July 26 2006 10:28 AM

Two holiday seasons have passed where e-business � especially B2C � received a lot of press. There were good points and there were horror stories. What was one of the most important lessons learned? Back-end considerations � the functional aspects of the operation � could not be ignored. Having a really attractive, interactive Web site was insufficient. If the supply chain did not communicate about SKU requirements, no combination of clicks and searches would relieve the pain associated with having the wrong product, a defective product or no product at all. The axiom du jour? You cannot solve the distribution and fulfillment of tomorrow with yesterday�s technology.
Even though surveys estimate that 80% of e-commerce customers had positive experiences shopping online during last season�s holidays, companies should be very worried about the negative repercussions generated by the other 20%, a princely amount of business to say the least.
Total Operations
When e-businesses have as much enthusiasm for their total operations as they do for their sales and marketing efforts, disgruntled customers will not take as much time during the evening news to discuss their bad experiences.
Total operations, you say? Yes, e-business needs to understand total operations: how all the functional areas work together to create an internal synthesis that optimizes the organization. Total operations has six elements: warehousing, distribution/logistics, manufacturing, maintenance, quality and organizational excellence/revolutionary leadership.
Shift in SKUs
Distribution is experiencing a major shift in the type of activities required to fill customer orders. The shift, plainly said, is from traditional full-case picking to each � or broken case � picking. As the depth and diversity of available SKUs increases, typical distribution center (DC) customers order more SKUs but reduce the quantity of items per SKU. The reduction in quantity per SKU ordered has increased order frequency and placed pressure on the distribution networks. They must cut lead times for order fulfill-ment substantially to enhance the power of the supply chain. The reasons for the shift in requirements include:
� Increased awareness of the inventory carrying costs � until the final consumer purchases the product, the organization must insure, provide space for it and protect it. These costs add up quickly, not to mention the costs associated with employees removing product for return, repackaging it and shipping it back.
� Rise in space costs � even e-businesses must have warehouses, so space maxi-mization and storage minimization are just as much factors for them as they are for brick-and-mortar businesses.
How is the shift reflected in e-business planning? Distribution must be prepared for the material handling considerations of handling eaches. The shift is critical for several reasons. Orders consisting of eaches create challenges in nearly every functional aspect of the DC. Picking, transporting, replenishing, and controlling are all impacted. The size of an each is typically much smaller than that of a case. Traditional handling media � for pallets and cases � is simply not designed to accommodate the change in physical characteristics.
You might be thinking, �but we�ve picked eaches from A-frames, pallets, flow racks and carousels for a long time now� � so why all the gloom and doom? The question for many DCs is not whether they have the technology and equipment to pick eaches � most do � but whether the mix of these technologies and equipment meets the specific distribution requirements, especially during peak times.
To determine the best mix of picking equipment, organizations must do the following:
1. Develop a strategic plan, which acts as a detailed review of all shipping activity over a planning horizon
2. Review technology
3. Establish, communicate and review picking rules
4. Determine equipment requirements by applying throughput information on lines, quantity, cube and SKU dimensions
Distribution Layout
How are companies re-envisioning distribution for e-commerce? One bookseller with brick-and-click capability developed a real-time WMS-driven system that makes definite distinctions between store product and online orders. When orders come in, they are broken into five categories, illustrated in Figure 1.
Order pickers are assigned zones and pick-to totes. Almost 75% of a million SKUs are stored in shelving over three levels; the velocity of the SKU (e.g. how fast it moves through the facility) determines the slotting layout. �A� movers � fast-moving SKUs � are shelved in the middle row with the slower movers to the top and bottom. Slotting an e-distribution center is vital to maintaining productivity and increasing pick rates � the speed of �e� would dictate nothing less. Because piece pick demand is relatively low for SKU, shelving offers a lower cost alternative than a carton flow rack or a horizontal carousel for small- to medium-sized products.
Totes are then conveyed to one of three packing stations: one for online singles, another for online multiples and the third for store orders. Conveyance systems must be designed for handling totes rather than larger, heavier boxes. Roller conveyors, belt conveyors and accumulators are all good choices for smaller, lightweight items in totes that must be transported quickly through the facility.
Sortation is a mission-critical facet of an e-distribution center. In the book distributor�s DC, the WMS separates orders into one of the five categories above. Effective sortation means greater dock efficiencies, which in turn means organizations can get better shipping rates based on how well they sort product before it is loaded onto the truck. For DCs requiring high-speed sortation, tilt trays, sliding shoe sortation and cross-belt systems offer the greatest justification. These high-volume systems are often excellent choices for big e-commerce DCs. For the book distributor, a combination of tilt tray and cross-belt sortation provides the necessary volume and speed to serve customer and store requirements.
Packaging stations are configured according to the type of order in the tote (i.e. single, multiple or store), thus increasing efficiency since the station does not have to intelligently determine the size and therefore packaging requirements of the tote contents.
The book distributor�s transition to a click-and-mortar organization forced the distribution and logistics division to recognize differences between shipping eaches to a home and cartons of SKUs to their stores. A re-envisioning of their processes, satisfying both requirements, has enabled them to provide exemplary service to everyone in the supply chain.
Key to competitive advantage is adaptability; the organization is constantly reviewing past performance and asking itself, �How can I do better for my supply chain tomorrow?� As more value-added activities are migrating upstream (e.g. price ticketing or client-specific packaging is performed at the DC rather than the store) and more needs are being met for different demographics, distribution must see itself as a major player in customer satisfaction.
Robert Olsen is project manager for Tompkins Associates. He is a logistics professional with substantial expertise in global trade, logistics and information technology. For more information, please contact Tompkins at 800-789-1257 or visit the Web atwww.tompkinsinc.com.