Today’s retail distribution centers (DCs) face more challenges than ever before. Consumers’ adoption of mobile technology and growing demands for convenience – coupled with the increasing competition of a crowded retail space – have led to complex omni-channel environments that put 24/7 demands on not only DCs, but entire supply chains. In the face of these pressures, DC managers are focused on streamlining processes, boosting productivity, and expediting order fulfillment. To do this successfully, managers must focus on achieving balance in the DC and employing advanced fulfillment technologies and processes to tackle the complexity and frequency of e-commerce orders.
First, let’s explore the importance of balance. For DC managers, there are four key “natural resources” to consider: labor, equipment, orders, and inventory. On the labor and equipment side, balance is needed between automation and human labor to ensure peak functionality without overstaffing. On the inventory side, achieving equilibrium between stock and order levels is critical to meet demand without creating a surplus or suffering a shortage. Failure to achieve DC equilibrium could result in costly setbacks, including higher cycle times, inventory shortages, and unfulfilled orders. In fact, no matter how balance is lost, the result is either money wasted or unhappy customers – sometimes both. To avoid this outcome and ensure proper balance, certain tools must be utilized. These include an enterprise resource planning system (ERP) to manage orders, a warehouse control system (WCS), to drive equipment and a warehouse management system (WMS), which oversees inventory, orders, and labor. These systems must work together for a successful, efficient and balanced DC.
Looking Beyond Balance
Ensuring DC balance is important, but it’s only the beginning; efficient fulfillment procedures are also critical for addressing the e-commerce challenge. The traditional approach, known as wave processing, involves fulfilling orders in large batches. As each batch of orders nears completion, the next batch is started, and so on. This approach represents a “push model,” meaning orders are “pushed” to the floor for processing in batches when they are ready, which creates peaks and valleys in labor utilization. As one wave nears completion – and before the next wave drops to the floor – labor and equipment utilization can decline significantly, leading to a reduction in overall fulfillment capacity. While this wave-based approach works well for traditional wholesale or bulk transactions where it drives significant picking efficiency, it is not as effective for managing the challenges of online shopping, where each individual order is unique.
The Digital Retail Challenge
E-commerce has truly changed the rules for DCs. Instead of just shipping to stores, today’s DCs also ship straight to customers, giving them a more direct connection to the shopper – every order has a face. Delivering orders on time (or ahead of schedule) means a higher likelihood of a repeat order. Conversely, failing to meet order deadlines could mean a lost customer, potentially for life. While DCs are not traditionally considered integral to customer retention, these days they play a significant role in delivering a satisfying experience that keeps customers coming back.
Additionally, the pressures of e-commerce fulfillment are higher than ever before. Orders stream in 24/7, from any location – home, office, or virtually anywhere via mobile devices. Consumers don’t have to wait to buy, and as a result they don’t want to wait to receive – speed is critical. Another characteristic that sets e-commerce orders apart is their size. Most orders consist of only one or a few items, a significant departure from the bulk orders more suited to wave-based fulfillment. Automation plays an important role in addressing the e-commerce challenge, but it’s only half the battle: investments in human capital and effective training focused specifically on e-commerce fulfillment are also important.
Taming the E-Commerce Beast with Order Streaming
Dealing with a greater number of one or two item orders demands a different kind of fulfillment approach. Given the unique challenges that e-commerce poses, order streaming, a form of waveless picking, is more efficient. Order streaming reinvents the way in which fulfillment logic is leveraged and produces a more flexible, e-commerce centric fulfillment method. Rather than batching orders and dropping them to the floor in waves, order streaming enables the continuous evaluation of the order pool and offers ways to optimize those orders as they’re being circulated through the DC. Unlike the “push model” of wave processing, order streaming operates in a “pull model,” meaning that as soon as there is capacity in the fulfillment cycle, new orders are “pulled” into the workflow. This results in more immediate action – orders are not held until they can fit into the next batch; as soon as an order can be addressed, it is pulled in and processing begins.
This approach to fulfilling e-commerce orders ensures real-time alignment between labor and equipment availability and helps maximize efficiency to enable DCs to strike a better overall balance of resources. Additionally, the dynamic assignment of tasks when they can be actioned – versus waiting to batch – means that fulfillment decisions can be delayed and more specific. Instead of queuing up a batch of orders with different needs or priorities, orders can be dealt with in real-time on a more individual level, and ultimately decisions can be made based on the most recent and best data. Order streaming also facilitates the seamless reallocation or repurposing of inventory previously allocated to another channel as well as the easy adjustment of priority items. This kind of power and flexibility is critical to drive e-commerce order fulfillment, and it is not achievable with traditional wave-based processing. Put simply, the ability to integrate order streaming with existing retail and/or wholesale flows is a game changer when it comes to driving efficiencies.
E-commerce has shaken up the retail world in myriad ways. Across the industry, stores, technology, employees, and processes have had to evolve to accommodate retail’s new world order, and DCs are no different. Order streaming enables DCs to better deal with the constant influx of small orders that are characteristic of e-commerce shopping and ensure speedy fulfillment and a positive experience for the consumer. E-commerce shopping will only become more dominant and more complicated in the years to come, and brands that are ready and willing to adapt their fulfillment processes to strike the right balance across labor, equipment, orders and inventory will be the ones that prosper and stand out from the competition.
Adam Kline is Director of Product Management at Manhattan Associates. Adam has worked at Manhattan associates for twenty years in a number of job roles, including experience as a business analyst and quality assurance engineer. Adam also has direct experience with Warehouse Management, Transportation Execution, Supply Chain Intelligence, Transportation Planning, Order Management, and Labor Management applications.