This appeared in the November/December, 2018 issue of PARCEL.
E-commerce sales in North America will continue to climb over the next five years, with some projections showing an average growth rate of nearly 15% annually on the way to $821 billion by 2021, according to figures from eMarketer.
Online retailers have spent the past five years building up capacity for this age of the new consumer, but the parcel industry is now playing catch-up in its ability to efficiently move the onslaught of online orders through courier and postal networks.
While there has been significant investment in speed by e-commerce fulfillment centers, a changing parcel stream with an increasing number of smalls and incompatibles is having an adverse effect on operations. Consumer expectations also are affecting delivery services as online buyers seek greater flexibility, such as order consolidation and vast delivery times.
Couple that with online retailers who want to take orders as late in the day as possible and still make same-day shipping, and the picture of a parcel industry faced with how to manage continuing service-level demands becomes clear.
Labor shortages, a lack of available land for facility expansions, and market disruptors such as UberRUSH have fulfillment centers turning to new and, sometimes, nontraditional strategies to increase capacity and improve throughput.
One way to combat challenges in the parcel industry is to process smarter by pursuing technologies that provide dynamic order processing and fulfillment. For example, new software technology tracks the location of a picker to allow automatic order updates. Inputs can change dynamically as automated systems are in operation, making it possible to consolidate orders and fulfill late orders. Enhanced software creates a dynamic environment that reacts to what is happening in real time.
Parcel operations may also benefit from alternative sortation systems, such as loop sortation instead of line sortation. Let’s examine this in greater detail.
Loop vs. Line Sortation
One of the biggest benefits of loop sorters is that they can greatly exceed the capacity of a line sorter. There are inherent features built into a loop sorter that don’t exist with a line sorter, and one is recirculation. As an example, a facility has a line sorter that is feeding 45 trailer doors. If a carton on the sorter is assigned to go to door 23, and door 23 is blocked when the carton arrives, that item must start the process again. The weight and orientation of the carton, its identification number, and other pertinent information all must be inducted into the system a second time. With a loop sorter, that carton can ride the loop until door 23 becomes available.
Loop sortation allows better control of items with the ability to physically track where any given item is at any moment in time. If a facility temporarily loses power, for example, a loop sorter will resume operation where it stopped at the loss of power. With a line sorter, items must be discharged with reacquisition of data and recirculation required to resume operations; a time-consuming process.
Loop sortation can handle a wider variety of product types from cartons to polybags with consistent capacity and throughput efficiencies. With line sortation, throughput decreases with larger items and increases with smaller items. Fewer touches and lower labor requirements are other natural benefits of loop sortation. High-speed loop sortation also offers greater flexibility, enabling operations to process direct-to-consumer, store, wholesale, returns, receiving, and kitting/sequencing on the same piece of capital equipment.
To determine whether your facility can benefit from high-speed loop sortation, consider these key questions:
· Are there bottlenecks in your facility that prevent you from reaching your throughput requirements and service levels?
· Do your systems lack features that would better align them to your business needs?
· Is manual sortation leading to increased labor costs?
· Is adding headcount having minimal effect or even making the problem worse?
· Are your current systems or processes stifling your growth, preventing you from being as flexible and responsive as today’s marketplace demands?
· Are increased inaccuracies leading to customer dissatisfaction?
A loop sorter typically will perform at a greater capacity and higher throughput than a line sorter in the same amount of physical space. While the cost differential can be significant, loop sortation is a sound investment for a facility receiving, sorting, and shipping more than 5,000 units per hour.
Alternative Fulfillment Strategies
Traditionally a small part of parcel volume, incompatibles such as big screen televisions and tires today are a growing and profitable part of the fulfillment business. But these oversized items are creating tremendous challenges that have parcel companies considering everything from building a facility dedicated to handling incompatibles to fulfilling orders directly from the manufacturer.
Another alternative is a dual fulfillment strategy, whereby two items from a single order might be shipped from a distribution warehouse and a third pulled and shipped from a local retailer. At least one home improvement company is experimenting with placing mini-warehouses in stores where inventory is closer to the customer base. Software that would allow dynamic decision making regarding the most efficient location from which to fulfill online orders is currently being developed. And perhaps the most advanced alternative fulfillment strategy is 3D printing on demand, such as Amazon’s 3D Printing Store.
Planning Is Critical
Automated systems and software are readily available to help parcel companies compete in the race for capacity and fulfillment efficiency, but planning is crucial. As more consumers connect online through mobile devices, demands on e-commerce fulfillment accuracy and speed will continue to rise.
Terry Brown is Director of Sales, Sortation & Distribution at BEUMER Corporation, where his responsibilities include solution selling, marketing, engineering, project management and customer satisfaction. He earned a BS in Mechanical Engineering from the University of Wisconsin and a Masters – Business Administration from Keller Graduate School of Management.