Success in E-commerce: The distribution Strategies
Ecommerce business has become highly competitive. Apart from marketing and unique value proposition, efficient fulfilment & distribution has become a key successes factor for every ecommerce business. The challenges presented by the digital economy are unique and go beyond just warehouse distribution systems. There is not only seasonality of the products but also wide variety of products, orders and customers that need to be accounted for. To meet these challenges advanced methods such as Wave management, packing optimization and optimal picking of products is important. Here are a few key methods which can help companies much higher efficiencies in their distribution operations.
- Efficient SKU pickup area. Storing all stock for one SKU at one place will mean that the picker will need to walk past all that stock to pick only one piece of that SKU. If there are 8 such SKU’s lined up, with say with 3 feet of front line, the picker has to walk 24 feet to cover all of them. If the front area was only 1.5 feet, he would walk only 12 feet. Multiply this with the number of times he makes this trip and you get the idea of all the extra walking he does. The idea here is to increase the SKU density per feet, so that the picker can pick as many items as possible with as little movement as possible. The pick up area can be replenished by stock kept just behind the pickup area, or elsewhere (for slower moving items). In fact items that move very slow should not be in the pickup area. They key challenge here is to keep the pickup area stocked with right SKU, to the right level with minimal frontage at all times. Various tactics ranging from Visual Replenishment (bin is checked for stock by eye) to more complex Demand based replenishment (where incoming orders are analyzed by replenishing team to keep the pickup area stocked just right) using a warehouse management system can be used.
- Pick strategy. A right pick strategy can make all the difference to the speed of fulfilment and capital investment of the warehouse. Manual picking carts are appropriate for a small size business. A larger business with many SKUs and high order run rate needs some level of mechanical solution. It could be vehicle based system (such as pallet jacks) or conveyer based system where items are placed on conveyer to move from one stage of order to the next stage, essentially creating an ‘assembly line’ of order fulfilment process, or much more efficient automated storage and retrieval systems using robots. Scale of business operations is an important consideration before deciding on the right pick strategy. For a business with smaller items or with large number of SKUs and high order volume, the manual cart may still be the best pick up strategy. They require very low maintenance when compared with other options. They can be scaled up quickly during high growth, high volume phase and can be simply kept aside during times of low order volume. Carts are available in various shapes and sizes and it is wise to experiment with a few different ones, before settling for one model that may be most suitable. These key factors should be evaluated while deciding the best pickup strategy.
- Pick up rates required.
- Size/volume/weight of SKUs.
- Spread of items across pickup area. (area of the warehouse)
- Upfront Investment and maintenance costs.
- Pick Methodology. The method by which the items in the order are picked to assemble the order also makes a huge difference in the efficiency of the fulfilment process. Some of the most common method are:
- Individual order: Picker goes around the warehouse picking individual SKUs for one single order. This method is slow, but in absence of a warehouse management system, most accurate. For smaller business this may be a very practical solution, but for larger businesses it is definitely the slowest and very inefficient.
- Batch order picking: In this method multiple orders are grouped for pickers to pick items from multiple SKUs. These items are then sorted to make individual orders. This method works when there are fast moving SKU’s that form part of large number of orders. It reduces the walk time and number of trip for the picker. The sorting area is where the items are assembled into a final order and it becomes ready for delivery.
- Cluster Picking: In this method, several orders are picked simultaneously. Picker picks items for each of these several orders and put them in separate containers (in one cart) as he makes his pass across the bins. This method works best with a warehouse management system which tells the picker exactly which item to pick and exactly which container to put it in, as he makes his pass. Here again, a full pass (full round of all bins) may be needed for each trip. It is much more efficient than Individual order picking.
- Pick and Pass: In this method, one picker is restricted to one zone. After the items from that zone are picked, the container for the order is passed on, to the picker of next zone. After passing through all the zones the cart comes to final order packing, ready to be shipped. Here also several orders can be clubbed in one cart but in separate containers, to pick SKU items for multiple orders in one pass, across one zone. If Multiple orders are clubbed, those many orders are ready after each complete pass of cart across all the zones. The key advantage of this method is that it reduces picker’s walking in large distribution centre and order is ready as soon as picking is done. If similar orders are clubbed together (which they most probably would be), the order cart is routed only through the required zone thus reducing the picking time.
These are some of the most common and quickly implementable solutions to achieve better efficiencies. However these are by no means the only ones. Organizations should experiment where possible, between different options to find the most efficient methods and options for them. Organizations should also continue to evaluate their chosen methods on regular basis. New tools and techniques come up regularly which can help organization in improving their distribution operations.