Many emerging e-commerce businesses start from a spare room in a house or garage. Orders trickle in day-by-day but grow steadily, up to 100 parcels per day. Packaging and labelling work is a laborious manual process and then you must still take parcels to the post office or collection point. It is not the best use of your time which would be better spent in the production of income. However, you are still coping. So, what happens next?
Scaling up to 500 parcels per day
When the business starts to really take off you may need some technology to help. There are “all-in-one” software packages specifically designed to make your life easier. Typically, these solutions use a dashboard system that allows you to manage core business processes, easily and visually. They integrate well with the e-commerce front end, i.e., the interface with the customer. Your website content, important information and the ordering process are a vital part of the user experience (UX).
These software packages can handle finance, inventory management and stock control and other back-office functions including label printing. Many of them integrate with popular parcel carrier services smoothing despatch and delivery processes.
Warehouse operations will still be quite basic at this stage but might include numbered or even bar-coded locations for storage and picking of stock. You may be operating from a small – medium-sized industrial unit or mini-warehouse at this point. You might have some well-organised packing stations and perhaps even a simple conveyor. Successful e-commerce businesses ramp up fast, you need to keep up with rapid growth in sales.
Moving up from 501 – 2000 parcels per day
A nice problem to have. But scaling up too quickly can often lead to periods of poor service. Operations need to be streamlined as you move on to the next stage. The more sophisticated you need the operation to become, the more you need reliable information to support your business goals. This includes assigning product codes, maintaining accurate product categories and descriptions, units of measure, weights and dimensions. Products should be clearly identifiable at all units of measure, preferably in both human-readable and barcode forms.
Decision time! This level of operation takes you to a crossroads. Do you outsource warehouse and delivery operations to a third-party logistics company (3PL)? Alternatively, do you take on more fixed costs and commitments in the form of a larger warehouse and continue with your current delivery methods?
Continuing growth, seasonality and changes in customer profile can make a specialist shared-user 3PL option very attractive. They will typically price on a variable basis providing a clear link between sales and costs. You benefit from shorter contract commitments (e.g., 3 years vs a 10-year property lease) and synergy benefits from sharing labour, systems and space.
The 3PL will typically provide a tier-one warehouse management system (WMS) allowing for sophisticated picking strategies, pick-face replenishment, a high level of stock accuracy, efficient packing and despatch. They will have strong relationships with carriers which gives you flexibility and more attractive rates, Benefits include later cut-off times for next-day delivery because your volume is consolidated with that of other retailers.
The downside of outsourcing to a 3PL is giving up some control over your inventory and your logistics and becoming dependent on a third party. Expect these trade-offs: more complexity, more admin and some systems integration – the benefits must be worth it.
More than 2000 parcels per day
Continuing growth means significant investment in more sophisticated warehouse automation and extended facilities. The flexibility of shared-user facilities starts to be overtaken by the productivity benefits offered by economies of scale. Large-scale e-commerce businesses tend to operate their own warehouses or work closely in partnership with one 3PL.
For example, at the more basic end, zone picking involves each picker operating within a certain zone while a conveyor system brings the order carton or tote to them. They pick what is needed within their zone and then push the order carton on to a takeaway conveyor which takes it to the next zone where it is needed. This is well-established technology but remains a good solution for situations where there are several items to be placed in one box, for example, meal preparation companies. There are various ways to make this more productive such as pick-to-light technology and simple ideas such as duplicating the most common SKUs across multiple zones.
Increasingly common and highly flexible, autonomous mobile robots form a goods-to-person solution. This is achieved by storing goods on mobile shelving units which are then retrieved to picking stations where an operator picks to multiple order cartons or totes. The storage density achieved is better than might be imagined, as the robots can block in the mobile shelving and work intelligently together to retrieve items as needed.
Are you managing more than 2000 packages per day? In the next article, we will highlight some more of the innovative solutions that can help you optimise and automate your operations – may be in preparation for the 5000 parcels-a-day business that is on your horizon