonal items, for example, can be placed closer to the packing stations to reduce the distance pickers have to walk to retrieve and deliver them to the packing stations, Belcastro says.
When retailers add channels to their existing warehousing infrastructure, such as a b2b channel, they should remain flexible.
"Multichannel distribution requires clear channel priority rules, but at the same time flexibility in changing the stock and channel allocation to address changing demand," says Uwe Bald, vice president of international business development for Hermes, a provider of integrated supply chain, sourcing, transport logistics, e-commerce, fulfillment and delivery services.
Retailers should also carefully consider what level of automation they need throughout the warehouse to meet their productivity goals. "A higher degree of automation does not always correlate with a higher degree of efficiency, especially when changing customer preferences lead to new processes that need flexibility," says Bald. "There is no one-size-fits-all solution."