Why Apparel Retailers Must Rethink Their Fulfillment Centers

9/3/2013
The numbers are staggering and continue to grow. At last count more than 50 percent of retailers now support physical storefronts as well as e-commerce websites, mobile shopping and social capabilities. Tablet and smartphone shopping is fueling much of the growth in the retail economy. "Click today and get tomorrow" is here to stay, putting a significant strain on fulfillment, and retailers are fast coming to the conclusion that centralized fulfillment is no longer an option.

It is increasingly important that multichannel retailers develop a process to integrate these channels and manage fulfillment efficiently and effectively. However, many retailers are busy on the front end optimizing their websites and stores. In trying to create a seamless experience for the shopper, retailers are missing significant signs that their fulfillment systems may be buckling.

For apparel retailers, this is especially tricky as thousands of SKUs come in and out supporting up to six selling seasons in a given year. Making sure that inventory is immediately available both on the floor and via web sales for holiday, resort, spring, summer, Fall I and Fall II can make or break an apparel retailer's year-end results.

Below are the five most important reasons why apparel retailers must rethink their e-commerce fulfillment centers before this year's make-or-break holiday season:

Quickly adapt to changes
In the order fulfillment industry, change is the new normal. Companies must be equipped to adapt to different and modified processes on a regular basis. A rocky transition can lead to shipment problems and delays, as well as issues further down the road.

In the past, retailers supported brick-and-mortar stores with a single-channel supply chain to replenish goods from a central pool of inventory.  A fulfillment center could allow hours or even a day before acting on incoming orders. This allowed for efficient organization of processing through "batching" in a logical sequence.

The new buzz word for DCs is "event-driven processing." This is where each event, or individual incoming order, immediately triggers a sequence of events that will begin the fulfillment process, ensuring same-day shipment, and, in turn, faster delivery.

Minimize replenishment errors or concerns
Since many retailers offer comparable products at similar prices, access to products and fast delivery have emerged as major factors driving consumer purchases. Even a limited number of errors in the order fulfillment process leads to big problems for e-commerce retailers.

Currently, the majority of all e-commerce orders are manually picked. If an individual worker discovers the wrong product in an assigned location, the entire process is brought to a halt. The employee must resolve what has gone wrong (wrong location, wrong item, etc.) before proceeding to complete the assigned picking path. But more often than not, the error is not discovered until the product is packaged and shipped to the end customer. This not only results in a very unhappy customer but incurs an estimated $50-$70 cost per occurrence to the retailer.

Reduce delayed shipments and missed shipment times
A successful e-commerce multichannel fulfillment strategy must accommodate demand fluctuations. In addition to scheduled pallet and case in-store deliveries, multichannel retailers must factor in the fickle demands of e-commerce shoppers into their fulfillment processes. Typically, this includes split-case picking, item-level touches and multi-line item sortation. Without processes in place to accommodate fluctuations in demand, retailers will experience difficulties delivering on larger or variable orders. This can compound itself to create difficulty delivering on seasonal promotions or shipping offers, and ruin customer relations before they have even begun.

Perfect inventory tracking while addressing management challenges
In larger warehouse facilities, with traditional operations in place, order pickers may walk more than 15 miles over the course of a shift.  Even in smaller distribution centers, where pick-to-belt systems are installed, operators can walk up to 5 miles each day on hard surfaces. These requirements can be physically taxing and lead to higher rates of error and injury as well as high employee turnover.

Decrease those record numbers of complaints and returns
A system is only as strong as its weakest link. Even with software that picks at high levels of accuracy and equipment that moves an order at rapid speeds, employees improperly trained or lacking important tools can disrupt the throughput of an order fulfillment system.

Return rates, especially for goods where sizing is a critical factor, can run up to 30 percent. Managing these returns as a simple add-on to the receiving or replenishment process can lead to tremendous bottlenecks. Since it is often difficult or impossible to group returns of like-SKUs together, employees are manually "piece receiving" items one at a time.

Your customer service department should not be reporting record numbers of dissatisfied customers and a high volume of back orders. If it is, it's time to rethink your fulfillment strategy.

Automation for next-generation fulfillment
Successful distribution center order fulfillment is a critical factor to ensure a competitive advantage in today's retail economy. Distribution centers must be able to guarantee delivery within ever-shortening lead times and with high expectations for accuracy and speed.

Additionally, with real estate at a premium, the ability to maximize every useable corner of the warehouse is paramount. Again, automated systems allow for up-and-down movement of critical SKUs for order fulfillment.

As a result, operations leaders are turning more and more to a variety of automated solutions to confirm smooth, integrated and well-oiled processes. Solutions that automate both the replenishment and returns process while optimizing all available space allow e-commerce retailers to optimize their picking process and ensure customer satisfaction in a cost-affordable and efficient manner.

Bill Leber is the director of business development for Swisslog North America. Prior to joining Swisslog, Bill worked 26 years for Ciba Specialty Chemicals in a variety of roles including manufacturing, logistics, sales & marketing, business development and general management.
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