Online shoe retailer, Zappos.com, has used sophisticated high-speed handling technology to give it an edge over high street competition. Offering the best service, an extensive product range and fast delivery was seen as essential. Zapposmade rapid order cycle time its highest priority, requiring the design of a system with the ability to process an order in under an hour.
Nick Swinmurn was shopping for a pair of shoes in 1999. After going from store to store, he finally went home empty-handed and frustrated. Fast-forward eight years and Swinmurn”s US based online retailer Zappos.com boasts the largest selection of shoes anywhere – online or offline.
The company”s ”wow” philosophy of service and selection includes 365-day free returns, 24/7 operations, 110 per cent price protection, and free overnight delivery. The Zappos shopping experience also features website search options, views of every product from every angle, and ”live” inventory where nothing is ever out of stock, with over 1,000 brands and almost three million pairs of shoes.
”The “wow” factor is vital to the success of our business,” says Craig Adkins, manager, Zappos fulfilment operations. ”We are not competing with other Internet companies; we are competing with the high street experience. Offering the best service and selection while getting our goods to the customer quickly is the only way to compete.”
But getting an order processed, packaged and delivered to your doorstep in less than 24 hours is not easy. It takes the right people, careful planning, and a fast, optimised order fulfillment system – like the one material handling solutions integrator, FKI Logistex and London-based design and business consulting company Arup provided for Zappos.
In 2005, exploding Zappos.com sales were pushing the limits of the company”s outdated fulfilment centre. As it had outgrown simple conveyors and paper pick lists, the company leased a 75,000 sq m building in Shepherdsville, Kentucky as a new primary warehouse and distribution facility and home for a brand-new automated fulfilment system.
Zappos turned to the Arup logistics team to create a design concept for the new fulfilment system. The final design covered 40,000 sq m of the building and includes unconnected but overlapping receiving and shipping systems, a dedicated returns system, a static-racking system storing each SKU in a pickable location, and a photo lab to shoot new products.
In 2006, Arup contracted FKI Logistex to integrate and install the equipment to automate all the fulfilment system”s material handling. FKI Logistex major systems sales manager David Campbell worked with Zappos and Arup to specify high-speed UniSort XV sortation systems and reconfigure conveyors to increase speed and optimise automation for receiving, pre-sort, put-away, picking, packing and shipping.
Zappos believes the speed customers receive an online purchase plays a vital role in whether they shop online again. Zappos made rapid order cycle time its highest priority, requiring FKI to design the system with the ability to process an order in under an hour.
When Adkins reviewed a standard design for the static-racking conveyor system, he asked: ”How much time will it take for a package to be conveyed from the furthest point on the conveyor to the packing area?” The answer was about 35 minutes but this was not good enough.
Fulfilment cycle time
”To keep our promise to our customers, we needed the ability to process an order in one hour or less,” says Adkins. FKI customised a conveyor system to cut travel time by 30 minutes – down to only five minutes. This and other system configurations brought the average fulfilment cycle time down to five hours, but with the capability to process an order in under an hour.
With the fast and efficient new system, Zappos felt confident to offer free overnight delivery on all orders, with the promise that any order received by 4 pm will be with the customer the following day. The new system also enabled Zappos to create an unpublished internal deadline, ensuring all orders received by 8 pm are on the vehicle for next-day shipping.
Adkins recalls that on a recent night, 70 per cent of all orders received between 11 pm and midnight made it to customers the next day, and the average cycle time was around 2.25 hours. Meeting customer expectations is one thing, but exceeding them is where the ”wow” factor really comes into play.
Zappos.com features inventory that is live to the customer, just as in a high street outlet. If someone orders the last pair of shoes in a size or colour and it”s no longer in stock, it”s no longer visible to online shoppers. The moment a new product, size or colour is put on the shelf, it instantly appears on the website.
To make the inventory truly ”live,” Zappos needed to get product photography onto the website instantly to allow online customers to examine products – as if they were on a retailer”s shelf.
Arup designed and built a photo lab in the fulfilment centre. An FKI Accuzone conveyor brings the first of every newly received SKU directly to the lab, where shots are taken and immediately uploaded to Zappos.com.
According to FKI Logistex project manager Dick Anderson, the new Zappos order fulfilment system includes almost every product the automation company manufactures for retail distribution and fulfilment. Working together meant Zappos had access to a single-source material handling manufacturer and systems integrator, making it easier to customise and optimise its system, while keeping to the aggressive project timeline.
When SKUs are received, a high-speed UniSort XV sliding shoe sortation system with Accuglide powered roller conveyor, routes a wide range of small cartons, shoeboxes, handbags, and other items to shrink-wrapping lanes. Packages are then redirected to another high-speed sorter for storage in the racking system.
When a customer places an order online, an employee picks it from static racking. A conveyor routes it to another UniSort XV, which distributes the SKUs to a single or multi-pack area. To create a quieter and safer working environment, Zappos chose to use a 24-volt powered roller conveyor, which operates at less than 72 dBA.
Completed packages are routed to three print-and-apply modules for automatic labelling. Ready-to-ship packages are sorted by a third UniSort XV at over 100 cartons per minute to the appropriate shipping lane and conveyed directly onto a vehicle.
FKI Warehouse Optimiser software serves as the host and graphic user interface driving the system, and was integrated with Zappos” existing homegrown warehouse management system (WMS). Answer system monitoring software alerts Zappos to any alarms or jams, and provides productivity information.
For low-speed sortation, a series of telescopic boom unloaders and accumulating loaders, as well as five UniSort IV belt-powered popup wheel sortation systems are also included. Because everything had to be floor-supported, FKI also installed eight mezzanines throughout the facility.
In October 2006, when the Zappos and Arup teams put the system to the test with extensive trials, Zappos wanted to ensure the equipment could meet strict uptime requirements before it would use it to start shipping orders – it passed with flying colours. A month later, the first orders were shipped from the new fulfilment centre. Over the next few weeks, daily shipments hit record levels, peaking at 42,000 units – almost doubling the 23,000 units shipped from the old facility.
”The sytem sailed through all confidence trials,” recalls Adkins. ”We”re running our system 24 hours a day, and we didn”t even come close to the downtime allowed.”
But according to Adkins, the tight project schedule was nothing unusual. ”The reality is that every major project that I”ve been involved with over the last 10 years is always a crunch, always a push, and always last minute,” he says. ”Having suppliers that can react to that is really important, and Arup and FKI Logistex did a great job.”
Zappos says the new system is intuitive and simple to train on, and therefore easy to drive efficiencies. It has reduced distribution and labour costs, achieved record-low order cycle times, and more than doubled shipping volumes to stay one step ahead of the company”s astronomical growth.
Zappos firmly believes that the online retailer with the best service will be the one people buy from. Evidence of its service-orientated company culture is felt by employees, investors, suppliers, and anyone else who works with them.
Although built to handle Zappos” projected 2007 capacity, FKI Logistex designed the material handling system to be easily scaleable to 2009 throughput levels. The receiving platform is two-thirds built, the singles pack area is half-built, and there are plenty of pre-built divert points on the UniSort XV sorters to tie in more lanes.