There has been a long debate whether multichannel retailers can service on-line sales through the same warehousing and distribution infrastructure as retail outlets. After all, you might ask, don’t they use basically the same operational processes and storage and handling equipment, etc for multichannel logistics?
With the experience of many successful projects, developing warehouse designs, operating processes and distribution networks for on-line retails as well as the High Street, THE LOGISTICS BUSINESS is not going to say that it can never be done. However, there are a number of characteristics of e-fulfilment that have to be considered, several of which may dictate a need for very different processes to a stores supply chain.
So what’s different?
- Delivery expectations – most shops provide immediate fulfilment and on-line shopping is increasingly expected to come as close as possible to this, by offering short delivery lead times. This could perhaps be next day, or in some cases even same day. So think about the service levels your customers expect. If it is ‘next day’ delivery, then how does this affect your fulfilment operation? What is the latest time that you can accept an order for next day delivery? And is this cut-off time a critical differentiating factor between you and the competition?
- Volatility of demand – the on-line fulfilment warehouse operation has to be highly reactive and has limited opportunity to smooth any peaks in demand that might occur close to the cut-off time. The demand is not always predictable and on-line retailers may wish to think about the way in which the contracts of employment for distribution centre operatives can incorporate flexibility to cope with this volatility.
- Stock availability – be aware of the potentially greater implications of out-of-stock items. Unavailability levels can be very visible to the online customer who may be skimming through different websites in search of a product. They normally don’t have anyone to ask about expected delivery dates into the fulfilment centre, and may not be prepared to wait for the item they want, or consider a substitute, but instead move on to the next retailer’s website. Maintaining availability might mean holding greater stock levels or ‘ring-fencing’ quantities of stock to ensure availability for the on-line business and prevent the allocation of the total stock to other parts of the business.
- Order picking – non-food on-line sales, like store sales, are normally single items or small quantities. In the fulfilment centre, this translates into a very different picking operation to store replenishment; singles picking rather than the multiple items, or case picking that typifies much of store replenishment. Without an investment in the appropriate picking processes the can lead to significantly lower ‘units per hour’ productivity rates and potential congestion in busy picking areas.
- Damage – the potential for damage to products is significantly higher in the on-line fulfilment centre, where, to pick single items, the robust packaging with which better suppliers protect their products in transit is opened or removed completely, exposing the presentation packaging, or the product itself to potential soiling and damage. Storage equipment and handling techniques may have to be modified to reduce this risk.
- Packing – the requirement to pack customer orders means the introduction of a completely new process compared with the majority of store replenishment operations. For a large proportion of the product range, the supplier’s transit packaging may have been removed completely, leaving the individual saleable units in need of protective packaging prior to despatch. This is no small task when one considers the number of orders, the potential variety of shapes, sizes and weights, and the likely need to try to consolidate several individually-picked items into a single parcel to reduce carriage costs.
- Order management – the large numbers of small orders that is characteristic of on-line retail can also have a significant impact on the administrative overhead, unless order-processing and warehouse management systems are appropriate for the task
- Returns – e-retail offer no personal interaction to see the condition of the product, establish reasons for the return, or authorise refunds or replacement. The product simply arrives at the door for the on-line business to deal with – and just like stores retailing, the customer expects prompt credit! Reverse logistics in E-retail can be a sizeable operation in its own right.
If all this seems a daunting prospect, don’t worry; THE LOGISTICS BUSINESS has accumulated considerable experience in this industry over many years and has helped many clients to overcome these difficulties with pragmatic, cost-effective solutions and go on to grow successful on-line retail businesses.