Monday 20th Nov 2017 - Logistics Manager

The customer is always right

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Across the globe, shifting consumer behaviour is driving developments in the supply chain. And nowhere is it more visible than in the order picking market. Alexandra Leonards explores…

The expanding needs and wants of the international consumer are reshaping the way Europe handles picking in the warehouse. To meet these growing demands, warehouse operators are striving for more efficiency, flexibility, and a balance between the two. And they’re looking for these heightened qualities in their order picking systems.

This article first appeared in Logistics & Supply Chain, April 2016.

This article first appeared in Logistics & Supply Chain, April 2016.

“Changes in consumers’ behaviour allow new players to get into the business and others to increase their share,” says Peter Totz, director business consultancy at SSI Schaefer.” The key developments are therefore: how to adapt the changing market, staying efficient and flexible.”

Consumer satisfaction and loyalty is paramount for retailers. And the efficiency of a warehouse picking system can influence a customer’s decision to choose one retailer over another. It is a simple and reliable operation that is most likely to attract and preserve customers. “This is more important than bottom line pricing,” says Darrel Williams, region director for Northern Europe and South Africa at Honeywell Vocollect Solutions.

But it is difficult to keep things simple in an industry that has no choice but to open its arms to increasingly complex services. The pressure felt by retailers trickles right down through the supply chain.

“The advent of the multi-channel and omni-channel environments has created many challenges for retailers in terms of picking operations,” says Williams. “Gone are the relatively simple days when a few orders went to a few stores.”

The range of choices consumers now have when it comes to shopping, especially online, is vast – and this is a big challenge for the industry.

“Now orders are going to store, direct to the home of the consumer, to the retail outlet for click-and-collect and even to various pick up points, to facilitate the life of the customer – all with the aim of earning customer loyalty,” adds Williams. “Factors driving changes in the European market are largely based on customer demand/expectation and the technology available to them.”

Consumers now expect a cheap and sometimes free same day delivery service, and a convenient click and collect option. And this isn’t set to change any time soon.

“The visibility and availability of commodities across the European economic region means that investment in process and technology to satisfy demand on an unprecedented scale is now a must,” says Williams.

The omnipresence of tablets and smart phones has completely reshaped the way we purchase.

“The buy profile shows us that purchases are being made much later in the evening – engendering better visibility and availability of systems and later cut off times for picking and delivery, all adding yet more pressure to daily warehouse operations,” says Williams.

Across Europe, picking using scanners and hand held terminals is still the method used by most companies. But according to Eric Carter, solutions architect at Indigo Software, voice systems are beginning to gain ground.

However, despite growing customer expectations, the amount of investment retailers are willing to put into their picking operations is something that varies across Europe.

 

business case

“In some parts of Europe, due to the lower cost of labour, companies may be less interested in making investments in efficiency improving technology because they believe there is a poor business case,” says Carter. “In these situations, companies have a tendency to introduce quality checks as a final monitoring stage in a process rather than build high quality operations into a process.”

In some European countries there is a perception that investment in picking systems is unnecessary. This is because they believe it is possible to achieve the right performance levels by increasing workforce numbers.

“However in the long term this is a false economy because one of the significant benefits of a picking system with automatic data capture comes from having a full audit trail, giving the ability to verify when and where a product was picked and by whom,” says Carter.

Peter Totz says that goods-to-person technologies will soon be at the forefront of the European market.

“We will have technologies to flexibly cope with fast movers and the extended range of goods in an efficient way,” he says. “In our European market goods-to-person technologies will take more and more of the share in picking now, and later on will spread to the other markets in the world. This gives good prospects to the European industry.”

A presence that is felt strongly across Europe is retail giant Amazon. And this is magnifying the already prevalent pressure retailers face from customer demands.

“In addition to customer satisfaction, the pressure is on retailers because global companies like Amazon are extending their two-hour prime delivery services around the world to all the big cities, allowing members to have items delivered free within a couple of hours; this process is only going to grow and expand that, as these global companies open more distribution centres in more locations; putting the pressure on all different types of retailers to improve their processes and do it in a cost effective way,” says Mark Thomson, retail industry director EMEA at Zebra Technologies.

Efficiency and flexibility are both important in a warehouse environment. But is it possible for these two vital qualities to co-exist in picking operations?

Neil Weightman, commercial director at iForce, thinks it’s possible – but he recognises that finding the right balance is difficult. Ending up with a trade off between efficiency and flexibility is not uncommon.

“It is important that picking operations have the right mix of efficiency and flexibility – very efficient picking methods aren’t usually very flexible,” says Weightman. “Conversely, very flexible picking methods are usually somewhat more inefficient so it’s important for manufacturers to get the balance right.”

He says that, in general, heavy investment in technology will result in a growth in efficiency – provided you have critical mass and similarity of product mix. However, once that technology has been installed, to then ‘tear it up’ and choose another operation could be expensive. So choosing a flexible picking solution can save cash as well as keep up with changes in the market.

“Careful consideration also has to be given to the technology that is installed and the products it will be working alongside,” he says. “For instance, you can invest in a state-of-the-art automated sortation system, but if it can only handle 90 per cent of your volume, for whatever reason, and the other 10 per cent has to be manually carried around, that can offset any efficiency gains.

“This is why planning ahead and anticipating any changes to product ranges is key.”

There isn’t, as a rule, a trade-off between productivity and flexibility in the market – it’s a matter of investment, says Zebra’s Mark Thomson.

“It’s a difficult one,” he says. “Many tier-two or tier-three retail warehouses are not using the latest process technologies, because they’re managing the current volumes with the pure scanning and printing technologies, which is fine for now.”

But as these businesses and operations grow – they will need to start picking more individual items. And this means potentially changing the warehouse’s existing order picking systems. “The older technologies won’t work anymore and they will have to look into updating their technology processes to the likes of voice, automation, pick to light etc.,” says Thomson.

Technologies like automation may demonstrate a high level of efficiency but are sometimes not very adaptable.

“Some technologies such as automation, provide high efficiency in highly repeatable and predictable processes, – but are very limited in their ability to adapt to any change without significant cost or disruption to service and indeed seasonal, promotional or “one off” activities are often not possible,” says Honeywell’s Darrel Williams. “In many cases the initial investment and set up cost limits automated technologies to markets which are believed to be stable and predictable for the mid to long term.

“Who could have imagined the changes in logistics operations that have come about with the growth of the multi-channel/omni-channel environments even two-three years ago? It’s not easy to modify your physically installed systems to quickly respond to changing customer demand.” In a dynamic industry that serves ever-changing customer demands, automation can be a risky business.

It is the companies that are able to adapt to these constantly moving markets that are the most flexible, and efficient.

“Today’s successful companies are those that embrace and capitalise on evolving business challenges and provide a service that satisfies today’s and tomorrow’s demands,” says Williams.

There are lots of different factors to consider when trying to find that balance between an efficient order picking system and a flexible one. Cost efficiency is a top priority for many retailers and warehouse operators – with return on investment (RoI) being a key branch of this. With investment in picking systems, there are opportunities for companies to improve the RoI.

“In a very harsh way, if they don’t improve their picking cost effectiveness, then they will start to have lower margins and possibly go out of business,” says Thomson. “The pressure from a margin perspective is that it’s huge at the moment, and we’re seeing retail purchases increase by around 3 per cent a year, across online and in-store, and the margins and profits on those sales are flat at best.

“This is difficult for retailers because it doesn’t, on it’s own, give them opportunity to drive new investments.”

However, it is investment in new picking and fulfilment technologies and systems that can prompt better visibility of stock. They can allow for picking individual orders from stores – which will in turn improve their effectiveness and profit margins on online orders.

“This is the fastest growing side of their business and that’s where they need to deliver cost improvements,” he adds. “Say companies are picking more than six million orders, if they can save a pound per order, that’s £6 million.”

According to research by The British Retail Consortium, by 2020 there will be 900,000 less jobs in retail and many stores will disappear.

“That is true if the stores don’t adopt and adapt to the more digital customer who wants to have that visibility of stock,” says Thomson. “Customers want to sit in a Starbucks and order a product, and then be told it’s available at a store three doors down; the type of visibility that stock management systems in particular need to be delivering to customers, there needs to be this immediacy of visibility.”

 

 

Boosting efficiency with WMS

Evans Vandodine, the manufacturer of janitorial and livestock protection chemicals, chose Indigo’s warehouse management system for its Lancashire warehouse. The company wanted to tackle operational efficiency and customer service.

Moving from a paper-based system to Indigo’s system had a big impact on both the business’ performance and its ability to scale operations. Prior to the installation of the software, Evans Vanodine would receive customer orders manually, enter them into the sales system and print the associated picking notes. This system didn’t work for the company, because there was no way for stock levels to be accurately checked once an order had been confirmed – and at the time, picking was managed according to regional delivery priorities.

The inefficient arrangement meant that pickers were unable to check stock availability before commencing, resulting in time wasting. 20 per cent of deliveries were shipped incomplete – something that, according to the company, the protection chemicals industry is used to.

“We have over 2,000 finished goods SKUs which could be located in any of the 3,500 pallet spaces in the warehouse,” says Anthony Evans, Evans Vanodine’s systems director. “Now we know exactly where all stock is located and what quantity is available for sale in real time.

“Once a customer places an order, we know straight away whether we can fulfil all their requirements and can inform them accordingly.”

The WMS is automatically and permanently updated with stock allocations – which means incomplete shipments are avoided. The company now achieves 98 per cent successful ‘on time in full first time’ deliveries – an increase of 18 per cent on their original rate, despite the large number of individual Stock Keeping Units (SKUs) in the warehouse.