Logistics 101: Order Fulfillment Challenges and Best Practices
The COVID pandemic reshaped the world of e-commerce and, concurrently, consumer expectations. With most brick-and-mortar stores temporarily shuttered, consumers moved online en masse and found a revamped online shopping experience. One report found that the pandemic accelerated the global shift to e-commerce by five years.
But now, as the world returns to “normal,” online retailers are struggling to meet new expectations. In fact, over 35 percent of retailers and manufacturers report feeling overwhelmed by now ubiquitous expectations for next-day delivery. Call it the Amazon Prime factor: consumers expect free, expedited deliveries and feel cheated when given less.
The new expectations are burdening online retailers, which are also coping with a general uptick in volume of e-commerce orders. Retailers are struggling to keep up with online demand as orders skyrocket. These issues require an overhaul of the typical order fulfillment cycle. Traditionally, order fulfillment went something like this: receive, process, package, warehouse, and ship. However, this model cannot keep pace with the new e-commerce landscape.
E-commerce’s problem calls for a new order fulfillment model, capable of getting goods closer to the customer for quicker and more efficient delivery.
Looking to Automation
Traditional supply chains can no longer keep pace with growing demand. Luckily, automation can solve much of the puzzle of the order fulfillment cycle and improve optimization.
For one, artificial intelligence (AI) can predict consumer demand to suggest what stock you should have on-hand at any given moment. AI can analyze market forces to see what consumers are likely to order on any given day, or which item’s popularity is likely to plummet and represents a waste of shelf space.
AI systems can also prevent processing errors, which cause backlogs and plague online retailers. As new orders are flooding in, the last thing you want is to be amending already dispatched orders. An AI system can make it more likely that the correct item is selected from the stock, packaged, and sent off.
These successes can be achieved by integrating AI with machinery to automate the warehouse itself. Smart forklifts can retrieve items without an operator, and digital locator tags attached to goods help to better manage inventory. Staff can receive real-time location updates on any item in the warehouse.
Such advancements are good news for distribution centers because travel accounts for half of all in-warehouse labor time, whether it’s workers manually picking items off shelves or chasing down an order in an unknown location.
For example, one AI system with “pick path” optimization reduces travel during order picking by 30 percent to 70 percent. The system determines the optimal route across a warehouse floor to pick items for dispatch, whether the picking occurs by man or machine.
All these tools will greatly speed up processing time. With these AI systems installed, you know you have the correct inventory on hand, you know exactly where the goods are located within a distribution center, and you can retrieve items along the most efficient path.
Micro-Fulfillment Centers for Last-Mile Delivery
While optimizing the distribution center is one key part of revamping the order fulfillment cycle, there’s another step that must be addressed: last-mile delivery, which has notoriously plagued online retailers. Last-mile delivery accounts for over 40 percent of supply chain costs; it’s the most expensive leg of the order fulfillment chain and thus the subject of the most scrutiny.
How can retailers begin to tackle it? Well, by eliminating the last mile in and of itself. Micro-fulfillment centers can do just that. Micro-fulfillment centers are small warehouses that are just large enough to hold a few days’ worth of stock. However, they're strategically built close to the consumer — whether in the back of a store, a parking lot, etc.— so that items can be shipped right away and arrive at the customer's doorstep within 24 hours.
Due to the smaller size of micro-fulfillment centers, it’s practical to build a lot more of them, as opposed to one large primary warehouse that’s far from consumers’ doorsteps. Take Walmart’s main distribution center, which is a massive 1.5 million sq. ft. facility in Casa Grande, Arizona. As a result of this setup, Walmart also has an arsenal of trailers — around 80,000 — to supply its other facilities.
In contrast, micro-fulfillment centers are widely distributed across a region to serve local stores and e-commerce orders, plugging in the last mile and drastically reducing transportation costs.
Coupled with new automated tools, micro-fulfillment centers can solve supply chain bottlenecks — based on AI forecasts — and ultimately reshape warehousing as we know it. They can certainly deliver.
Carl Wasinger has led Smart Warehousing since 2001 and spent his entire career in the logistics, warehousing, and fulfillment space, from working the warehouse floor to CEO and founder. He is a logistics management and operations veteran, actively leading the business to its next phase of growth.
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Carl has led Smart Warehousing since 2001 and spent his entire career in the logistics, warehousing, and fulfillment space, from working the warehouse floor to CEO and founder. He is a logistics management and operations veteran, actively leading the business to its next phase of growth.