E-Commerce Causes Major
The rapid growth of internet
retailing is creating serious
challenges for supporting
retail and wholesale distribution operations. The good
news is that growth rates for
e-commerce are significantly
exceeding expectations for
most companies. The bad
news is that there are some
very stressed distribution
operations behind the scenes
that are having difficulty keeping up with sales.
—Marc Wulfraat, president, MWPVL
he complexities of fulfilling internet orders are now better
understood as a result of record shipping volumes in 2011—in
some cases exceeding 100,000 units shipped per day. Key differences exist between providing distribution support services
for a high-volume retail web storefront versus a traditional retail store network.
For starters, web commerce peak shipping days are sharper, more intense
and more concentrated than traditional store order fulfillment. Peaks run
between November 1 and December 20 based on the buildup for Black Friday,
Cyber Monday and Christmas. These massive surges place tremendous stress
on the underlying throughput capacity and staffing requirements for supporting distribution operations.
Another challenge is that many retailers sell products on their web store
fronts which are not stocked in their distribution center(s). They rely on a network of wholesale distributors to fulfill consumer orders with transparency for
these non-stock items. This involves a fairly complex set of wholesale distribution support requirements, including: inventory reserved for retailer web storefronts, compliance issues, retailer-specific pricing/taxes, paperwork, and rapid
order-delivery cycle times, which are expected by the consumer.
Distribution center operations are also vastly different for internet order fulfillment as compared to retail store order fulfillment. Most often, the shipping
unit of measure ordered by the consumer is different from the unit of measure
ordered by the store. Unlike retail store orders, consumer orders tend to be
small in terms of order lines and units. The design of the picking and packing
operation is critical to the success of the e-commerce fulfillment center. Intelligent order-wave planning, intelligent batch and/or cluster picking, and slotting
optimization are vital strategies needed to minimize the travel time required to
pick internet orders. If volumes are high enough, a mechanized pick-to-belt
system may be required to efficiently manage split case picking operations.
A final challenge: many retailers have outsourced their e-commerce fulfillment
operations to third-party logistics services companies because the supporting distribution requirements are so different from what they are used to. This strategy
has not been entirely successful. Increasingly, retailers are now looking at ways to
bring web order fulfillment operations in-house for self-distribution.
Supporting distribution requirements for internet order fulfillment are vastly dif-
ferent than providing support for retail stores. Getting it right may require differ-
ent IT systems, strategies and infrastructure to handle the surges in volume and
anticipated growth for the internet retail channel.