Rethinking Order Fulfillment Automation in the age of rapid changes

It’s clear that the current climate of rapid changes in consumer purchasing behavior and available technology make making the right automation investment decision for your warehouse a tough and risky proposition. The only worse option deciding to stand still, operationally speaking, as business conditions and consumer expectations are changing ever faster. ‘Business as usual’ today should mean outpacing change, or one could find one’s self on the outside looking in very quickly.

For decades, the supply chain was uniform, steady and predictable. Manufacturers produced goods and shipped these in pallet loads to wholesale retailer’s warehouses. There they were received and broken down and re-shipped in mixed pallets to retail stores. Where we the consumer drove to, to select and take the products home.

Figure 1. The traditional supply chain, which existed almost unchanged for decades.

The internet, and internet commerce following on its heels, changed everything. The impact of our change in purchasing behavior on the supply chain - which has really only just begun - hard to overstate.

Today, more than 10% of all retail sales is done online and outpacing brick and mortar retail sales growth by a factor of 7 to 1. Of course, these numbers vary strongly from industry vertical to vertical. Grocery and particularly perishable food shopping is still done mostly in-store, with e-sales less than 5%. On the opposite end of the spectrum are books and electronics, with on-line sales close to 50%.

Manufacturers, retailers, wholesalers, everyone opened their own e-store. Of course e-commerce only retailers popped up, none more dominant than Amazon. Consumer behavior and consumer expectations have changed as a result.

No longer are we the consumer taking care of transporting the goods to our homes after an exhausting day of retail shopping. Instead now all these tiny internet orders need to be shipped to a multitude of locations. What’s more, all these small internet orders need to be filled, and filled efficiently. But virtually no-one is setup to handle this really effectively and efficiently. The exception perhaps being amazon.com, who has even found a way to have its customers pay for shipping and handling with their ‘prime’ offering.

This lack of knowledge of how to deal with internet sales, is a real opportunity for 3PLs to provide unique ‘expertise’ and added value. The lifeline and crutch for those manufacturers and retailers not knowing how to get their goods to the consumer. Which is why we’re seeing a lot of growth and consolidation in that market space.

Adding to dynamic nature of today’s supply chain, is the ever growing flood of new technologies being introduced, and introduced at an accelerating pace at that. Not a month goes by where ‘the next big thing’ in supply chain is being discussed or predicted. Tests being performed with drone deliveries, self-driving trucks. Net-worked and self-learning autonomously operating guided vehicles bringing goods to operators. 3D printing of orders, predictive order algorithms, the list goes on and on. At times it feels like Star Trek is just around the corner.

Brings to mind a quote by Edward Murrow – ‘Anyone who isn’t confused really doesn’t understand the situation.’

Figure 2. Today’s supply chain, which is still developing and in full motion.

Meanwhile reality on the ground today still paints a very different picture, with only 5% of warehouse operations reporting a high level of automation in order fulfillment in a late 2017 Modern Material Handling survey. In that same survey over 40% reportedly were still operating completely manual. But with every day passing these warehouse operations are falling behind and becoming less and less competitive. Automation has the potential to eliminate a lot of cost in a warehouse operation, with 60-70% of warehouse labor tends to be tied up in order fulfillment. Not to mention costs associated with mis-picks.

But while productivity gains are always a goal, given the dynamic nature of the market, true flexibility, scale-ability and configurability of the solutions being evaluated, maybe just as important, if not more so. Can your order fulfillment solution of choice grow and change with your operation? How easily and quickly can it be reconfigured and repurposed when the product portfolio changes? Because it will change, that’s the only certainty there is.

Understanding that the market is still in the midst of fundamental changes, selecting an order fulfillment solution that can change with you is of vital importance.

WERC, Networking 101, a perspective from a Rookie:

May 1^st, this was my first and I am sure not my last WERC (warehouse education and research council) conference. I was not quite sure what to expect being new to the industry and new to networking. I wondered whether this would be a welcoming crowd, what I’d learn. Would I pick up a thing or two or would it be too much and would I be uncovered as the new kid on the block?  

On day one I learned that WERC is geared towards the warehousing professionals at all levels, you have procurement managers to business owners and everything in between. Regardless of their job description each person has one thing in common, all are looking for a way to better their business. The one thing that resonated with me in the quest to fulfill that was “THE AMAZON EFFECT”, a topic mainstay for the entirety of the conference.

            Since Amazon started in 1994 they have changed the warehousing industry completely. The explosion of e-commerce dominating the retail and skyrocketing the 3PL market catapulted technology into distribution centers and depots. Myself working for a company that specializes in warehousing and order fulfillment solutions was utterly intrigued. These people were my sales targets! How could I gain their business?

The first session I attended was a Peer to Peer group on The Hottest Retail and Distribution Trends. Perfect. I sat down as the new guy in the room, and was intent on soaking up as much information as I possibly could. These people were my target market, I could surely gain a few contacts out of this meeting.

The room was at max capacity, so we divided into two smaller more intimate groups. Everyone went around and introduced themselves, the majority of the group being upper management for their respective companies, you had everyone from Walmart to Ryder present. Then there was me, the Pick to Light solutions provider who had been on the job for six months and was as green as the grass outside.

The conversations started, what was everyone’s pains? The topic ranged from hitting goals set in KPI’s to the quality of order picking in general, and then it happened. “Hey, Dan could you provide a little insight on this” the back of my head burned like someone was sitting behind me with a blow torch; this was your time to shine! “Ugh sure!” as everyone looked on for my explanation. “Well picking by light is the way to go” I exclaimed, like a new born fawn stumbling out of the gate, but as I gained momentum I could feel my confidence growing, and the room listening more intently. I covered everything from ROI to the basic pitfalls of just hiring your order pickers, to say the least I had felt like I had earned a place in that room by the end of that session.

As the topic moved on and others spoke their piece I realized something incredibly invaluable. The ability to relate to your peers and just hear their differing operational situations, as well as their views, is something you will never be able to read out of a book. It is something that you must experience. You can meet everyone from a head engineer at a robotics firm to a warehouse manager, it is all relevant because at one point or another these are people you will have to network with, relate to, and deal with in our professional lives. Having a place like WERC to put that on the main-stage is something that you really can not substitute.

So, in conclusion, as my first WERC conference concluded later that week, I felt a sense of community. A sense of this is a place I need to come back too, a place where I can grow as a professional, and as a part of the warehousing community.

Here is to the first of many, until next year, cheers.