For e-commerce companies in particular, shipping represents both a significant expense and opportunity for competitive advantage. But shipping doesn't happen in a silo. Finding an optimal strategy requires taking a holistic view that reconciles shipping with fulfillment operations in the warehouse and considers the relationship between the two.
A zone-skipping strategy might be just what the doctor (or CFO, customer service team, chief supply chain officer, etc.) ordered. When successfully implemented, having e-commerce fulfillment operations take on sortation steps traditionally reserved for the parcel carrier can reduce transportation costs and improve transit time.
How can you translate this theoretical benefit to real results? Step one is to understand the fundamentals of zone skipping, outlined in part one of this blog series. When it's time for the rubber to hit the road, be sure to account for these critical steps to lay the foundation for success.
1. Identify opportunities for zone skipping
For starters, where is your fulfillment center in relation to parcel hubs? Operations shipping from coast-to-coast have plenty of zone-skipping opportunities, due to their shipments going through several local and regional hubs as they travel long distances. This is important because the more steps in the shipping process, the greater the opportunity for cost savings and faster delivery speed.
And secondly, how many orders are headed to the same region? A sufficient volume of shipments routed from the fulfillment center to a specific regional destination hub is what makes a zone-skipping plan cost-effective. Therefore, identifying the most common destination regions to leverage existing delivery volume is a critical step in building a zone-skipping strategy that fits operational needs.
2. Coordinate with parcel carriers
Although zone skipping takes some of the sortation and transportation burden off of parcel carriers, this does not mean that retailers and e-commerce operations totally assume the shipping process themselves. Coordinating with parcel carriers to integrate zone-skipping with their shipping operations makes the most of these efficiencies. This includes working out shipments destined to bypass local hubs and go straight to regional destination facilities, proper labeling and other practices to ensure a smooth implementation that delivers on efficiency promises.
The implementation of zone skipping should result in big operational savings from the carrier. It is important to negotiate and develop clear cost savings expectations prior to implementing a solution.
3. Build the right sortation system
Analyzing operational characteristics helps determine what demands will be placed on the sorter and define the best-fit sortation solution. The top considerations are:
- Throughput - The sortation solution must offer sufficient throughput capability to meet average and peak operational needs. A sweeper sorter is a simple, reliable option for lower throughput requirements in the 6,000-item-per-hour range, while other technologies like sliding shoe, cross-belt, tilt-tray, bomb bay or push-tray sorters can handle rates in excess of 20,000 items per hour.
- Layout flexibility - One of the key challenges of zone skipping is finding sufficient warehouse space to house the volume of diverts necessary to presort orders and keep them flowing to the right region. Destination pitch indicates how closely divert chutes can be located, with a lower pitch enabling a higher chute density. This metric is critical for operations with limited floor space, and also guides technology choice and configuration.
- Product handling capability - Sortation technologies can handle a wide range of package sizes and types, with these capabilities ultimately dictating what is considered "conveyable" and "non-conveyable." The greater the volume of non-conveyable items, the lower the payback on a zone-skipping sortation investment. Making this assessment upfront is critical, as is considering future demands since the variety of packaging types used by e-commerce operations can fluctuate due to a variety of external factors.
Hungry for more zone-skipping insights? Stay tuned for the final installment of the zone-skipping blog series to see how omnichannel fulfillment operations can use it to their advantage.
Zone skipping has emerged as a logistics strategy with great potential for e-commerce operations, for its ability to reduce shipping costs and increase delivery speed. But how exactly does it generate these returns?
The first step in building a successful zone skipping operation is understanding the fundamentals. This initial installment of a three-part blog series on zone skipping introduces the basics of the strategy and how it drives benefit for e-commerce fulfillment operations.
What is zone skipping?
Zone skipping is a sortation strategy that involves the retailer or e-commerce fulfillment operation taking on sortation steps traditionally reserved for the parcel carrier. Packages are pre-sorted at the fulfillment center rather than by carriers. In a traditional workflow, all shipments are picked up by a carrier, sorted at a local facility, again at a regional hub and once more at the destination facility before final delivery. Zone skipping effectively "skips" several stops between the fulfillment center and delivery to the customer. It involves pre-sorting orders at the fulfillment center, thus avoiding sortation steps by parcel carriers; routing orders directly to a later phase in the shipping process for final delivery to the customer.
How is it a competitive asset for e-commerce operations?
Shipping operations are complex, so why would retailers want to get involved? Simply put, efficient delivery plays such a critical role in meeting customer service expectations and protecting margins that any efficiency gains are very much worth the effort. According to the 2016 UPS Pulse of the Online Shopper study, of the more than 90 percent of buyers who reported abandoning shopping carts, at least half cited unexpectedly high shipping costs as the reason for doing so. Further confirmation that in today's demanding e-commerce climate, speed and low shipping costs are critical to success.
Therefore, every supply chain process must be conducted as efficiently as possible. Otherwise, they cost businesses time and money. Much of the cost savings driven by zone skipping come thanks to reduced transportation costs, as the pre-sorting enables orders to bypass parcel carrier sortation and the associated transportation between carrier hubs. As operations face dimensional weight (DIM) and other pricing pressures, finding ways to reduce dependence on parcel carriers can help keep shipping costs in check.
Zone skipping also saves time, simply by reducing the number of steps required to move an order from the fulfillment center to the final destination. As Amazon, Walmart and other giants battle it out over free two-day shipping and consumers become accustomed to fast and free delivery, cost-effectively saving time is critical to keeping up and protecting margins.
ROI: How do the savings add up?
Operations can expect a savings range of 25-75 percent per parcel with zone skipping. Of course, no two operations are the same, so exact ROI figures vary but a company can completely recoup $1 million spent on a sortation system in less than a year. Assuming a conservative savings estimate of $0.20 per item in shipping costs, multiplied by 200,000 to 500,000 order per week, operations can generate between $40,000 and $100,000 in weekly savings. Furthermore, the benefits of zone skipping extend beyond shipping costs. Faster shipping times can improve customer retention and even help win new online business as consumers comparison shop for the best combination of speed and total cost.
For tips on getting a successful zone skipping operation off the ground, stay tuned for part two of the blog series that will cover implementation. In the meantime, check out the Intelligrated white paper, Zone skipping strategies to reduce e-commerce shipping costs.
The digital age has transformed the postal sector, offering alternatives for personal correspondence, billing, advertising and news, while driving the growth of e-commerce. Increasing parcel volumes, aggressive delivery timelines and other pressures confront operations with unprecedented postal processing challenges.
These topics will be the focus of the educational sessions and solution demonstrations at the National Postal Forum, May 21-24 in Baltimore. For a preview of what's to come at NPF, read on for the top five challenges facing parcel and postal sortation operations today.
Challenge 1: Package variety
E-commerce is the fastest growing retail segment, with direct-to-consumer orders accounting for over half of shipping volume since 2014. In addition to flats and letters, this challenges postal sortation solutions with a variety of product sizes and shapes like soft packs, polybags and corrugate boxes. And this shift is not yet complete - while most parcel volume is currently between 44-88 pounds, the dominance may switch to small packets less than 4.4 pounds. The variety of packaging types forces postal operations to find sortation solutions with the capability to keep up. For example, sliding shoe, tilt-tray and cross-belt sorters provide fast, gentle handling of letters, soft packs, polybags, corrugated cases, cartons, totes and other odd or oversized items.
Challenge 2: Volume
In addition to a variety of package types, postal sortation systems must process growing order volumes. While traditional mail volume has remained relatively flat since 2012, USPS has seen significant increases in package deliveries, driven by e-commerce. In that sense, postal operation sortation systems have adopted many of the same characteristics of sortation solutions for e-commerce. Serving this expanded volume has also driven major logistics companies to expand their operations, opening up one or two new regional sorting hubs, on average. Sortation solutions must offer the necessary throughput speed and scalability to deliver dependable, accurate throughput during seasonal spikes or long-term growth in volume. Tilt-tray and cross-belt sorters are capable of delivering the necessary capacity and speed when handling the wide-ranging product mix of post and parcel sorting environments.
Challenge 3: Automation integration
Automation offers a solution to improve overall postal operator efficiency. Part of this benefit comes from streamlining processes and reducing manual touches, helping protect operations from labor shortages as demographic shifts make their mark on the workforce. In modern processing centers, these automated systems include more than just sortation, as a variety of transportation and diverting functions can be automated. Putting conveyor, sortation, software and other technologies together requires deep integration experience and the capability to handle emerging technologies. As more businesses adopt the Internet of Things, data gathered from automation can help fuel this data-driven quest for greater efficiency and transparency. More post and parcel logistics processes continue to be automated, with significant increases in drone use over the last two years as companies explore adopting them as an everyday delivery solution.
Challenge 4: Customer expectation
At the click of a mouse or tap of a touch screen, consumers expect quick access to a variety of products from virtually anywhere. Keeping up with aggressive delivery timelines requires order fulfillment solutions that leverage sortation for greater efficiency inside and outside the four walls, setting up downstream logistics processes for success. For example, sequentially releasing orders to match delivery routes offers greater efficiency after leaving the processing hub. Furthermore, postal operators and retailers must collaborate to enable different delivery features, such as click-and-collect, parcel lockers and delivery time visibility into logistics processes. In the race for speed and transparency, postal operators must adapt their logistics and IT processes to keep up.
Challenge 5: Space utilization
As population dynamics shift and more people move to cities, carriers must serve greater volumes in areas with limited, more expensive real estate. Instead of building out, these conditions encourage postal operations to build up and increase storage density by adopting vertical storage solutions. Implementing vertical sortation solutions saves valuable floor space and can save money - helping avoid the cost of expansion or new construction.
To learn more about innovative sortation solutions designed to overcome the challenges facing post and parcel operations, visit USS, an Intelligrated company, at NPF booth #309 or email email@example.com to schedule a meeting at the show.
The rapid growth of e-commerce and rising consumer expectations are prompting retailers to adjust their order fulfillment strategies to keep up with these demands. Luckily, several enabling technologies are coming of age which allow retailers to respond accordingly.
Here's a quick overview of the most effective strategies and solutions currently available, which can be combined and integrated in multiple ways to meet any fulfillment operation's unique needs.
Enhance picking productivity
Many DCs have already made the shift to paperless picking solutions, which increase productivity by up to 50 percent. Depending on your business needs, productivity can be enhanced with one or more of the following:
Pick-to-light - These scalable, easy-to-use systems combine intuitive colored displays that guide the pick with sophisticated algorithms that reduce movement times and accommodate hot picks. Minimal training is required, and built-in diagnostics enable easy troubleshooting - making pick-to-light the industry's most efficient, accurate and high-speed order fulfillment solution.
Put-to-light - Similar to pick-to-light, put-to-light solutions direct pickers to the correct bin or slot to place an item. Best suited for batch-picking applications, put-to-light brings comparable improvements to accuracy and productivity when compared to traditional manual sorting.
Voice picking - This solution provides voice commands via a wireless network, leaving the picker's hands free while increasing picking speed and accuracy rates. Voice commands can also be programmed in multiple languages, significantly decreasing training requirements for non-English speakers. Voice picking can be used as a cost-effective, stand-alone system or as a fully integrated enhancement of other solutions.
Radio frequency (RF) technology - Handheld and mobile RF devices are ideal for lower-velocity SKUs, enabling 99.9 percent accuracy and increasing productivity by 10 to 15 percent.
Mobile picking carts - For low-velocity applications, mobile cart systems combine advanced pick-to-light components, voice automation and RF scanners in a system with go-anywhere flexibility.
Improve omnichannel distribution with put walls
Whether DCs rely on operator-to-goods batch picking, disparate zone-picking processes, or an automated storage and retrieval system (AS/RS), put walls maximize efficiency by serving as points of demand consolidation. Ideal for multi-line orders, flash sales or seasonal demand, put walls save time and labor by enabling intelligent order batching, adjustments and other allocations among wave, pick and put.
Automate for efficiency
Respond to ever-changing business needs quickly while minimizing labor with intelligent automation solutions:
Warehouse execution systems (WES) - WES software optimizes your facility with an operational brain, delivering real-time responsiveness with automated decisions based on constant analysis of orders, inventory, labor, processes and equipment.
Automated storage and retrieval solutions - Ideal for operations with high-turn inventory storage and short order cycles, AS/RS systems provide quick access to products, while reducing storage labor and footprint requirements.
Unit sortation - Designed for ultra-light, irregularly shaped and polybagged items, these systems deliver the highest throughput at minimum speeds for years of reliable, low-maintenance operation.
Intelligrated is an experienced designer, manufacturer and installer of all these solutions. To learn more about order fulfillment systems that can save you time, money and hassles, click here.
Warehouse operations depend on varying degrees of automation to maintain process efficiencies. Getting product out the door and into customers' hands requires the predictable execution of repetitive tasks - from picking, putting and sorting to shipping, receiving and storage. Even slight deviations from standard processes can put customer serivce levels at risk. And while many operators know that automation will help them avoid these pitfalls, they are unsure about which automation solution is best suited for their business.
In Intelligrated's recent On The Move webinar, titled "Sort it out! Making smart sortation automation decisions," I discussed the full range of sortation automation solutions available for modern distribution and fulfillment operations. Making the move to automation is a difficult decision, requiring careful evaluation of all variables, including:
- Pick density - how closely things are stored together
- Peak to average order volumes
- Number of SKUs, unit movement, orders across SKUs
- Conveyability of product - liquids, fragile, eaches, full cartons
- Customer service levels and delivery commitments
- Orders per day
- The cost and accessibility of labor
- Product volume
- Expected future growth of the company
- CAPEX budget requirements
- ROI expectations
While these are all important factors, order volume is often the first thing operators consider when selecting a sortation automation solution. Unfortunately, there is no cookie cutter equation to help operators select equipment purely based on order volume. Their expectations, key performance indicators and business requirements - now and in the future - are equally important factors.
It's the marriage of people, processes and equipment/automation that drives the automation decisions and solutions required. The investment in automation should provide long-term capacity, including the scalability to grow and adapt to changing requirements. Only then can operators ensure a return on their automation investment.
To help demonstrate the options available to today's DC operators, the webinar presented automation options from entry-level, manual types to sophisticated sortation and conveyance systems. For e-commerce retailers who must sort 25,000 items per hour to fill up to 150,000 orders per day, a state-of-the-art, tilt-tray conveyor and sortation solution is required. But for mail order or catalog companies, voice, GoKart and pick-to-light picking technologies may be just what they need to increase throughput and reduce errors.
To determine which sortation and automation solution is suitable for your operation, please visit our On The Move webinar archives and view this session in its entirety.