31 October 2021 Understanding the specific characteristics of e-commerce logistics and what changes need to be made to the warehouse to transition from physical sales to online commerce. In the face of the crisis triggered by the coronavirus, the vast majority of businesses find themselves at a crossroads: either invest permanently in e-commerce or spend all their energy managing losses and consequences. Those who are already working with online sales, offering their consumers other purchasing channels besides physical stores, are a step ahead. On the other hand, there is a diversity of companies that have never had an online presence and now, urgently, are trying to create their digital sales platform overnight. But it’s not enough to just create a website and make products available online. With the quarantine, the competition among e-commerce companies has intensified. Therefore, it’s no longer possible to offer an average service, as when it comes to e-commerce, price is not the only differentiator. Customers also want agility and flexibility in deliveries and quality of service and product; in other words, having excellent logistics performance is crucial. The great dilemma for companies that did not have online sales channels is to structure themselves quickly without making mistakes, as a slip in the relationship with the consumer can be fatal. Conversely, companies that were already well-structured for e-commerce are seeing their sales increase, even in the midst of a crisis. This is because the current context has opened up a huge opportunity for this type of business and an exponential growth in online sales. WMS for your e-commerce You might be wondering: what is the secret to this growth? The answer is: having the right technical and logistics structure to best meet customer demands. Below are some reviews from people who have recently made purchases on an ecommerce site of one of our clients (source: Google). – “My first purchase on the site. It exceeded my expectations.” – “Great experience, fast delivery. Congratulations.” – “Fantastic! I placed the order yesterday and it arrived this morning.” This shows that the company was well-prepared to seize the great opportunity that the crisis offered. It is probably even more diligent about the quality and agility of deliveries, as it has already understood that this is a differentiator at this time. Right structure Creating an online store is relatively simple. There are several platforms and solutions available. However, managing storage, order preparation, and shipment management are significant challenges. Companies that continuously invest in logistics innovation, relying on automated or semi-automated processes, find themselves today in a far greater position than those maintaining a manual structure and trying to do everything possible to fulfill online orders. And the latter are largely responsible for consumer dissatisfaction with e-commerce purchases. They lose a customer today, another tomorrow, and thus unravel without realizing that everything could change if they invest in tools that help bring speed to order fulfillment. If you don’t want this to happen to your business, start preparing now, trying to understand what you need to prioritize in your company to win over consumers who can no longer leave the house to shop in physical stores. To help you, we will share some tips on how to structure your company’s logistics operations to fulfill online orders. But for everything to work well, it is necessary to have excellent performance within the distribution center. So, keep reading to understand how to make the right changes. Preparing the warehouse for e-commerce demands A warehouse that handles hundreds or thousands of fractional orders must have the ideal structure to meet the specific needs of e-commerce. If the distribution center does not have an intelligent strategy to direct products and stock rotation through picking, if it does not use the ideal sorting mode for fractional items, does not have an order prioritization system, or even lets its employees make decisions based on “feeling,” it is very likely that there will be errors in picking and shipping. And not only that: when processes are not standardized and optimized, costs are high and, in most cases, end up being incorporated into product prices or transportation, which can be a significant factor in reducing the company’s competitiveness. All this results in a loss of customers or low profitability. Therefore, it is necessary to pay attention to all details. Below are some points that must be observed and modified when there is a transition from physical sales to e-commerce. Distinct storage areas Typically, warehouses that only serve physical stores work with orders with a high average ticket and a larger volume of items. E-commerce, on the other hand, deals with predominantly fractional requests, mostly orders with one or two items. Therefore, it is essential to have specific storage and separation strategies for each type of operation. Having an exclusive area for e-commerce fractional picking is the most suitable model to ensure efficient picking. In another area are pallets and closed boxes for the separation of large volumes. You must also interpret the requests. For example: if a box of a product has 12 units and the order requires 24 units, it is easier for the operator to go to the area where the closed boxes are located and pick two rather than go to the fractional picking area and pick 24 units. This prevents unnecessary depletion of this line of fractions and saves time in executing the task. The WMS system is a great ally for the good execution of this process because as soon as the order arrives, the software automatically interprets the order and generates the activity, directing the employee to the correct position. Automation of repetitive processes Automation is an infallible way to improve efficiency. Think about it: e-commerce platforms have already made the product selection and checkout process much more efficient through automation. Why not do the same for order processing and shipping? In this case, you might think: but I can’t invest in a complete automation of my warehouse right now. The good news is that you don’t have to automate everything. A semi-automatic operation is already much more efficient and economical than a manual one. For example, you can use a system to exclusively manage picking, using RF collectors to optimize picking and improve accuracy. If you can implement the WMS during the operation, the software will be of great help in managing orders and activities, monitoring movements, and controlling inventory. With process automation, the operation gains efficiency and assertiveness, reduces efforts and costs, and thus has a quick ROI. Ideal picking mode To ensure agility and assertiveness in picking, it is necessary to use the ideal picking method for the company. Additionally, it is important to have efficient separation to reduce costs: studies show that picking occupies about 60% of the costs of an operation, given that it involves more people, the use of equipment, and movements that, if unnecessary, convert into expenses. Hence the great importance of choosing the most appropriate type of separation. There are different types of picking. Each of them has its particularities and must be chosen based on the specific needs of a business, such as: • Picking unit (if orders are sorted into pallets, cartons, fractional, by weight, etc.) • Number of orders fulfilled in the day • Quantity and diversity of SKUs in stock • Estimated time for order picking • Types of products stored (their form, degree of fragility, etc.) • Ease or difficulty in merging loads • Size and operational layout of the warehouse • Stock volume • Sales seasonality Besides using the ideal picking mode, it is important to pay attention to other points, such as: – Directing products based on their turnover (high-performing products should be located in areas close to shipping to reduce movements); – Intelligent replacement of picking areas (stock rotation must occur following picking) and line balancing, avoiding stock out; – Implementing order grouping strategies to speed up picking and also creating a divided area before shipping; – Order prioritization, especially in the presence of different delivery modes (e.g., same day, next day, etc.); One of the biggest challenges for logistics managers is to take care of all these aspects that ensure the perfect functioning of separation. That’s why companies have sought automated or semi-automated processes with the help of the WMS system, which significantly reduces effort and errors. The software not only manages orders and generates activities automatically. It also manages dynamic addressing (according to both rotation and storage rules for each item); strategically performs stock rotation (Kanban); calls the right employee to perform each task (Active Call); tracks and records all movements made (increasing quality control and inventory accuracy) and offers Visual Management, which allows real-time process monitoring. This is what we will talk about in the next topic. Visual management and KPI definition The best way to ensure that separation occurs efficiently is to follow real-time data. And with WMS Visual Management, this is possible. The software offers a series of information related to the progress of operations in the warehouse, including picking. If something is out of the ordinary, the system automatically issues notifications so that changes can be made, thus avoiding impacts on shipping. Visual Management allows the manager to verify if the order is being processed within the deadline, performance at each picking station, checkout execution, among other details. The most interesting thing is that this data can be shared with employees on monitors placed in strategic points of the warehouse, which creates self-management and immediate problem-solving capacity in them. It is worth adding the importance of measuring the entire operation. That’s why defining KPIs is also crucial. KPIs help identify bottlenecks, plan warehouse operations, and measure overall customer satisfaction. There are dozens of KPIs you need to consider to optimally manage an intralogistics operation, and a good WMS solution can easily offer you all of these. Just to give you an idea, here are four to consider in a DC that manages e-commerce orders: – Inventory turnover: the frequency with which you sell all your inventory (or a certain amount of inventory). – Order lead times: the total time needed to fulfill an order, including picking, packing, and shipping. (Learn more about OTIF, OFR, and OCT). – Return rate(s): the frequency with which items are returned. Customer service should also record the reasons for the return, as this suggests where the problems might be: receiving, picking, quality control, etc. – Shipping cost per package: the total cost to move an SKU or order, including labor costs, handling equipment, and security, etc. With the use of Visual Management and KPIs, the following benefits are obtained: increased service level, greater productivity, better quality of operations, optimization of space occupancy, and better operation sizing. All of this is essential to serve the customer well and reduce costs, making the business profitable. Reverse logistics management Since e-commerce became the main channel used by consumers, exchanges have become routine. Cases of regret and disagreement in requests are also frequent. And are logistics operations ready to handle them? Unfortunately, many are not. This is because they do not have efficient reverse logistics management. With the WMS system, all returns are treated the same as received products, verifying if the returned item is indeed what was sold, its quantity, and its condition. Subsequently, its position on the dock is identified, and storage is carried out. If the product is in good condition, it is directed to the picking area; otherwise, it goes to the control area. By applying these processes, the exchange can be carried out quickly, as the system integrates with the ERP, generating returns and allowing replacement. Additionally, there is complete monitoring of all returns and a reduction in losses. Therefore, it is advisable to rely on software to have the best reverse logistics management and thus ensure customer satisfaction. Attention to the last mile In view of the current pandemic, consumers have sought to have minimal personal contact to make their purchases, which is why it is crucial to pay attention to the last mile, that is, the last mile delivery. Therefore, quality in direct-to-consumer deliveries must be one of the priorities, in order to ensure a high level of service. In addition to ensuring on-time delivery with quality and assertiveness, it is important at this time to offer flexible options, both for delivery and for order pickup if the customer chooses the latter. Many companies have turned their physical stores into pickup points (in-store pickup), as in the case of Walmart and Target. There are also those who use lockers or collaborate with other companies to facilitate customer access when ordering. In all cases, there is great creativity to offer consumers different options, improving the shopping experience. Another relevant aspect is the availability of real-time information on the status of the order, so that the customer can track the delivery. Additionally, it is necessary to be open to customer feedback and monitor the service level through indicators such as OTIF, OTD, OCT, for example. Remember: “what cannot be measured cannot be improved.” Finally, here is the recommendation for this moment: make sure to make investments that will bring improvements in customer service, as they will surely bring a quick ROI and make your company more competitive in the increasingly fierce world of online sales. By optimizing your internal processes, you not only add more quality to your services but also reduce costs. So it is worth investing in technologies that will transform your business, structuring your logistics or warehouse for e-commerce through a valid and efficient WMS! How to Structure Logistics for E-commerce Deagor WMS per ecommerce può aiutarti!