All the talk in the retail market is about going omni-channel – but before you can get there you need to have a strategy for picking orders. Are we on the verge of an omni-picking world?
Goods might have been coming into the warehouse by the container-load since the 1960s, but the way they leave has been changing dramatically in the face of developments in technology and changes in consumer buying patterns.
In retail, back rooms have been turned over to selling space so increasingly goods have to leave the warehouse ready to go onto the shelves. And, of course, there has been the growth in online shopping. These changes are having a dramatic impact not only on how orders are picked but where. On top of that the industry has seen the dramatic growth of technologies such as voice picking. VoiteQ, the Vocollect voice technology reseller, reported a 15 per cent rise in sales last year.
Bruce Stubbs, industry marketing director at Intermec, points out that picking accuracy is of growing importance to managers as visibility increases over the cost to the business through measures such as The Perfect Order Index.
“Managers believe mis-picks to be an ongoing issue within the workplace and one that could be avoided through new technology and processes,” he says. “When it comes to managing picking accuracy, the vast majority (90 per cent) of managers in the UK claim to measure the cost of mis-picks in some form. However, with over half (52 per cent) of companies reporting a pick rate of less than 97 per cent – there remains a huge opportunity for cost savings to be achieved.”
However, improving picking accuracy can require a leap in cost, warns Edward Hutchison, managing director BITO. “Moving to pick by light, for example, while saving a lot of time and giving a lot of accuracy can be expensive. Many companies are therefore seeking low cost improvements wherever possible – a flow shelf with good labelling rather than a traditional static shelf, for example. This allows the creation of picking zones so rather than have one picker trawl round the warehouse with a trolley on a five mile track, the picker can look after a section of the warehouse, he can pick out of that zone and then pass the order to the next zone.
“Ultimately a company may wish to go to a pick by voice or pick by light system but they can spread their investment over several years with an initial investment in flow racking, with good labelling before moving to the new technology when it is appropriate.”
The growth in online retail has had a dramatic impact on how picking is organised.
Balancing the requirements to pick for store and pick for online needs careful evaluation, says Andrew Southgate, managing director of Zetes. “Companies who want to operate an ‘omni-channel’ business model can find it is very difficult to balance the two within a single warehouse. Instead, it may be more cost effective to consider single approaches for each with separate warehouses – one for e-commerce and one for traditional retail distribution, but with complete data visibility between the sites. Although customers understand the need for a more joined up, omni-channel approach, in practice they are finding traditional retail store fulfilment needs to be separated from e-commerce fulfilment because the operational processes, technology and equipment required to operate each efficiently can be radically different.”
Andy De’Vere, managing director shared user network, at NFT, agrees. “Store picking remains at distribution centres, while the online function is completed at store. This is due to product range availability. With the product ranges available online, setting up dedicated depot picking would be very costly and would potentially lead to more food waste. It is an ongoing challenge to find a solution that suits the consumer and the retailer alike.”
With online retail picking largely managed by the retailers, De’Vere argues: “3PLs need to come up with cost-effective solutions to safeguard the future and create sustainability. Currently, the operation, in the main, is done at store, with a member of staff simply picking from the sales aisles. We need to consider how this can be made more efficient and can further meet retailer needs in the long-term.”
There is also the issue of returns. Stubbs says: “Online retail has led to a surge in returns to the warehouse, meaning workers face a huge challenge to minimise the cost of returns.
“Free postage on returns, for example during the Christmas period, is a big driver for online sales, yet the cost of this to e-retailers and the disruption it can cause to the supply chain can quickly become crippling without the right tools and processes in place.
“If caught off-guard with high returns, retailers can often accumulate significant losses, as distribution centre workers who are normally focused on meeting current shipping deadlines are challenged to address getting returned goods back into the supply chain in a cost effective manner. So increasing initial pick accuracies through proven methods such as voice picking is driving these accuracies and reducing returns.”
There is still work to be done in developing technologies to handle this changing operational environment. Andy De’Vere says: “In varying degrees, the WMS systems are not compatible with store EPOS systems and more integration is needed in the future. However, the explosion of online is here to stay, so IT and logistics professionals need to seek a more robust solution to create a more seamless picking function operation across both store and online.”
“The current system cannot be sustainable for the retailers in the long term without support from the distribution networks. Taking the cost of the staff member picking the items and the delivery to customer at an average cost of £5.50 per delivery, it’s plain to see that a solution is needed, and the sooner the better from a financial perspective.”
And, says Hutchison: “Multichannel retail has led to a mix of adjustable shelving for slower moving items and carton flow racks, which offer a greater density of pick locations within a short distance. Boltless versions of these systems are popular because they can be quickly and easily configured or reconfigured to handle the large peaks experienced in the online sector.”
The average mis-pick currently costing £14, says Stubbs who highlights the importance of the right mobile computing and data capture tools to deliver productivity and accuracy.
This can be a challenge when workers are temporary and demand is highly seasonal. He points to Hardware as a Service (HaaS), the leasing of devices to businesses, as one way to manage the cost and ensure optimal returns processing results.
“The Perfect Order’ metric also remains key to providing visibility onto picking accuracy and subsequent performance. For those companies using ‘The Perfect Order’ metric, opportunities for increased savings are clear, with complete shipments (43 per cent) seen as the most profitable to the bottom line,” he says.
Case study- What price automation?
Some retailers have attempted to negotiate the unpredictable nature of the market by significantly increasing the number of SKUs available online compared to those held in store.
However, says Phil Steeds, sales director at TGW Logistics, “this approach has a significant impact on the warehouse and internal logistics solutions. It has the potential to increase the cost per pick across the whole operation if the incumbent solution has not been designed with this scenario in mind.
“In some cases retailers sub-contract or relocate their entire e-tail channel – possibly to a 3PL operator. This may force the retailer to hold stock in more than one location.
However, he argues that it is possible to manage an efficient multi-channel operation from a single site. Fitting out a new or existing warehouse with automated warehousing equipment could provide the answer.
“Automation can be of great benefit to a multi-channel operation as the various automated technologies can facilitate the picking, sequencing and dispatching of orders in several load types. This includes pallets, cartons, totes and parcels for e-tail.”
Keith Rogers of The Logistics Business points out that it is in the automation arena that we have witnessed most recent innovation to increase pick productivity; driven mostly by the high number of internet fulfilment sites that have been developed within the past five years.
“Their solutions are constantly being enhanced, with recent developments around goods to man solutions allowing far more flexibility in terms of the physical size that can be included within the range.”
But BITO’s Edward Hutchison, warns: “Opting for an automated solution will generally require a large initial outlay. While automation will bring big increases in productivity and personnel savings, the size of the initial investment will mean any payback will be on a longer term basis.
“To avoid the risk of operating a costly white elephant automation should only be introduced when the business case justifies it. The flexibility of the system will also need to be considered carefully by companies seeking a solution that can meet possible changes to their operations.
“The tipping point towards automation moves closer when personnel costs are higher or indeed personnel are difficult to find or when there are high volumes that demand accuracy. This also leads to a more favourable case for automating small parts storage and retrieval.”