The idea that a retailer would only service a single sales channel is a thing of the past. Multiple sales channels are now the order of the day in retail and defining a picking strategy to support them is a critical competitive puzzle. Malory Davies reports.
Online shopping can seriously bloat a retailer’s inventory levels. It’s all to easy to end up with fragmented stock-holdings, conflicting demands from the separate distribution channels, and a mountain of returns to deal with.
And a key challenge in reconciling store and online distribution is how to organise the picking operation. Craig Rollason, managing director of Knapp UK, says: “Over the past few years, the retail industry has had to adapt to the changing nature of demand. Customers today value not only choice, quality and competitive pricing but also convenience, reliability and speed of service – with the ability to browse, shop, collect and return goods wherever and whenever they want.”
Edward Hutchison, managing director of BITO Storage Systems, points out that many multi-channel retailers are now picking store orders and online from the same stock rather than having siloed pick faces or facilities for each channel. “They are using more sophisticated demand planning and warehouse management systems to manage the centralised pool of stock for the different channels. Once the stock is retrieved it can than be sorted and packed to according to the channel.”
The critical issue for the retailer, says Rollason, “is how to balance capacity between online and store, while minimising costs – especially the picking and packing costs for online orders. “This question may involve some trade-off in service levels between store replenishment and home delivery, always bearing in mind that it is crucial in e-tail not to disappoint customer expectations. Retailers planning to improve order cut-off times or shorten delivery windows must be absolutely sure that their operations can deliver on these promises. Without a ‘store experience’ to fall back on, delivery of the right goods on time and with pleasing presentation is essential to avoid the cost of returns and ensure repeat orders.”
Mike Alibone, business development & marketing manager at SSI Schaefer, highlights the approach of NBTY, parent company of Holland & Barrett, which services its high street stores and their online customers from the same distribution centre in Burton on Trent. “In the DC the internet stock is managed and stored entirely separately from the stock for the retail stores, even though the same SKUs are involved. SSI Schaefer built a two-tier mezzanine floor and installed mesh-decked pallet racking beneath it. This increased the available storage space and enabled NBTY to store bulk and replenishment internet stock, in both large cartons and on pallets, at ground floor level. Zone-picking is practised on all floors. Travel between floors is via an extensive conveyor system which, as well as linking each zone, also connects all levels and culminates in a series of packing benches where the cartons have documents inserted and are sealed and labelled.”
The separation strategy guarantees stock availability for internet orders, says Alibone. It also increases picking speed of singles which, for high accessibility, are likely to have already been decanted into totes or open cartons and picked from shelving or carton live storage.
“These orders are also viewed as more time critical than store replenishments. Additionally they have to undergo a secure packaging and labelling process, involving some method of document insertion as part of the procedure. It is widely acknowledged that this is the bottleneck of any operation of this nature and the requirement for automation in this area is understandably high. By contrast, retail store replenishment usually lacks the requirement for every package to be labelled and have documentation inserted and is therefore usually a much simplified process.”
Andy Robson, supply chain solutions manager at GS1 UK, points out that technology has an increasingly important role to play in support of the operational challenges of picking stock at a more granular level. “However, the technology enabling efficient real-time stock management can only be as effective as the quality of the supporting data allows.”
Manual picking has the advantage of flexibility, but as volumes increase it quickly becomes an expensive option.
Hutchison points out that automation gives high-density storage, predictability of operations and a competitive edge in terms of hitting service levels. However, these benefits can only be realised when there is a good business case for automating a process, otherwise a company can end up with a system that lacks flexibility and will not achieve the envisaged throughputs to deliver a return on their investment.
“Where there is a high rate of picks per SKU, live storage becomes more suitable. Live Storage also offers a high-density system for order picking. You will see a smaller saving in personnel compared to automation yet the investment is relatively small so the payback period will be shorter – between 3 to 6 months. Integrating the Live Storage system with conveyors and picking technologies such as pick to light, pick to voice, barcode and wrist scanners will also increase pick rates and accuracy as well as provide a flexible system that enables a company to reconfigure its pick faces according to need,” says Hutchison.
At Holland & Barrett, says Alibone, voice-picking is used to pick single items for internet orders as opposed to pick-by-light, which has been used and is better suited in this instance to picking full, single-SKU cartons for store replenishment.
Balancing efficiency and flexibility can be an issue for omni-channel picking. “This is why it’s so important to get to grips with a customer’s order data,” says Rollason. “Only then can we design a solution that provides the flexibility that the client needs to meet volume fluctuations, but with optimum efficiency for all the elements of that solution – some of which may be semi-automatic or manual operations.”
“It is a question of cost really,” says Robson. “If there is a requirement for operations to be highly flexible, then the supporting systems that enable it need to be sophisticated enough to manage it, which obviously brings higher associated expense.
“The greater levels of automation and mechanisation that are required to enable individual item picking represent a fairly fundamental shift in how stock is managed and processed, so the measures that inform ROI will also evolve. The opportunity certainly exists however, as going through these changes ultimately allows businesses to assess and establish what the appropriate ROI should be,” he says.
Alibone points out that operations which provide opportunities for picking both internet and retail orders, combined with picking location replenishment within a single, closed system will provide the highest RoI.
“An example of such a system involving a closed conveyor loop, which delivers full carton quantities of stock to pick zones for ‘pick to tote’ retail store replenishment, and takes the residual carton quantities on to replenish internet picking locations, has been installed by SSI Schaefer for a leading clothing brand. The same closed conveyor loop delivers picked internet orders to a series of work stations to complete the packing process prior to shipment. This surprisingly simple system eliminates the need for unrequired stock to be returned to bulk storage locations, reducing handling time and freeing up locations for inbound goods.”
New technologies currently being developed could have a significant impact on picking in the future. “We’re very excited about the possibilities provided by robotic picking,” says Craig Rollason. “This technology has been under development for a few years now at Knapp and the first installation is now live at a customer site in the Netherlands. Knapp’s Pick-it-Easy Robot system uses our KiSoft Vision image analysis technology to detect the best item to pick among randomly oriented articles in a tote, based on the amount of accessible surface area. It’s incredibly fast and accurate.”
Andy Robson sees growth in the use of RFID tags, which can help provide the granular certainty required for individual item picking, though no warehouse operations are currently doing so on any notable scale.
CASE STUDY: John Lewis builds an omni-channel campus
John Lewis is making a significant investment in further capacity at its Magna Park National Distribution Centre in Milton Keynes. The addition of Magna Park 2 – a new 675,000 sq ft building connected to the existing DC via an elevated bridge – more than doubles the footprint and creates a ‘campus’ operation. With the building complete, installation of its largely automated systems – supplied by the company’s long-standing logistics partner, Knapp – is now underway. As well as a 20m-high pallet store, the new building will feature an automated handling system for hanging garments, supplied by Dürkopp Fördertechnik, a Knapp subsidiary. This new technology will enable the consolidation of clothing and small items for omni-channel fulfilment.
“The growth in omni-channel business is driving our investment plans,” says John Munnelly, head of operations at Magna Park Campus. “John Lewis achieved £1.1 billion of online sales in 2013. Considering that the 2010 forecast for 2013 was £300 million, it’s clear that we’ve had to increase our capacity at an astonishing rate. Fortunately,” continues John Munnelly, “the modular nature of our automated warehouse systems has enabled this incremental growth, but we’ve had to plan new investment beginning in January – immediately after the Christmas peak – every year since the facility opened in 2009.”
The initial Magna Park DC focused on shop replenishment but, even as plans for the new facility were being developed, burgeoning online sales led to constant revisions. “When Magna Park went live in 2009,” says Munnelly, “we were delighted that the site immediately demonstrated its stability and capacity by coping with throughputs up to 40 per cent above the business forecast at peak.”
The initial introduction of e-commerce was delivered in partnership with two third-party logistics providers but rapid growth and increasing customer demands necessitated a step change in internal capability. This has been developed at Magna Park and three additional fulfilment centres, which serve both online and store demand from a single pool of stock. John Lewis introduced direct-to-customer fulfilment at Magna Park in January 2010. Since then, the online range has grown from 30,000 to 250,000 SKUs – of which some 100,000 have come from Magna Park – and this number is set to double as Magna Park 2 comes on stream.
The transition from multi-channel to omni-channel began in 2011, as the introduction of ‘Click and Collect’ allowed customers to order online for collection in their local John Lewis the following day. The popularity of this service led to it being rolled out to over 200 Waitrose branches, and subsequently the number of collection points increased to over 500 with the addition of the Collect+ network.
Key to success is the use of the right technology, with the correct resource levels, for each part of the fulfilment operation. With peak volumes capable of being nine times those in low-demand periods, this is no mean feat. “Of course, we employ a significant number of temporary staff in the pre-Christmas period,” says Munnelly, “but the technology has to be adaptable as well as the labour levels.”
CASE STUDY: In the bag
The big challenge for e-commerce, aside from the cut off times, is how to process returns as fast as possible and get them back into the ‘order well’, says Gordon Smith, CEO of SDI Group. “This is particular acute in the apparel e-commerce sector where customers may frequently order 2-4 items – perhaps different sizes and colours – to buy just one product. It often gets forgotten about but returns can account for 25-30 per cent of merchandise handled. There’s a challenge to make money out of this because it’s expensive to do.”
“We are seeing more and more e-commerce and fashion businesses looking to invest in specialist centres for returns processing, trying to get product back on the shelf, or ‘virtual shelf’, as quickly as possible and without duplicating stock. In a fast fashion world, retailers are very conscious of the fact that if you don’t get a fashion item back, processed and on the shelf quickly it may not sell. And considering about two thirds of online fashion items are returned, dealing with returns efficiently is essential to maximising the margin.”
He points out that returns is a strong area for the new MonaLisa hanging pouch system which enables, for example, a hanging garment and shoes to be kept together using a zip up bag. “The overhead sortation system allows both hanging garments and boxes to be stored in dynamic picking loops. They can be accessed rapidly, whenever an order is called off by the WMS. Bags are transported by the overhead technology to automatic packing stations.”
CASE STUDY: Alpheios chooses Pcdata’s PickCart
Pcdata is to install a PickCart system at Alpheios – one of the largest professional cleaning businesses in the Benelux.
The Alpheios distribution centre is located in Hoensbroek and a second centre is currently being built. A larger second centre is necessary as the total number of daily orders is growing both online and off line. Due to this growth Alpheios is in need of a faster and more efficient pick system.
Alpheios would like to fill and ship and orders within 48 hours of receiving that order. In addition to the implementation of a new warehouse management system and the introduction of a bar-code scanning system, Alpheios has also chosen Pcdata’s PickCart to improve order picking quality, efficiency and productivity.
PickCart enables the picking of multiple orders in one go around the warehouse, meaning that products can be picked and shipped faster and more efficiently.
Originally printed in Logistics Manager 11/2014
