Small Order – Big Problem
Order size is changing. How do you adjust?
E-commerce sales continue to account for the majority of the retail sales, but it is not getting any easier on the distribution/fulfillment center operations managers. There continues to be an increase in the number of SKUs and orders with one to three lines. In addition, with growing supply chain lead-time concerns, impacted by Tariff changes, inventory levels are rising! This makes the job even harder for operations managers.
The 2019 Holidays are fast approaching and this only means more on-line order volumes and marketing pushes with even more new SKUs. Not to mention ‘Cyber Monday’ and other key seasonal dates spiking volumes considerably. Add to this the continuing retail trend for multi-channel fulfillment, such as allowing customers to order an item online or inside a store, and having it delivered from the distribution center to the store for the customer to pick-up.
Chances are that most companies dealing with these changes designed their facilities to ship case and pallet level quantities. The continued growth of on-line purchasing and other supply chain trends are creating a major shift from these higher volume shipments to selecting orders from a wide range of products and shipping these smaller orders.
So, what does a Small Order operation look like? Whether you squeeze it into an existing operation, setup separate inventory locations, expand your building or establish new space, the best practice for a successful Small Order operation involves the consideration of many factors, such as:
- Order management processing capacity for increased frequency of orders
- Processing one to multi-line order sizes
- Pick locations for a high number of SKUs, with a potentially wide range of sizes/weights
- Setting-up separate inventory locations for e-com only
- Picking less-than-case line quantities (piece-picking, broken-case, open-case)
- Handling high frequency of orders, with tight shipping windows
- Product slotting and advanced WMS capabilities
- Packaging into envelops through various box sizes
- Dealing with special packaging /gift wrapping
- Shipping small parcel, considering major providers including USPS, UPS and/or FEDEX
One of the primary concerns is dealing with the increasing number of SKUs. While online orders are typically less than three line items, the assortment of on-line items for most companies is growing. This explains why online orders account for the majority of the retail sales growth – you cannot buy many of the items in the store! This means the distribution center/fulfillment operation must provide additional storage, pick locations and handling equipment for more SKUs. Compounding this opportunity is many facilities are out of space, and facing the challenge of adding storage and pick locations within their current infrastructure. The right solution depends on your specific requirements, and current layout & equipment.
- Identify the fast, medium and slow-moving items
- Factor the size of items, from small to large, including if the item can be conveyed
- Conduct an SKU cubic velocity analysis to identify the slower/smaller items
- Right-size the forward pick area with the proper days of supply in the pick location
- Balance picking and replenishment labor
- Remove dead moving SKUs (not sold in 12-18 months)
- Add shelving bays within a current case flow module for the slower/smaller items
- Add additional levels/mezzanine to utilize vertical space
- Convert storage areas to very narrow aisles (72” vs. 96” – 144”) – for slower items
How to make small orders work
Now, how do you handle the increasing number of Small Orders if you’re stuck within an existing operation? Most businesses are initially forced to squeeze these orders through an existing operation, even if it is not efficient. If you are constrained to an existing facility, the following are some considerations, which can be combined with the solutions for dealing with the increase in the number of SKUs. The right solution depends on your specific requirements, and current layout & equipment.
- Cluster-batch pick one-line orders and handle separately
- Batch pick using smart carts (voice and/or light technology) from the current pick/fulfillment area and use specifically assigned pack stations
- Batch pick into totes using existing pick module and conveyor systems and divert to specifically assigned pack stations
- Batch pick and establish separate put-wall stations for fulfillment/packaging of orders
- Establish a separate area/space (i.e. on a mezzanine) and use smart carts with a separate pack area
At some point, (and, for some immediately), it might not be feasible to support the increase in SKUs and Small Orders within the same facility. So it may be necessary to conduct a comprehensive logistics strategy where you can consider various scenarios, such as:
- Expand your facility to include a separate processing area
- Use a 3PL to set-up a separate operation in the location that best services your Internet customers
- Establish your own separate facility in the location that best services your Internet customers
- Retailers can consider fulfilling e-commerce orders using some of their strategically located Retail stores
- Set-up certain products to ship direct from suppliers
If e-commerce sales continue to grow and the multi-channel trend continues, the Small Order phenomenon will continue to be an operational challenge. In a highly competitive market, shippers that get their Small Order operations running efficiently are going to earn the larger market shares. There is no one answer for everyone but many of the considerations outlined in this article are being used by companies choosing to ride the wave of change within E-commerce/Multi-Channel space.