What do you need for fulfillment?
Table of Contents
Depends if your major business is rather wholesale or more individual customer e-commerce.
The warehouse service infrastructure is not universal. Typically, warehouses are equipped with a set of traditional, pallet size driven logistics infrastructure. First of all it is metal, high racks with many pallet size levels. Picking locations are few, on “0” and “1” levels. Typically they are large, at least on “0” level. The aisles are wide, suitable for reach trucks. Space is more utilized “up”, then focusing on density of picking locations. For a wholesale (B2B) customer it means maximum efficiency with pallet and collective boxes handling, so also a warehouse service fees will be acceptable. But it works only for traditional sales. When comes to e-commerce, the situation changes dramatically.
Typical e-commerce logistics deals with small stock, sometimes with no safety stock at all. Customers are also different, there is usually a large number of small parcels dispatched to many small end customers in numerous location.
What does it mean to fulfillment organization? They should prepare the filling infrastructure. Here the best solution seems to be paper racks or sometimes a multilevel mezzanine. In so organized warehouse there are many small picking locations, fully utilizing the warehouse height. There is also a possibility to arrange at least 5-6 levels of picking locations, all reachable from the floor level. The density of picking locations could be high not only vertical, but also horizontal. Aisles could be narrow, down to 0,9 – 1 m, as there is no more a need for space for reach trucks, but size for basket or trolley picking is more than enough.
But also the ordinary operations are different. In B2B-organized fulfillment timing is important, however not essential (customers are more forgiving, but also have safety stock for such cases, so mistakes are not a disaster.
Efficiency is always needed, but in traditional fulfillment it has potential in other areas then in e-commerce. It is mainly procedures and work organization than staff management. In traditional fulfillment the manual workload is limited, most of operations are done with fork lift trucks and reach trucks.
Picking and packing are easy, as it is mainly collection of full pallets, sometimes boxes. Counting is easy, as ready-made packages are not opened for recounting (as a rule, with exceptions).
Respectively, the mistake level is typically low, as single pieces are picked rarely, so no extra control is needed (another area of costs efficiency). Possible mistakes are easy to correct with another delivery (customers are typically repetitive). Shrinkage is occasional, as goods are prepared for dispatch already at the production site.
In e-commerce the main factor is time and accuracy. Tolerance level of end customer is very low, they do not accept not neither mistakes not damages. On the other hand goods are delivered in single pieces, typically not suited for individual transport. So the packing procedures must be tight and personnel well trained and controlled. Cartons should be adjusted to outbound logistics in the warehouse, not at the factory, like in B2B.
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How is it in particular?
Space.
For B2B you need large warehouse traditionally equipped with racks. But if you are in e-commerce business the warehouse well equipped (in means efficient and offering favorable prices) has dense racks with many picking locations.
Docks.
Here is not difference, may be except e-commerce works more and more with cross dock, so there must be a possibility of cross docking and adding just delivered products at the ramp. It means a bit more space required, but mainly it is a challenge for the WMS system.
Racks.
The pallet size high metal (for heavy pallets) racks are very suitable for wholesale, b2b business. But if your external logistics partner is using them for e-commerce, it becomes inefficient and expensive. Best find such, who has experience with e-commerce and proper racking. The key here is aisles (high metal racks require wide aisles, with a loss for a number of picking locations).
Picking places.
For B2B business the best solution is large, pallet size locations, on level “0” and “1” but some could be even higher. For low rotation product you can utilize also upper levels, as you handle mainly pallets, sometimes collective packages. Another issue is the size of the picking location, for B2B should be mainly large, sometimes pallet size. For e-commerce all the SKUs should be available from the floor level, but mainly small, as buffer stock is usually very limited (if any).
Picking infrastructure.
It is not just picking locations, available from the floor, racks with isles adjusted to picking containers, the containers. You need also algorithm how to re-locate the goods to optimize the picking path. You need also the procedure how re-fill the picking locations. Among other things you need to control the accuracy of goods quantity on picking locations, as it is the main constrain to efficiency.
IT solution.
The traditional WMS system is optimizing the space, the e-commerce logistics WMS should be oriented the workload. The cost of traditional warehousing depends on how efficient you utilize the space, as the main cost driver is the rent. In e-commerce logistics it is different. Here what counts for efficiency (and cost, of course) is the labor cost. Big part of work is manual, and will remain like this for a long time. Products are different in size and shape, so automatization of picking differentiated products, however possible, is very expensive. And it makes sense only with very high volumes, available only to biggest sellers. All small and mid-size companies should rely on manual operations, which is why labor force optimization is essential.
The service warehouse IT system (WMS) must be also integrated not only with IT system of the customer, but also with couriers. It needs to print the packing list and delivery note, the moment parcel is ready, but also need to transfer this system to the customer.
Packing infrastructure.
Large number of small parcels require not only efficiency in picking, but also suitable infrastructure. First of all you need a space to queue up the trolleys and baskets with already picked items. Then you need professional tables, with all necessary supplementary material next to the packing person. Then you need
Last but not least is the possibility to insert different additional material, invoice for end customer, leaflets, gifts. It all disturbs packing process, so your potential partner need to prove the already possessed experience.
Packing expertise.
In B2B packing is relatively easy, goods (collective packages) are well protected for transport. Most of parcels are cuboid, easy to pack. But for e-commerce each delivery is different, products are also different and not protected for transport. So your employees need experience, but first of all precise guidelines, how to attribute right package (carton, foil pack), how to on one hand fill-in the parcel to protect the goods, on another one how not to overpay the costs.
Courier service.
End customers use many different couriers, and those, among different prices, have their own specifics. There are some, which offer same day delivery, some offer parcel lockers, some handle large volumes, some accept glass and fragile items. If your focus is on B2B business, especially in many countries, you may need international well-known brands, not necessary the cheapest. They must also accept large volumes, including full pallets. But if your focus in on e-commerce, best solution would be same day delivery and parcel lockers, even if they are neither the cheapest nor accepting the high volume. Your 3pl partner needs to have at least contacts with those couriers. But best would be a fixed contract with favorable prices and IT integration.
Reception of returns.
It is an integral part of e-commerce logistics. The first challenge is to recognize the goods (service warehouse typically has many customers and end customers not always respect the rules of return). Then the parcel must be opened and goods inspected, which status to be attributed to. Sometimes goods need to be prepared for further sales, sometimes repaired, sometimes scrapped. All this requires experience and detailed instruction from the customer.
Experienced co-workers.
Including group leaders. On one hand e-commerce require (can afford) for less educated and less experienced staff, as margins are thin and every penny counts. On the other hand the requirements are higher, goods are more difficult to pack and less protected. How this could work together? You need to have better, dedicated equipment, more advanced IT system and better group leaders. Except for all this you need more deliberate procedures.
Procedures.
E-commerce requires less educated (cheaper) employees, so it must be compensated by more detailed procedures. Such procedures need long term experience, that is why your future partner should prove he knows what he is talking about.
Edyta Pogorzelska
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