Designing Facilities For Order Fulfillment: Secrets To Amazon And Walmart’s Success

By Kelly Reed, EVP, Material Handling Integration, Tompkins International

Holiday 2013 proved to be an eye-opener for many retailers. Fulfilling orders and getting them to consumers on time requires the right supply chain planning. Although UPS and FedEx caught the brunt of the flack for late shipments, many retailers weren’t prepared for the last-minute rush of online orders. (Read more about this topic on the Tompkins International CEO’s blog.)

I can’t say this enough: Order fulfillment strategies are vital to retail companies’ online success.

We’ve been watching as companies such as Amazon and Walmart set the pace. Now is the time to take a look at some of their secrets and reassess your fulfillment strategies. 

A good multichannel or omnichannel experience requires the right order fulfillment strategy.

Consider the following factors for e-Commerce order fulfillment:

• Shipping times: Peak shipping days tend to be more intense and more concentrated than store order replenishment.
• Order and shipment size:Consider the impact on picking and packing a glass item shipped in a master case to a store, but then shipping it individually to an e-Commerce customer.
• Endless aisle:Many products sold through an e-Commerce channel are not sold through stores and may not be stocked at the DC, providing the customer with an endless aisle experience.
• Utilizing stores:Store fulfillment, pick-up in store and return to store are becoming more commonplace, helping retailers keep up with the competition.

Keep in mind that there is no one-size-fits all approach when it comes to fulfillment strategies. And companies need to be sure that they create a solid strategy before starting on their fulfillment network structure.

Once the right strategy is clear, you can proceed to infrastructure — planning the network of fulfillment centers, DCs, direct delivery centers, forward fulfillment centers, direct special services centers, depots, forward picking locations, crossdocks and other processing/shipping locations.

Also think about whether you want to handle fulfillment internally or outsource to logistics service providers. Another key consideration is whether to perform fulfillment operations in the store replenishment DC or to open separate fulfillment centers that are dedicated to fulfilling e-Commerce orders.

Some best practice design principles for today’s e-Commerce fulfillment include:

1. Develop flexible solutions for shorter time horizons: Traditionally a five- to 10-year time horizon has been used for DC designs. That approach is no longer viable since uncertainty about the future is much greater. A much shorter time horizon — two to three years — is essential to build capabilities that meet core requirements. But be sure it is scalable to meet future needs.
2. Plan for same-day order fulfillment: Customers are demanding instant gratification. Build fulfillment systems to pick, pack and ship customer orders the day the order is received. And remember to size the operation to accommodate the order volume expected during the peak season.
3. Automation is not a guaranteed solution at high volumes: Automation may experience constraints with a greater peak to average ratio. Certainly the right amount of automation plays a key role in fulfillment center design but strong business cases are built with the investment fully justified.
4. The order fulfillment process normally consists of multiple flows to optimize productivity and efficiency, and reduce order cycle times. For example:
   1. Batch pick single-line orders and send directly to packing.
   2. Some multi-line orders that are not easily batched or consolidated may require a discrete order picking process.
   3. Some multi-line orders should be batch picked and consolidated in a downstream order consolidation process.

   
   

5. Packing quite often becomes the throttle for the entire fulfillment process. Take special care to properly size packing. Use order types and profiles to drive the process. A combination of manual and automated pack lanes is generally the right path.

Use these guidelines to establish the right strategy and structure for your e-Commerce order fulfillment. You can learn more by viewing our recent video on this topic, or downloading the Tompkins International paper on “Personalized Multichannel Logistics.”

As Executive Vice President at Tompkins International, Kelly Reed has more than 30 years of experience in logistics, warehousing, warehouse management systems, material handling systems, inventory management, and inventory deployment. He is responsible for developing strategic plans, justification of systems and equipment, detailed facility planning and specification, and management of the material handling integration implementation process. Reedy leads Tompkins’ Material Handling Integration service line and is responsible for designing and implementing complex material handling systems to include the associated information technology systems (e.g., warehouse control systems, warehouse management systems, labor management systems).