The E-commerce Effect

Market Research Reveals Impacts to Distribution and Fulfillment Operations

The relentless march of e-commerce continues to put tremendous strains on distribution and fulfillment operations. Honeywell Intelligrated, in collaboration with Modern Materials Handling and the Peerless Research Group (PRG), recently surveyed 171 U.S.-based material handling executives to understand how their respective companies are managing in lieu of e-commerce pressures. The revealing results were published in a report entitled: The Impacts of E-commerce, Fulfillment Challenges and Improvement Priorities.

It came as no surprise to learn that the majority of retailers are actively seeking solutions to combat rapidly escalating fulfillment complexities and new tools to manage mission-critical challenges, such as: labor management, order processing and tracking, and warehouse and distribution costs. Yet despite these issues, many have been slow to adopt the technologies and automation needed to keep pace with increasing service levels.

Let’s take a closer look at some of the key research findings.

The Efficient Order Fulfillment Imperative

Thirty-five percent of MHE executives reported that fulfilling more orders, faster and at lower costs, was their primary operational challenge. Other findings include: 28 percent stated that reducing errors in order processing/improving order accuracy was their top concern; 25 percent reported continually struggling to obtain enough labor to support operations; and 24 percent cited the difficulty of keeping pace with rising customer expectations was their greatest challenge.

Operational Efficiencies Limited by Labor and Facility Constraints

Insufficient workforce to handle e-commerce volumes and the lack of available floor space were the top two constraints to operational efficiencies, at 46 percent and 40 percent, respectively. Difficulties adapting inventory workflow on the warehouse floor was cited by 38 percent of respondents.

Automation: The Key to Short- and Long-Term Growth

Forty-four percent of DC managers stated that deploying more automated systems in their facilities will be necessary to address growth targets. Also, 37 percent seek to add more manpower to their current labor force, and 33 percent reported that implementing process improvement strategies and expanding the footprint of current facilities are also in the works.

Adapting to Inventory Management Challenges

The survey group cited inventory management bottlenecks (39 percent) as the most likely deterrents to achieving supply chain adaptability. Processing and managing orders, manufacturing and production challenges, and supplier collaboration were also reported as barriers to becoming more adaptable.

Room for Fulfillment Improvements

When identifying functional areas ripe for improvements, managers listed many phases of the fulfillment process, including: inventory management (46 percent), order picking (35 percent), order waving/releasing (28 percent) and packing (20 percent).

Coordinating Automation and Resource Availability is Critical to Meeting E-commerce Customer Expectations.

Controlling Freight and Labor Costs

The majority of respondents expressed the criticality of controlling freight/transportation and labor costs (79 percent and 75 percent, respectively). While fewer than one in 10 companies currently has automated labor management processes, 34 percent plan to introduce automation in the next few years. Surprisingly, nearly one out of five assert they have no plans to implement labor management technology. Order management, invoicing and shipping visibility are most likely to be automated, although the majority of respondents still only rely on partially automated methods.

Investment Areas

With an absence of end-to-end automation across fulfillment operations, 58 percent of companies surveyed expect to increase investments in distribution software, such as warehouse management systems (WMS), warehouse control systems (WCS) and warehouse execution systems (WES). Labor management facility expansion, packaging equipment and materials, and implementing or upgrading automated materials handling systems are also prime areas for upgrades.

The Emergence of Automated Solutions

In light of these findings, it’s important to also consider a few of the solutions we’re recommending to help companies rise to meet the e-commerce challenge. 

AS/RS, Robotic Picking and Automation 

The 80/20 rule is changing. While the focus has traditionally been on deploying picking automation for the 20 percent of the most commonly ordered SKUs, DC operators are expanding their focus to now include the other 80 percent. In response, many fulfillment operations have introduced automated storage and retrieval system (AS/RS) shuttles to help efficiently manage their entire SKU mix and alleviate labor resourcing pressures. 

To improve productivity and reduce errors, many DCs are integrating robotic picking automation (via articulated arms) and goods-to-operator (GTO) stations, especially to offset labor-intensive and repetitive tasks. In addition, many have deployed automated truck unloaders as an efficient alternative to the arduous manual tasks of truck loading and unloading, which are often performed in extreme temperatures.

Labor Management Software (LMS)

Peak demand cycles, in which fulfillment volumes can grow up to three times their normal rates during two to three weeks out of a year, pose significant staffing challenges for DC operators. LMS provides a suite of tools that allows DC managers and supervisors to mitigate these challenges, regardless of the demand requirements.

LMS helps supervisors quickly visualize labor status, identify bottlenecks, and understand how people, operations and facilities are performing. Historical data allows managers to accurately forecast their staffing requirements in both peak and off-season scenarios, thereby reducing their reliance on temporary sources. By leveraging advanced analytics capabilities, LMS utilizes algorithms to help identify employees who may be at risk of leaving — giving management the opportunity to take proactive steps and try to retain top-performing resources.

Dynamic Warehouse Execution Systems (WES)

Coordinating automation systems and resource availability is critical to meeting e-commerce customer expectations. Although pick-to-lights, voice picking and put walls are all tools many DCs have integrated to improve order accuracy and productivity, a lack of real-time visibility into all automation activities can still present throughput barriers. This is where a WES can help.

A WES can check workstation and labor capacity and intelligently route work to available areas. By evenly distributing the workload, a WES limits unnecessary congestion, bottlenecks and overworked resources. In doing so, it alleviates labor fatigue that could potentially lead to errors and lost productivity. 

These are just a few examples of how Honeywell Intelligrated is helping companies address the challenges of e-commerce. To learn more about the research findings or our targeted solutions, please contact us.