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« 10 Ways to Achieve E-Commerce Distribution Success, Part 1 of 10 – Create a Forward Pick Area | Main | 10 Ways to Achieve E-Commerce Distribution Success, Part 3 of 10 - Determine Overall Pick Strategy »

10 Ways to Achieve E-Commerce Distribution Success, Part 2 of 10 - Set Up Effective Replenishment

By Ian Hobkirk | 08/10/2016 | 6:56 AM

Under increasing pressure to work faster, better, and smarter in today’s omni-channel and e-commerce business environment, companies need help getting their distribution operations up to speed with customer demands and expectations. To help, I’ve identified 10 key tactics that successful companies are employing in order to make a graceful transition to higher levels of e-commerce in the distribution center.

In this ten-part blog series I’m covering four basic, three intermediate, and three advanced tactics that will help your firm achieve e-commerce distribution success. This blog, Part 2, will focus on the second of the four Basic Tactics: Set up Effective Replenishment.

 

Tactic #2: Set Up Effective Replenishment, a Basic Tactic

Eventually, the supply of goods in the forward pick area will be exhausted. Rather than having pickers be caught by surprise when this happens, effective rules must be set up for controlled replenishment.

 

Types of Replenishment

A. Visual Replenishment: This may be the only system possible with a primitive WMS system. At certain times, designated replenishment workers conduct a visual survey of each bin, and replenish the ones which are getting empty. This method can be haphazard, as additional work is required to visually survey each bin, and notations must be made as to replenishment levels. Furthermore, if demand for a SKU is exceptionally heavy, the bin may still be depleted before a replenishment can take place.

B. Min/Max Replenishment: This system involves using the WMS or inventory control system to trigger a replenishment when the bin is depleted below a pre-set minimum level. To be most effective, each SKU or SKU family should have a different pre-set minimum, based on demand and cube.

C. Demand-Based Replenishment: Both of the above systems are predicated on the assumption that demand will follow certain patterns. Both systems can fail to prevent a bin-level stock-out if demand is unusually heavy for certain SKUs. Demand-based replenishment proactively looks at SKU demand for a given day or shift, and preemptively triggers a replenishment for SKUs with extra-heavy demand.

D. Hot Replenishment: Even the best of systems will occasionally experience an unexpected shortage due to inventory inaccuracy and other imperfections. When this happens, it is helpful if pickers can trigger an automatic replenishment of the shorted SKU to correct the problem.

E. Top-Off Replenishment: At slow times during the day, bins can be proactively “topped off” to their maximum levels to get ahead of schedule. This can be done visually or with system-driven routines.

 

The Importance of Replenishment Synchronization

More advanced forms of replenishment require close synchronization of work between pickers and replenishment workers. For example, decisions must be made as to what event will actually trigger a minimum-quantity replenishment. Will the replenishment be ordered at the exact moment when the bin is depleted below minimum levels? Or will the replenishment occur at the moment when an order is waved for picking which is expected to eventually deplete the bin below minimum? If the replenishment occurs before the bin is actually depleted, the new product being brought in may not fit in the designated bin. If the replenishment occurs too late, then the bin may be out of product when a picker arrives. The same situation can occur if a demand-based replenishment occurs too early.

One way of rectifying this is to allow the same SKU to have multiple locations even within the forward pick area. At the same time, a certain percentage of bins are intentionally left empty when this area is slotted. If a replenishment is performed which will over-fill the primary bin, then the product is instead deposited in an empty bin, which becomes a secondary location for that SKU. The original primary location can then be picked to empty, and is added to the queue of available bins.

 

A Word of Caution…

Many WMS systems struggle mightily with the concept of multiple locations for the same SKU in a single zone, and cannot manage the replenishment logic. A simple method for dealing with bin overages is to simply have an informal area either overhead or on the floor adjacent to the bins to allow overflow product to be placed. The WMS “thinks” the product is all in the primary pick location, but pickers must be alert to check these overflow areas for product from time to time. Related content, Whitepaper: “Selecting the Right WMS.”

In the next segment of this ten-part series we’ll look at Basic Tactic #3, Determine an Overall Pick Strategy.

 

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About Ian Hobkirk

Ian Hobkirk

Ian Hobkirk is the founder and Managing Director of Commonwealth Supply Chain Advisors. Over his 20-year career, he has helped hundreds of companies reduce their distribution labor costs, improve space utilization, and meet their customer service objectives. He has formed supply chain consulting organizations for two different systems integration firms, and managed the supply chain execution practice at The AberdeenGroup, a leading technology analyst firm.



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