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Cliff Holste

Supply Chain Digest
Material Handling Editor

Logistics News

Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.

June 15, 2016

Logistics News : E-Commerce Verses Conventional Order Fulfillment


Can E-Commerce Order Fulfillment Co-exist Within A Conventional DC Operation?

 

Over the past several years internet generated sales have become a significant factor for retailers and shippers looking to grow their business. On-line e-commerce shopping evolved from catalog shopping, which has been around for a century dating back to the original Sear Roebuck catalog which offered consumers a huge variety of products that could be ordered over the phone or through the mail. Catalog sale were very popular particularly for consumers in rural areas. However, as the cost of owning a PC decrease, and processing speed increased, millions of consumers were attracted to the many conveniences of on-line shopping.


Holste Says...

For companies trying for the first time to respond to consumer demand for on-line shopping capability, e-commerce can be a major challenge.

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Retailers who already had a catalog business were quick to utilize that infrastructure to integrate e-fulfillment into their existing operation and immediately gained a competitive advantage. However, for companies trying for the first time to respond to consumer demand for on-line shopping capability, e-commerce can be a major challenge.

The first question is does the company have or can they easily develop the capabilities to do e-fulfillment effectively, whether in their existing DCs or in a separate facility. The second question has to do with whether or not the company has sufficient internal resources to do this in-house, or should e-fulfillment be outsourced. Here the concern is volume and customer order profiles. Typically, on-line orders tend to be small quantities of one or two items, and can overwhelm the conventional batch order picking/packing/sorting conveyor system operation.

Another key consideration is space, both in terms of floor space to process e-fulfillment orders and warehousing space as the business grows. While storage space is always at a premium, fixed (bolted-to-the-floor) material handling systems may present space and operational constraints as well. Internet ordering volumes are growing at a rate of about 15% annually, but many companies exceed that number. Therefore, a key consideration is if the building can be expanded and current order fulfillment systems adjusted to accommodate the growth and internet customer order profiles.

 

In addition to the physical considerations companies contemplating adding e-commerce need to assess whether they have the right Warehouse Management System to support e-fulfillment requirements. Many companies have home grown WMS systems that have been modified over time to do exactly what was required at the time. Those requirements probably did not include processing internet orders. So the question becomes can the WMS be modified to support e-commerce, and at what cost, time frame, and risk. The risk aspect needs to be properly vetted.

In addition to convenience, speed is the key to internet shopping. Same day shipping and next day delivery are what internet shoppers expect. This expectation far exceeds the capability of the conventional mechanized DC order fulfillment system. Because, internet orders received in the DC must be picked, packed, and shipped within a few hours, a standalone or separate offsite processing system may be required. If outsourcing is a consideration, the use of a 3PL may be a good alternative initially. However, a fast growing e-commerce channel could easily outstrip a given 3PL’s capability to deliver.

Companies who want to keep their e-commerce business in-house should give some serious consideration to the “Goods-to-Person” (GTP) order fulfillment strategy. E-commerce is the dynamic environment that GTP was developed for and it often can be easily integrated into an existing conventional mechanized system operation – see “Evaluating Goods-to-Person Order Fulfillment Solutions Part 1 of 2” and “Part 2 of 2”.

Final Thoughts

Optimizing an existing conventional DC operation to support quick response e-commerce order fulfillment will no doubt require major operational changes in receiving, inventory, picking, and shipping. However difficult the challenges may be, not participating in the on-line global marketplace will at some point stymie growth.



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