22 SCS:E-FULFILMENT
operation would be outsourced to a 3PL and integrated
into a multi-user e-fulfilment operation, sharing facilities
with others and running alongside other e-fulfilment
operations, operating a standard set of processes. This
offers the potential for a fast and cost effective start up.
The third offering from a 3PL would be a dedicated efulfilment
operation, and that may be centred around the
processes a 3PL, such as DHL, operate or are maybe more
tailored to the retailer’s specific process needs. This could
be in a dedicated warehouse or co-located in a facility
that is also undertaking other activities. It could stand
alone, or they could be sharing the facility but operating
their own processes.
Option number four is direct to consumer. If the retailer
is looking to offer a wider range of product on the internet
than it is offering through its stores, one possible solution is
for the 3PL to organise the collection from the supplier,
linking that in with the retailer’s own stock product and
shipping out to the end consumer. In this scenario the
product never sits in the 3PL or retailer’s DC, it goes direct
from the vendor.
Multi-channel
The final option is the integrated multi-channel approach.
This is very similar to leveraging the store fulfilment DC,
except that systems have been developed so that multichannel
orders sit in with store fulfilment orders. The
benefit being that the double handling associated with
option one (ie the store fulfilment DC picks items to go into
a separate pick pack area before being shipped outwards)
disappears, so that it’s picked just once. Owen says:
“Typically, you should be expecting to gain 25-30 per cent
labour savings, but it often takes 18 months to two years of
systems development to integrate the systems.”
“Many companies will start with a basic approach, until
they understand what their needs for the market are, but
it’s only once e-commerce becomes a core competency
that companies tend to go down the integrated multichannel
route.”
Another key concern is returns. Owen believes retailers
“need to give as much thought to returns as they do their
initial offering to the market place. It’s all around how easy
or difficult you make it for customers to return goods. The
top end retailers make it as easy as possible for the
Many companies
will start with a
basic approach,
until they
understand what
their needs for
the market are,
but it’s only once
e-commerce
becomes a core
competency that
companies tend
to go down the
integrated multichannel
route.
Sophisticated systems
are opening up
more opportunities
for e-fulfilment.
OCTOBER 2008 SUPPLY CHAIN STANDARD
www.supplychainstandard.com
consumer to return their goods
andtogivethemthechoiceof
returning to a store, even if they
have ordered over the Internet.
This is particularly complex
where there are concessions in the retailer’s stores.”
An increasing demand for more efficient e-fulfilment
operations has focused attention on the potential for
automated material handling solutions. Steve Richmond
of Jungheinrich’s projects division says: “Clearly the
dramatic rise in internet shopping has forced many
retailers and their logistics service providers into a
fundamental rethink of their warehouse design. Faced
with falling distribution volumes but increasing order
frequencies, the ability to flex picking cycles and
prioritise urgent orders is critical to winning online
customers.” Richmond believes that retailers with
standard warehouse installations will be left scratching
their heads and wondering where they went wrong as
higher volumes of sales come from internet savvy
consumers who insist on next day delivery of single item
orders. He says: “As a result, traditional bulk stores are
giving way to facilities with greater numbers of picking
faces and increased picking efficiencies.”
Integrated
“High volume retail distribution centres are not suitable for
picking single customer orders,” says Paul Brooks,
divisional director at logistics services company, Unipart
Logistics. “Having said that, in certain circumstances, such
as sometimes seen in the fashion sector, if the retail DC
tends to pick in singles and each SKU is not particularly
high moving, then integrated solutions may be appropriate.
If you have a heavy collation factor then it’s less suitable; if
you have more singles then you want to align it with the
environment because you can then bulk pick and pack out
separately. If you have between two and three items per
order,thenyouaregoingtohavetohavesomesortof
forward pick location within your DC that is unique to your
multi-channel offer.”
Brooks sees e-fulfilment as one of the fastest growing
areas of business. Unipart Logistics has recently won a
contract with pet foods and pet accessories retailer, Pets at
Home, to service the e-fulfilment needs of its new online
channel which has been set up to complement the
company’s network of over 200 stores.
“With our main retail store business doing so well and
growth for the full range of our products online as yet
unproven, we were looking for a low-risk way to assess the
potential of an online offering with a great customer
experience,” says Catriona Marshall, commercial director
of Pets at Home.
Phil Steeds, sales director at TGW in the UK, sees great
potential for the application of automation within the efulfilment
operations of the online grocery retail sector.
“The only company that has made big investments in
picking solutions is Ocado, with highly automated facilities
in Hatfield. They are setting the standard for where things
are going,” he says. “However, Tesco has gone down a
manual route, picking in-store through to manual picking
within warehouses.”
But according to Steeds, “Ocado have been very focused
on how they scale things and the volumes they have
available to them, which is significantly different to what
you would get in a pick-in-store operation.”
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