With Prime Day and back-to-school shopping in the rear-view mirror, next up is the big one, the real test for e-commerce supply chains: holiday peak season.
While fulfillment centers are a vital step to e-commerce operations delivering on promises of fast delivery, parcel carriers are the crucial link to get orders to doorsteps and allow for on-time gift-giving. Take 2013, when package volume exceeded delivery network capacity, leaving major carriers scrambling to deliver late-arriving gifts and deal with a barrage of negative customer feedback. This led parcel carriers to implement a range of new policies, headlined by the shift to dimensional weight pricing, to incentivize more efficient packaging for e-commerce orders and maximize delivery capacity.
Now holiday peak season is coming once again, and parcel distribution centers are dusting off old playbooks to source temporary labor and equipment to meet demand. But what if the question this year is not simply “where will I find labor for the next few months?” Are market realities of limited labor availability and swelling order volumes conspiring to dictate a lasting shift in peak season strategy, with year-round consequences?
Year-round Challenges, Magnified During Peaks
E-commerce volumes in general continue to rise, more than doubling as a percentage of total retail sales in 10 years, from 5.1% in 2008 to 14.3% in 2018. But holiday peaks in particular have special ingredients to exert extra stress on fulfillment and delivery networks.
Everyone has the same deadline – and an extension is not possible. If online shoppers order late, they still expect their gifts to be delivered in time for the holidays. Rather than late orders coming with an equivalent extension, the window to pack, ship and deliver shrinks.
And with these massive order volumes and reduced processing time comes a scarce labor pool. Unemployment stands at 3.7%, a 50-year low, and competition for available labor is fierce enough to drive warehouse worker turnover at a rate of 25% annually. Operations in low-population areas feel the effects most acutely and often deploy creative incentives and recruiting tactics to level up their permanent and temporary workforce. But even the biggest hiring pushes by the biggest businesses can have limited effect. Take Amazon’s Jobs Day for instance – the company hoped to fill 50,000 job openings, but only attracted 20,000 people – only enough to fill less than half of the open positions.
Embrace Automation as a Tool to Scale
The forces affecting distribution centers during peaks are the same ones dictating permanent shifts in the industry. For example, both scaling up for peak volumes and handling long-term e-commerce growth are not problems that can be solved by simply adding labor – the workforce just isn’t there. With these foundational realities in mind, scaling up for peak season is no longer a fleeting, temporary act. Instead, it requires a more permanent, strategic shift. A shift to automation can break the cycle of constantly scrambling to source labor for peaks.
Automation enables operations to handle high order volumes with the speed necessary to meet the increasingly fast delivery commitments of e-commerce and reduces dependency labor. Employees can be reassigned from repetitive, low-value tasks to more engaging, higher level positions, or workflows can be reconfigured so that workers’ roles are less physically demanding and magnify their strengths.
Take the task of unloading trailers of incoming parcel freight. Using extendable conveyor that reaches completely inside a trailer can allow workers to simply turn and place parcels on a height in their ergonomic golden zone. This smart deployment of automation minimizes walk time and helps reduce repetitive bending and twisting so that workers are less fatigued and stay more productive, longer.
Deploying automation in this manner helps improve employee engagement and reduce turnover, not only boosting the number of parcels processed per hour, but helping distribution centers reduce their exposure to the risks of a limited labor pool.
But automation is no silver bullet. Handling peak season is not just a question of package volume, but package type. Contemporary e-commerce brings special challenges in the form of package variety and irregular items that can challenge automation to fully deliver on promises of peak efficiency.
Handling Packaging and Product Variety
With consumers ordering everything from jewelry and apparel to power tools and furniture, the critical automation infrastructure distribution centers depend on must keep up. Traditionally, non-conveyable items that are especially heavy, oddly shaped, oversized or otherwise challenging for automated equipment have been a major driver of temporary labor in distribution centers.
This packaging variety pushes product development teams to innovate. For example, take large tilt-tray sorters and autonomous mobile robots. Large tilt-tray solutions handle everything from golf clubs to flat pack furniture, expanding maximum item length from 48 to 78 inches. Autonomous mobile robots offer immense flexibility, both in their ability to carry large items and to work in a variety of workflows. These robots are becoming increasingly capable and can easily adapt to changing operational requirements over time, no need to remove and replace any associated infrastructure.
The Right Long-Term Fit
In planning for both sustained growth and for the unique challenges of holiday peaks, distribution centers must maximize utility from automation investments. Afterall, these are highly engineered solutions tailored to specific operational requirements. A thorough planning and engineering process is necessary to deliver the proper mix of equipment, technology, labor and processes to scale for peak volumes and handle daily business most efficiently.
Rush Fullerton is Senior Vice President, Business Development, MHS.
