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Archives for September 2016

10 Ways to Achieve E-Commerce Distribution Success, Part 7 of 10 – Manage Parcel Shipments Effectively

By Ian Hobkirk | 09/20/2016 | 10:15 AM

September 20th, 2016

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 Parts 1 through 4 of this ten-part series, I covered the four basic tactics: Create a Forward Pick Area, Setup Effective Replenishment, Determine Overall Pick Strategy and Determine the Optimal Pick Methodology. Parts 5 and 6 introduced the first two Intermediate Tactics: Practice Real-Time Warehousing and Optimize Packing. This blog, Part 7 is about how to manage parcel shipments effectively.

 

 TACTIC #7: MANAGE PARCEL SHIPMENTS EFFECTIVELY

 

With increased e-commerce come increased levels of parcel shipments. The choice of parcel carriers in the United States is generally limited to two main providers: UPS and FedEx, with some shipment profiles also lending themselves well to the United States Postal Service (USPS).  Among shippers, the choice of which carriers to use is almost a religious debate. For every shipper with a strong preference for one carrier, there is another shipper with the same preference about the opposite carrier. Horror stories abound about “the time we switched to the ‘other’ carrier”, and why we switched back.

 

Part of the reason for such differing opinions often comes down to the strength or weakness of the shipping manager’s relationship with the parcel carrier’s local account manager. The speed with which a carrier acts to resolve problems, and the perceived level of attention from the carrier, often factor heavily into a shipper’s choice. Additionally, shippers may go for long periods of time without aggressively renegotiating rates. Then, when they introduce the competing carrier and give them an opportunity to bid for the business, the new carrier submits extremely aggressive rates in an attempt to unseat the incumbent. This can lead to the perception that the shipper had been taken advantage of by the incumbent carrier. In reality, both major parcel carriers tend to get complacent when a shipper does not aggressively negotiate for better rates on a regular basis.

 

Dynamic Multi-Carrier Rate Shopping

To effectively deal with this oligopoly, I often recommend that shippers divide their shipments between UPS and FedEx, rather than giving one carrier all of the business. This forces both carriers to constantly be “on their toes” to offer competitive discounts, and allows shippers to determine the best carrier for each parcel on a shipment-by-shipment basis. To do this effectively requires the use of multi-carrier manifesting software. Rather than having separate computer terminals for both UPS and FedEx manifesting, these systems allow each parcel to be quickly shopped against rates from both carriers (and the USPS in many cases), and select the lowest cost provider based on the shipment characteristics, destination, and service level required. In a matter of seconds after weight capture, the appropriate carrier can be selected and a shipping label can be printed, from one terminal and one label printer. Manifesting software can interface with the WMS or ERP systems to receive shipment data and transmit tracking numbers and other data in a timely fashion. Multi-carrier rate shopping can reduce freight spend, improve manifesting efficiency, and reduce the number of terminals and other hardware required on the warehouse floor.

 

Parcel Invoice Auditing

In addition to making effective carrier-selection decisions upfront, it is just as important for companies to carefully audit their parcel invoices after the fact. For many firms, this is a daunting challenge. Parcel bills are complex by their very nature. In addition to ensuring that the correct rates and discounts have been charged, a single parcel shipment can have a maze of confusing accessorial charges attached to it, which may or may not be valid. Duplicate shipments may be invoiced. The guaranteed service level may not have been met by the carrier. Proper auditing involves at least 34 points of validation on each shipment, including:

 

Parcel Invoice Auditing Points
1. Incorrect Rate or Discount 13. Inaccurately Billed Collect Shipments 25. Saturday Delivery and Pick-up Validation
2. Incorrect Accessorial Charges 14. Inaccurately Billed 3rd Party Shipments 26. Early A.M. Deliveries
3. Late Deliveries (GSRs) 15. Duplicate Invoice 27. Invalid Account Number Usage
4. Dimensional Weight Errors (DIMS/SCC) 16. Duplicate Tracking Number 28. Returned Service Labels not used
5. Manifested but Not Shipped (Voids) 17. Inactive Account Reporting 29. Additional Handling Charges
6. Address Corrections 18. Multiple Account Validation 30. No Proof of Delivery
7. Commercial/Residential Adjustments 19. Declared Value (Insurance) 31. Special Contract Consideration
8. Delivery Area Surcharge (DAS/Rural) 20. C.O.D.s 32. Packages Not Previously Billed
9. Extended Commercial/Residential DAS 21. Undeliverable Returns 33. Chargebacks
10. Fuel Surcharge 22. Weight Accuracy 34. All Miscellaneous Charges
11. Minimum Net Charge 23. Large Package Surcharge  
12. International Import and Export 24. Late Payment Fee Visibility  

 

Companies that have invested time into a meticulous auditing process generally find that they are able to uncover a surprising number of errors and recover no small amount of funds. However, the act of checking each of these 34 points can be a never-ending task that consumes a tremendous amount of administrative resources. Many companies choose to outsource this function to a third-party auditing firm that specializes in parcel billing. These firms often work on a contingency basis, and only bill their clients for a percentage of the funds they are able to recover.

 

In the next installment of this ten-part blog series we’ll move on to the Advanced Tactics, starting with: Pick-to-Shipping Container.

10 Ways to Achieve E-Commerce Distribution Success, Part 6 of 10 – Optimize Packing

By Ian Hobkirk | 09/13/2016 | 7:06 AM

September 13th, 2016

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 Parts 1 through 4 of this ten-part series, I hit on the four basic tactics: Create a Forward Pick Area, Setup Effective Replenishment, Determine Overall Pick Strategy and Determine the Optimal Pick Methodology. Part 5 introduced the first Intermediate Tactic: Practice Real-Time Warehousing and this blog, Part 6 details how to optimize packing.

 

TACTIC #6: OPTIMIZE PACKING

The packing operation is often the biggest area of inefficiency that still remains when distribution centers convert to higher levels of e-commerce. Packing requirements often creep up over time, and since the evolution is gradual, companies often initially address the needs with manual processes that simply proliferate as volumes increase.

 

There are four levels of packing automation which companies often go through in their evolution.

 

Evolution of Packing Methodology: From Manual to Fully Automated

 

Manual Packing

 

 

 

 

 

 

 

Specialized Packing

 

 

 

 

 

 

 

Semi-Automated Packing

 

 

 

 

 

 

 

Fully-Automated Packing

 

 

 

 

 

 

 

Manual Packing

In manual packing environments, large pack stations are utilized, each staffed by a worker who performs all of the various packing and shipping functions themselves. While having a greater breadth of ability, this worker usually becomes a “jack of all trades,” and is unable to execute the packing process in a very efficient manner.

 

As the image above indicates, there are as many as ten (10) steps in a packing process, and it takes a very talented worker to master all of these and be able to rapidly transition from one diverse task to another. Carton erection, order checking, dunnage & sealing, manifesting, and label printing require a highly specialized skill set. Having a single worker perform all of these functions does not lend itself well to economies of scale.

 

Additionally, with manual packing, each packing station must have a significant amount of equipment and supplies: stacks of knocked-down corrugate, case sealing devices, dunnage machines, bar-code scanners, parcel weigh-scales, label printers, and other devices. The cost of acquiring and maintaining all of this equipment can be high.

 

Manual packing is often practiced in non-real-time warehousing environments, where the absence of bar-code scanning at picking necessitates a secondary checking process during packing. This amounts to significant additional labor requirements, as well as additional scanning equipment and computer terminals at each packing station. The job requirements for the packing role also increase to a higher level of sophistication than would otherwise be required.

 

Even within the realm of Manual Packing, however, it is possible to make simple changes which can lead to process improvements. For example, one often-overlooked device in this area is the automatic tape dispenser. These units can be programmed to dispense a specific length of tape that is suited to the size carton being used. Operators push one button, and a piece of tape is quickly fed out of the machine, and applied to the parcel. Pack times are reduced as is tape consumption.

 

Specialized Packing

A natural evolution towards greater packing efficiency involves a simple division of labor into two basic roles: (a) packer and (b) manifesting clerk. In this way, the more manual aspects of packing (case erection, sealing, etc.) can be performed by workers with those skill sets, and the more information-oriented function of manifesting can be performed by another worker. Expensive equipment like scales and printers can be isolated to just the manifesting function, and overall cost can often be reduced.

 

Semi-Automated Packing

Semi-automated packing actually reduces a number of the packing steps by utilizing a “pick to shipping container” process. While Tactic #8 will discuss how this functionality can be achieved in more detail, migrating to this operating method can produce real savings.

 

Case erection is performed en masse prior to order picking, sometimes using automated carton erectors. Ideally, the parcel carrier should also be selected prior to picking. This is usually possible if a good database exists of unit weights to enable effective multi-carrier rate shopping. Once the carrier is chosen, the shipping label is applied to the carton and serves as a “carton ID label” for the life of the order in the distribution center. Two very tedious functions – carton erection and label application – can be converted to repetitive, assembly-line style functions.

 

Picking to the shipping container is usually only practical where real-time warehousing is used, and the pick transaction can be confirmed with a bar-code scan at the time of pick; this eliminates the need for a labor-intense secondary check at packing.

 

During the picking process, units are picked and placed directly in the appropriate shipping container, eliminating the need for extra handling at packing. The packing function is reduced to adding documents and dunnage, and case seal. The manifesting function is reduced to a simple weight verification and sortation by carrier.

 

Fully Automated Packing

Fully automated packing involves the use of three pieces of equipment to round out the packing and shipping process:

  •  Case sealers
  • In-motion weigh scales
  • Sortation technology

This equipment must, of course, be tied together with a well-designed conveyor system with an appropriate amount of accumulation capacity.

 

Spotlight: WCS

Managing the various devices required for fully automated packing can sometimes be challenging. If shipping label application is to be performed during packing, it is especially important for data transmission speeds to be fast. Some companies have found that the use of a Warehouse Control Software (WCS) system simplifies device management and facilitates greater communication speed. Architecturally, a WCS sits between the WMS and the machine level controls for the conveyor, weight scale, printer-applicator, and any sortation equipment that is used. To learn more about the role of a WCS in the warehouse, see this presentation: “WMS vs. WES vs. WCS, Sorting out the Truth from the Hype.”

 

 

In the next installment of this ten-part blog series we’ll move on to cover the third and final Intermediate Tactic, Manage Parcel Shipments Effectively.

 

10 Ways to Achieve E-Commerce Distribution Success, Part 5 of 10 – Practice Real-Time Warehousing

By Ian Hobkirk | 09/08/2016 | 7:20 AM

September 2nd, 2016

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 Parts 1 through 4 of this ten-part blog series, I detailed four basic tactics: Create a Forward Pick Area, Setup Effective Replenishment, Determine Overall Pick Strategy and Determine the Optimal Pick Methodology. This blog, Part 5, will focus on the first Intermediate Tactic: Practice Real-Time Warehousing.

 

TACTIC #5: PRACTICE REAL-TIME WAREHOUSING

As the complexity of a company’s pick methodology increases, the need for a real-time warehousing system to direct and confirm the execution of these picks becomes more and more important. While discrete order picking and very basic cluster picking can be managed with paper-based pick tickets, high-volume cluster picking, zone picking, and batch picking almost always require the use of a WMS to administer.

 

Wireless, mobile devices are WMS’ backbone. These devices generally feature a small computer screen where workers receive instructions, a bar-code scanner where workers can confirm that they have properly executed those instructions, and an alphanumeric keypad to enter additional pieces of information.

 

WMS serves several critical functions in the distribution center:

 

Organization of work

  • Task direction
  • Transaction confirmation
  • Real-time location tracking
  • Elimination of redundant data entry

WMS systems are usually cost justified by the labor savings they enable. For instance, labor requirements can be drastically reduced when companies transition from discrete order picking to cluster picking. This labor can be redeployed to other areas of the operation where it can be better utilized.

 

As with most forms of technology, one size does not fit all. There are over 100 different providers of Warehouse Management Software in the marketplace today, each with their own set of strengths and weaknesses. Careful attention should be given to the selection of a WMS provider. Decisions made here will have implications for years to come in terms of functionality which can be enabled in the distribution center, and the level of technical resources required to support and maintain the system. Related content, Whitepaper: “Selecting the Right WMS.”

 

Six categories of WMS vendors

I divide the WMS provider community into six categories:

 

  • Category #1: Full Features & Functionality
  • Category #2: Flexibility and Adaptability
  • Category #3: Short Time-to-Value
  • Category #4: Ease of Enterprise Integration
  • Category #5: Ease of MHE Integration
  • Category #6: Industry Focus

 

Properly implementing a WMS system can take a year or more. Generally, companies should allow the following amounts of time for this initiative:

Distribution Optimization:                             3 – 6 months

WMS Vendor Selection:                               2 – 4 months

WMS Implementation:                                  6 – 12 months

It is worth noting that for very simple operations without a lot of process complexity, WMS implementation time can be drastically shortened, to as little as two months. More companies are offering WMS in the Software-as-a-Service (SaaS) model which can facilitate shorter implementation times as well. To learn more about planning for WMS implementation, read, “The Ultimate WMS Preparation Guidebook.”

In the next installment of this ten-part blog series we’ll move on to cover the second Intermediate Tactic, Optimize Packing.

10 Ways to Achieve E-Commerce Distribution Success, Part 4 of 10 - Determine Optimal Pick Methodology

By Ian Hobkirk | 09/02/2016 | 9:09 AM

August 26th, 2016

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 4 will focus on the last Basic Tactic, Determine an Optimal Pick Methodology.

 

TACTIC #4: DETERMINE OPTIMAL PICK METHODOLOGY

Once the pick strategy has been determined, attention can be turned to pick methodology. There are many confusing terms for different types of picking, and there is not a universally accepted definition for some of them. Here’s a breakdown of each:

 

Discrete Order Picking

With this method, one order at a time is picked, start-to-finish, by one picker. Without a Warehouse Management System (WMS), this may be the only method of picking that can be practically executed in some distribution centers. Discrete order picking is simple to learn and not very prone to error. For companies used to picking large-cube orders, this method may be very effective; there simply may not be a good way for a picker to transport more than one order around the warehouse at any given time. However, discrete order picking is colossally inefficient for small- cube item picking. To pick five orders, each of which might fit in the size of a shoe box, a worker must make five separate trips around the entire warehouse. Walking is excessive, and labor costs are as well.

 

 

Advantages:

  • Simple for operators
  • Less error prone
  • Little/no technology required
  • May be the only practical method to pick very high-cube items

Disadvantages

  • Very high levels of walking
  • Operators return to home-base after each order is picked
  • Each order requires a trip through the entire warehouse

 

Cluster Picking

Moving from discrete order picking to cluster picking is one of the single greatest leaps forward in efficiency that a company can take in the distribution center. With cluster picking, multiple orders at a time are picked, start-to-finish, by one picker. As the orders are picked, they are placed in discrete, separate containers. In the analogy mentioned previously, the same five orders now involve only a single trip through the distribution center. Cluster picking is much easier with a real-time warehousing system where pickers are directed in an efficient pick path, and are told exactly what to pick and where to put it. However, good results are still attainable with paper-based systems, using batch pick-tickets. Paper-based cluster picking is certainly more error prone than discrete order picking, so if automatic data capture like bar-code scanning is not used to ensure accuracy, then secondary checking will need to be employed.

 

Advantages:

  • Dramatically reduces walking
  • Possible to do on a limited scale without a high degree of technology
  • Each order is only touched once
  • Orders are ready-to-ship as soon as picking is done

Disadvantages

  • Hard to pick a large group of  orders without real-time instructions
  • Orders may travel significant distances without any picks being performed
  • Travel distances are excessive in large warehouses with many SKUs
  • Increased likelihood of errors

 

Zone Picking

Zone picking involves multiple pickers each picking separate portions of the same order. It is often deployed in conjunction with cluster picking, where multiple pickers each pick separate parts of multiple orders at the same time. Zone picking works best when there are a variety of types of SKUs or very large SKU sets that orders can be drawn from. There are two flavors of zone picking:

 

Pick-and-Pass, or sequential zone picking, involves one picker “passing” a group of orders to another picker who then performs additional picks for the same orders. The product is still placed in a discrete tote or carton that is handed off to multiple picks in sequence until the order is picked to completion. Pick and pass can be used with cart-based picking (the entire cart is passed to the next picker) or with conveyor-based picking. With the latter strategy, more complex zone routing can be employed, where totes can skip over zones where there are no picks for maximum efficiency. Zone picking must almost always be deployed with a real-time warehousing system.

 

Advantages:

  • Reduces walking in larger distribution centers
  • Each order can only be routed to zones where there are picks
  • Orders are ready-to-ship as soon as picking is done

Disadvantages:

  • Almost impossible to manage without real-time warehousing
  • Zone routing can only be done with complex conveyor systems
  • All of the SKU’s in the order travel through the entire DC

 

Pick-and-Consolidate, or simultaneous zone picking, involves multiple pickers picking parts of the same orders at the same time. The items ore picked into discrete totes which must then be married up or consolidated in a secondary process downstream. This method is well suited for situations where the total cube of an order is fairly large, or where there is a wide disparity in characteristics amongst the various SKUs in an order. For example, there may be some large, non-conveyable items on an order along with smaller conveyable items. Each type of SKU would be picked in its own zone and the entire order would be married up at the end of the process.

 

 

Advantages:

  • Reduces walking in larger distribution centers
  • Each order can only be routed to zones where there are picks
  • Orders are ready-to-ship as soon as picking is done

Disadvantages

  • Almost impossible to manage without real-time warehousing
  • Zone routing can only be done with complex conveyor systems
  • All of the SKU’s in the order travel through the entire DC

 

Batch Picking

Batch picking involves picking the entire quantity of a SKU, which is required for multiple orders, and then sorting it to those individual orders in a secondary process. Batch picking works best in a “few-to-many” environment, when there are a small number of very fast moving SKUs which are required for a large number of orders. For instance, a picker may pick an entire pallet of product, bring it to a sorting area, and then perform a “put” process and distribute the items to each of the outbound orders. Batch picking can be used in conjunction with other forms of picking as well. For example, a picker can perform a cluster pick – picking ten orders simultaneously into discrete containers – and then drop those orders at a “put” station where a few fast moving SKUs are put to the orders.

 

 

 

Advantages:

  • Reduces walking in larger distribution centers
  • Each order can only be routed to zones where there are picks
  • Orders are ready-to-ship as soon as picking is done

Disadvantages

  • Almost impossible to manage without real-time warehousing
  • Zone routing can only be done with complex conveyor systems
  • All of the SKU’s in the order travel through the entire DC

 

Related Content: “Distribution Center Design Series, Part II – Developing a Throughput Design Tool and Determining a Pick Strategy.”

 

In the next installment of this ten-part blog series we’ll move on to cover the first of three Intermediate Tactics: Practice Real-Time Warehousing.

 

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

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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