Retailer Takes New Approach to Optimizing Direct-to-Consumer Warehouse Operations

A few months ago, I talked to a specialty retailer that operates both stores and a direct-to-consumer channel. Five years ago the company decided to bring its direct-to-consumer operation in-house and it built a 500,000 square foot distribution center (DC).

The retailer implemented VARGO’s COFE warehouse control system (WCS) to increase warehouse efficiencies at this DC and to help decrease its overall cost of the project. COFE (Continuous Order Fulfillment Enterprise) was designed with an e-fulfillment focus. It is quite different than traditional WCS solutions. Most WCS solutions work to improve the efficiency of one or more material handling systems, such as the conveyance and sortation systems in this DC. However, the COFE solution also seeks to optimize human efficiencies. When it comes to improving human efficiencies, part of what differentiates the COFE solution is a very different way of looking at waves.

In traditional warehouse management systems with waving functionality, a large batch of work orders is dropped to the floor simultaneously. For example, a warehouse planner may know that a UPS truck is scheduled to arrive at dock #4 at 3:30 PM. In this instance, the wave of orders that is released is focused on all the outbound orders that need to be loaded on that truck.

The Vice President for Distribution explained to me that there are inefficiencies associated with the WMS waving process. First of all, several floor-level workers may have a period of time where they have no work to do as one wave nears completion but a new wave has not been released to the floor. Secondly, the creation of waves also requires spending money on planning labor; at least one planner’s efforts are required, and in large distribution centers, more than one planner is sometimes necessary. In contrast, COFE releases orders nearly autonomously; very little human intervention is required.

At the retailer’s e-fulfillment DC, floor personnel pick distinct order lines into totes; workers do not pick complete orders. Once a tote is full, or if COFE recognizes that the last order line to complete an order has been picked, the tote is placed on a conveyor. The tote then moves to a pack station where the completed order is packed and moved to shipping.

Typically, about 15,000 orders per day are shipped. The COFE work queue contains about 1,000 active orders, orders available to be worked on, at any one time. Orders move up or down this queue based on ever-changing operational realities and consumer demand. As one order is completed, another order is added to the queue. Workers are directed to pick certain items based on the priority of an order, the proximity of the last item picked to another line item in the queue, and in a manner that ensures efficient walk paths. Once a tote is on the conveyor, logic in the WCS ensures that the totes with SKUs most immediately needed to complete an order are efficiently moved by the cross belt sorter to a pack station. Other totes on the conveyor, not so immediately needed, are buffered. The “pull” process helps to minimize the possibility of totes getting out of sequence. This results in less of a need for conveyor buffering.

The VP of Distribution is very happy with the solution. This retailer has benchmarked its performance against a select sample of other e-commerce warehouse operations (using the customer orders picked per hour metric) and it was at the top of the pack.

More importantly, the VP believes the system paid for itself the day the DC opened! How could this be? It is because the VARGO solution allowed the retailer to open both a smaller warehouse and a warehouse with a significantly smaller conveyor and sortation footprint than would have been the case without the WCS.