eFulfillment Challenges of 2020 – How to Understand, Address & Pivot

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eFulfillment – In general terms, eFulfillment refers to the processing, packaging, and shipping of goods bought electronically and generally direct shipped to customers. The goal has always been customer satisfaction; to create a positive user experience so that customers keep coming back and your eFulfillment operation continues to grow. However, the challenges of 2020 have pushed fulfillment centers into hyper-drive imperiling good customer relationships for even the savviest of retailers. Pricing is not significantly driving purchases, but inventory availability and reliable delivery are.

The expectation of fast delivery is unchanged, yet as the quantity of online orders has grown, items per order are getting even smaller. Effectively what has transpired is a consumer expectation for more choices with uncompromised quick shipment. Luckily technology has kept pace with consumer demand. There are operational changes and soft-automation solutions that can be implemented relatively quickly to increase storage capacity, order picking accuracy, and fulfillment productivity.

Top 4 eFulfillment Challenges

Thanks to mega online retailers, $601 billion was spent by consumers on eCommerce orders in 2019. That’s an increase of 14.9% from 2018, which is in keeping with the industry growth rate for the last several years and represents more than 10% of total retail spending in the US. The growth of this industry has been explosive and shows no signs of weakening. Coupled with the 2020 health crisis the growth rates are expected to accelerate even faster.  This will affect your operation in several ways.

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  1. Labor challenges abound. A shrinking workforce was already an issue before the unique challenges of the 2020 health crisis. Population decrease and the seasonal retail peak have created an enormous labor shortage for warehouse operations. Now add the post-COVID health and safety regulations and fulfillment center operations have even more to juggle. It’s a serious problem and competition to keep your dependable and trained workers is growing, as is the demand for temporary, seasonal labor to meet the peak holiday fulfillment expectations.
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  3. The shift to fulfillment of smaller, more frequent orders is not going to lighten up. Distribution Centers (DCs) need to evolve from pallet-in and pallet/case-out to “piece pick & pack and ship,” meaning pulling products from your inventory, packaging them, and shipping them to your customers. Those that still lack the material handling technologies and/or supporting warehousing systems (WMS/WCS) to adapt to these new customer demands must make the pivot and soon.
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  5. Besides labor challenges and outdated material handling methods is the looming short-time delivery expectations. Online consumers have become accustomed to instant gratification. Now that most retailers offer online ordering, if you don’t have a product in the specific color, shape, or size the customer wants, or if you can’t deliver it fast, you will lose that order and perhaps the customer for good. Here are 4 common “Standard Shipping” delivery options: (1) a mega-retailer promises next day delivery, (2) an omnichannel enabled retailer (fulfills orders from their DCs or brick & mortar stores) offers two-day delivery, (3) an online specialty retailer (with a single warehouse) offers three to four-day delivery, and (4) BrandABC.com, who uses a Third-Party Logistics (3PL) company, offers standard delivery. Who do you think gets the order?  “Next Day” delivery trumps Price and Brand!
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  7. Profit: What are the components of the price you pay for fulfillment?
    • Fulfillment Locations– Using strategically located stocking locations and increasing SKU volume to ensure you have the items customers are seeking will raise your costs. Still, efficiencies can be found mainly with last-mile delivery costs by implementing advanced order fulfillment and transportation logistics software.
    • Fulfillment Efficiency– Fulfillment costs continue to rise and are now complicated by the increasing costs of warehouse sanitization and health monitoring. Efficiency must rule the day (and night if you’re employing shifts) from the point when the order is received through the time it leaves your facility. Labor-saving technologies, such as Goods-to-Man, Pick/Put-to-Light, Voice, Vision, Print & Apply, and Robotics, can be relatively easily implemented and your team quickly trained to improve productivity. Automation is no longer a nice to have; it is a must-have to compete long-term and have the capacity to handle peak surges.
    • Flexible Packaging – One size does not fit all when it comes to shipping materials. With a trend to smaller orders, an intelligent approach to packaging is required to keep up and prevent penalties for improperly packaged materials. Parcel dimensioning systems are one advancement that can help. It can improve your use of not only packaging materials but warehouse storage space as well.
    • Fulfillment Quality – Warehouse logistic systems (WMS/WCS/LMS/TMS) coupled with enabling scan/light/voice/vision-based order picking technology can drastically improve item selection efficiency and accuracy to help keep the customer satisfied. Anything less than 100% accurate results in additional costs for credits, returns, or lost customers.
    • Returns – 20% is the average return rate for eFulfillment purchases vs 8% -10% from brick & mortar stores. While the cause for many returns is buyer related and has nothing to do with the fulfillment process, any return represents undesired headaches and costs. Eliminating errors in processing ensures the lowest return level and thus cost for your operation. In addition, proper packaging and care of orders while en route will help minimize inventory damage and further reduce returns.

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Capitalizing on Exploding Customer Demand

Exploding demand for online purchases and immediate gratification are driving the eFulfillment industry today. “Don’t let that explosion leave your business in the dust. Instead, learn how to apply the right tools to win the race,” says Apex Automation Solutions’ Gregg Hague. Distribution models and inventory deployment must be able to react quickly, as does management to pivot and respond effectively. Stocking locations should be regularly rationalized, and outdated operations and inefficiently equipped warehouses should be re-engineered for storing and processing SKUs for today’s demanding customers. If that all sounds daunting, don’t let it be!

The Apex Automation Solutions team is ready and equipped to identify your productivity and efficiency challenges and offer cost-effective solutions that can be quickly implemented. Contact Apex Automation Solutions today to schedule a free consultation and for more information.