e-commerce Logistics is Different
Thursday 21st April 2016
The demands of e-commerce are very different to more traditional sales channels and the standard or more traditional warehouse and distribution operations (however sophisticated) are not always set up to deal with e-fulfilment operations.
Operations set up to deal with medium size or bulk orders to retail outlets that then ‘add-on’ e-commerce direct to the consumer (B2C) are suddenly faced with the realisation that the on-line buying habits of the consumer can have a serious impact on the picking and despatch operations. This is further compounded by the increase in returns as the seasoned internet shopper will order many variants (e.g. size or colour) of the same product at the same time safe in the knowledge that they can return the incorrect ones and have still received the one they actually want on the first delivery.
The nature of the B2C e-commerce model means that the order profiles are likely to change as the B2C orders will be smaller (i.e. fewer items per order) as opposed to the medium or bulk B2B orders.
Quite simply e-fulfilment and e-commerce logistics is different.
There is no unilateral right or wrong answer…
Operating both types of order profiles in the same facility is of course possible, and frequently carried out by many companies, however there are many different opinions on how it should be done, and how successful it is.
Having visited many warehouse and distribution facilities where companies are expanding their e-commerce business alongside their traditional B2B business I have observed the following:
New e-commerce businesses with a good product tend to grow exponentially and the result is often a mix of the in-house fulfilment operation and some external pallet and bulk storage.
Optimal pick-face layouts are more difficult to determine when picking B2C and B2B orders from the same pick locations due to differences in fast/slow movers – extending travel and pick times for e-fulfilment orders.
Some companies keep separate pick faces for B2C and B2B orders, albeit for the same products. This is usually determined by the range and mix of product as well as the ratio of B2B and B2C business.
Other companies change their pick regimes to batch or bulk picking and then finalise orders at a secondary pick location near to or at the packing benches
A number of businesses outsource their e-fulfilment business as they have acknowledged that it requires a different pick regime and mind set to their traditional business.
In short there is no unilateral right or wrong answer as it is down to many variants such as product mix, sector, ratio of internet orders to total orders, facility size and capability etc....
It’s all about maintaining customer service levels…
The internet retailer (e-tailer) often thinks that they have made some good sales at a good margin whilst still having discounted the high street retail price because they don’t have the same overhead, or do they? Have the true costs of internet selling actually been accounted for? The fact remains that the e-tailer needs payment systems, administration and customer service personnel, warehousing and stock management systems and a physical logistics infrastructure to provide the same service as a high street shop.
Delivery costs of e-commerce B2C sales are usually a greater proportion of the total sale price due to smaller order sizes so can the retailer also justify increasing sales costs to cover the cost of returns - after all they are selling in a highly competitive market place where discounts from the RRP are considered the norm? It is not just the direct cost of return transport, but also the indirect costs of receiving and processing a return, carrying out a quality check prior to repacking for re-sale and returning the product to the pick face ready to be sent out again.
All of the direct and indirect costs mentioned must be built into the total cost model of an e-fulfilment operation and all too often they are not.
The luxury of a purpose built e-commerce facility …
However the one thing that is clear is that a purpose built e-fulfilment centre, if designed and equipped correctly, can despatch far more orders and individual items per operator hour than trying to integrate it into most traditional B2B pick/pack operations.
This was clearly demonstrated during the design and fit-out of the new European e-fulfilment Distribution Centre for Bodybuilding.com; the world’s largest on-line retailer of sports nutrition products including powdered and liquid health supplements and bulking powders for athletes; with an annual turnover in excess on $500M.
The Warehouse and Distribution Centre specialists at Gideon Hillman Consulting were engaged by Bodybuilding.com to optimise the new purpose built facility design and layouts, provide the equipment specification and the procurement of it; ensure construction Health and Safety Compliance (including supplying the Principle Contractor and CDM Coordinator) and site implementation, supplier and build co-ordination and commissioning support.
The facility, which went live in March 2015, is a significant part of the Bodybuilding.com growth strategy and is capable of processing and despatching 14,000 orders per day from a large sku range of thousands of products with over 98% of UK orders delivered next day and transit times reduced by 50% for European orders.
The 42,000 sq ft facility includes a pedestrian zone pick operation where orders are picked to tote bins from carton live flow racking and then taken by pick trolleys and put onto the conveyor to the packing area. A secondary conveyor takes the packed orders to the goods out despatch area whilst a third conveyor returns the empty totes to the picking area.
The bulk replenishment stock is held in pallet locations above the carton live pick face and lifted down in the replenishment aisles where the carton live system is continually backfilled.
The whole design is based around the principle of short pick distances and minimal pick times enabling it to run 24 hours per day, seven days per week with as few as 40 operators receiving, picking, packing and despatching in excess of 95,000 order per week as well as stock replenishment, product returns and goods in.
This prime example clearly demonstrates the benefits of a purpose built e-fulfilment distribution centre, the specific operational requirements for e-commerce and the speed and volume at which orders can be processed with relatively low staff levels.
It is all about the design and process flows to optimise layouts, workflows, resource and systems in a 24/7 picking operation
To discuss your e-fulfilment and e-commerce logistics requirements contact us on 01926 430 883 or email email@example.com