Technology can help e-retailers hasten the amount of time it takes to get orders handed off to delivery carriers.
The Home Depot Inc.’s system routes the order to a fulfillment center in Locust Grove, Ga., one of three facilities it currently uses for direct-to-consumer web fulfillment (it plans to open two more by the end of next year), and the system gets to work.
The drill is housed on the right side of the company’s 1.1-million-square-foot fulfillment facility and the drill bits are housed in the middle. A robot with a plastic storage container called a tote picks all the drill bit sets it needs to fulfill the current orders of the set—let’s say 20—and another tote-topped robot picks up all the drills it needs for current orders—let’s say 10. A conveyor brings these filled totes to an array of 400 mailboxes, each of which represents a customer order that needs to be fulfilled.
An employee then uses a bar code scanner to scan a code on the tote containing the drill bits. The software uses that code to recognize the orders the products in the tote represent. Each mailbox represents one order, and the 20 mailboxes needing the drill bit set light up. The employee then puts a set in each of the lighted mailboxes, pressing a button on each mailbox to confirm the product is in the box. The employee does the same with the tote containing the drills. When all the products needed to complete an order are in the mailbox, the light turns red and another light on the other side of the mailbox lights up. An employee on that side removes the mailbox’s contents and sends it on its way for packaging. The process happens fast; the customer’s order may be on its way mere minutes after pressing the Submit button.
Home Depot developed those processes to shorten the amount of time it takes to get orders handed off to delivery carriers which, in turn, decreases the time it takes to get an order from the warehouse to the consumer. And it’s hardly alone as top e-retailers’ total fulfillment times are getting faster. Analysis from customer service research firm StellaService Inc. found that the average fulfillment time—measured from when the order was submitted to when it arrived at the buyer’s doorstep—for the 140 e-retailers the company tracks was 4.6 days during the first half of 2014. Among the top 25 e-retailers—as ranked in Internet Retailer’s Top 500 Guide—fulfillment was even speedier, with a greater percentage of top retailers picking up their pace. From February to July 2014, 84% of the top 25 e-retailers delivered in fewer than five days, up from just 68% during the same period a year earlier. A subset of those retailers moved even faster: 52% of the top 25 e-retailers delivered in fewer than four days, up from 40% a year earlier.
The put-to-light technology Home Depot uses is just one way e-retailers are increasing service speed. E-retailers who are adding technology to their fulfillment centers and warehouses say technology can cut the time elapsed from when a customer places an order to the time that order is handed off to a carrier for delivery, improve fulfillment accuracy and help warehouse staff work more efficiently. Those improvements, e-retailers say, mean they can provide better service to customers.
As part of its system, The Home Depot hired supply chain software provider Manhattan Associates to help outfit its Locust Grove facility, which opened in February. The retailer’s first order of business was to integrate Manhattan Associates’ warehouse management system into the Home Depot software system, says Scott Spata, the retailer’s vice president of supply chain direct fulfillment. The warehouse management software organizes the fulfillment process, such as figuring out the best route for a specific product to take through the warehouse and organizing orders with multiple products located in different areas of the warehouse.
The Home Depot also incorporated Manhattan Associates’ labor management software into the facility. Eric Lamphier, senior director of product management at Manhattan Associates, says grocery chains first used the technology a decade ago to eke out more productivity from its workforce. For Home Depot, the software allows the retailer to measure each warehouse employee’s productivity. Managers use it to keep an eye on the overall warehouse productivity. A standard is set by timing each process involved in filling an order, with each employee’s performance measured against that standard.
Lamphier says clients that use the labor management software have been able to increase warehouse productivity by up to 25%. Home Depot declined to say how the labor software is working for it, but says that it has been investing heavily in warehouse technology in general. It says it expects it will be able to deliver 90% of U.S. orders within two days once it opens two more e-commerce fulfillment centers next year.
Like Home Depot, online apparel retailer BHFO Inc. has found that efficiency is essential to fast fulfillment. That’s particularly true for BHFO because its inventory is a moving target. The company purchases excess merchandise from brands, department stores and boutiques, which means it can’t always predict what it’s going to receive. Every incoming item has to be photographed and uploaded to the company’s branded storefronts on eBay.com Inc.’s marketplace or Amazon.com Inc.’s marketplace.
The retailer can process up to 5,000 SKUs of new inventory a day, says Matt Wade, BHFO’s chief operating officer. And its warehouse management system helps the company keep track of all inbound inventory, including where it is stored in the warehouse so that it can get items out the door quickly once a customer places an order.
BHFO moved into a new 240,000-square-foot facility earlier this year that it built out with a vertical automation system, which maximizes the space’s 30-foot ceilings. The system includes Perfect Pick, an automation system manufacturer Opex Corp. launched last year that uses robots to stock and collect merchandise. The Opex robots bring totes of products to warehouse picking stations, where employees read order instructions on computer screens to pick the right products from each tote for each order.
BHFO worked with Bastian Solutions, a technology reseller and systems integrator, to integrate the Perfect Pick system. BHFO would not say what it paid for the system, but the company’s chief financial officer Tom McLaughlin says it was the largest capital investment the retailer has ever made. A spokesperson for Bastian Solutions says the cost of a complete installation varies based on the length and height of the warehouse, how many robots a retailer uses and how fast they’re programmed to pick, but base costs are $525 per tote, and $800,000 for each 75-foot aisle where merchandise is stored and picked.
The Perfect Pick system has helped BHFO significantly decreased the time it takes to get an order to a customer. Before moving into the new warehouse, BHFO manually handled fulfillment. Employees could pick up to 100 items per hour, which is about half of what each robot in the Perfect Pick system is capable of picking. Before the new system went live, 90% of the company’s orders shipped within two businesses days, Wade says. Now, 94% of the company’s domestic orders ship within a day, he says, and that’s with 30% to 40% fewer staff. Many orders are picked and packaged within five minutes of the Perfect Pick system receiving the order.
Speed is nice, but accuracy is essential, says Chris Halkyard, Gilt Groupe Inc.’s chief supply chain officer and general manager of distribution services. “I can get something out faster than Amazon, but if the order’s wrong, it doesn’t matter,” he says.
While Gilt boasts a four-day average time from order to delivery, its order accuracy is in the upper 90% range, Halkyard says. Its picking accuracy is 99.9%. And that’s thanks to the technology the retailer deploys. Gilt first began using Kiva Systems Inc.’s robotic system at its Shepardsville, Ky. warehouse in 2010, but declined to share how much the system cost. (Amazon.com Inc. bought Kiva Systems in 2012 for $775 million and isn’t currently selling it to new customers.)
No time stresses the limits of an e-retailer’s fulfillment processes like the shopping season leading up to the holidays. And many e-retailers start early. Gilt’s Halkyard says the retailer started planning for the upcoming holiday season in February.
The week that includes Black Friday and Cyber Monday is the biggest week of the season in terms of order volume and sales for Gilt. “If you don’t effectively plan for that week, you can find yourself digging out of that volume all the way until Christmas,” he says. During the holidays, Gilt’s order volume typically increases up to 40%, Halkyard says.
He says warehouse efficiency is an important part of staying on top of holiday sales, and Gilt does not intend to let fulfillment times slide because of high volume. One of the ways the company keeps the same delivery times is by hiring about 400 seasonal employees for the busiest four-week period of the holiday season. He’s says having the appropriate warehouse technology in place and the right staffing is essential. “We’re not going to change our delivery promise for that time just because we’re so busy,” he says.
With leading e-retailers quickening the fulfillment pace, e-retailers are finding how the right mix of technology can keep them in the race.
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