Many 3PLs, needing to better manage the diversity of e-commerce fulfillment and retail store replenishment for their client companies, are turning to more intelligent solutions, like warehouse execution systems (WES), to improve productivity. WES – such as the Continuous Order Fulfillment Engine (COFE) from VARGO – are proving to be a smarter option for 3PLs, and particularly those handling multiple brands. Combining waveless fulfillment with a single inventory and labor force, these WES more effectively orchestrate and balance both labor and automation across pick, pack and ship processes in real time.
by Art Eldred,
Client Executive, Systems Engineering, VARGO Companies
Diversification in omnichannel fulfillment has prompted an increasing number of retailers to use third-party logistics providers (3PLs) to handle aspects of their distribution. Many companies do not have the in-house expertise or resources to implement new distribution or fulfillment models at the speed in which the market is demanding – whether for e-commerce, returns processing, crossdocking or retail store replenishment. But much of the current growth in 3PL usage is being driven by the need for small-order online fulfillment. The use of 3PLs is growing rapidly, expanding at a rate of 12 to 15 percent annually, corresponding to the growth in e-commerce purchases.
Retailers, whose online orders are growing at an accelerated rate, often prefer the flexibility of working with a 3PL that is equipped and experienced to handle their ever-changing online needs. Internet fulfillment requires retailers to consider numerous, complex factors:
As these factors escalate, they continually raise the bar for logistics executives, who lean on 3PLs to provide solutions.
As well, retail store replenishment has taken on an increasingly more diversified role, and 3PLs have successfully adapted to meet these changes. 3PL operations must process a mix of less-then-truckload (LTL) shipments with full-pallet and mixed-case-pallet orders. They must be able to balance the complexities compounded by the growing demand for combined split-case and mixed-case store and distribution center orders, in a number of different transport formats. Further complicating store replenishment, 3PLs must accommodate specific shipment-compliance labeling, order-shipment documentation requirements, and manifesting rules, and where applicable government-mandated track-and-trace regulations.
Consumers and retail stores want flexibility in distribution, and they want options. They are requesting different service levels. Simply delivering the goods is no longer an adequate mission for fulfillment centers. Both consumer and store satisfaction has to be a critical priority for 3PLs. Improving the management of inventory, speed of delivery, and better customer handling and support are the factors that are driving retailers to 3PLs.
Integrated Processes – from Order Receipt to Delivery
Managing fulfillment successfully by 3PLs, particularly for online order processing, requires multiple interrelated activities, which are made possible only because of sophisticated software engines that capture orders on the front end, and process these orders on the back end through fulfillment and shipping. Leveraging this technology, 3PLs have expanded their service offerings to provide a comprehensive mix of integrated fulfillment options. On the front end, with the handling of e-commerce orders, this includes managing the web portal, the website and updating website content, as well as supplying telephone call centers with live operators who take orders, dispense product information, provide tech support and process return orders. Processing return orders efficiently becomes a major factor, considering the much higher number of returns when compared to brick and mortar sales.
Because of the digital nature of e-commerce and retail store fulfillment, its infrastructure permits the integration of this front-end order management information with systems across the entire fulfillment and distribution network. From multi-channel inventory management, through picking, packing, shipping and delivery, sophisticated warehouse management systems allow 3PLs to record the relevant details of each item inventoried, and each order being shipped. Shipments can be tracked and proof of delivery quickly confirmed, permitting3PLs to analyze transportation costs and performance, thus helping the 3PL to negotiate the best shipping rates and improve service.
This level of integrated supply chain analytics, from the initiation of the order through delivery, allows 3PLs to maintain precise control of their orders, their inventory and their shipments, through every stage of the supply chain, and provide the heightened service levels that consumers and retailers increasingly expect.
Labor costs are among the largest expense in 3PLs, as they are in most all distribution centers. This is particularly evident during peak seasonal times, when everybody is competing for the same workers, and the availability of labor at any cost becomes a priority. Add to this the strain of integrating fulfillment with full pallets and cases, and a closer look at automation becomes a more attractive solution.
For many third-party logistics providers, the selection of automation to improve performance in their distribution operations takes on specialized challenges compared to conventional distribution centers and manufacturers’ warehouses. Such distribution facilities are more likely to build out highly-capitalized automation, where the return is expected over a 10 to 20 year time frame. But 3PL providers need to factor their automation investment for a shorter ROI, essentially the term of their clients’ contracts, which usually makes heavily-capitalized equipment less of a desirable option. Three-year to five-year contracts are typical with 3PL clients, and ten-year contracts are pushing the upper limit. As with all distribution operations, equally important is the scalability of the automation as their clients’ SKU counts and throughput needs increase or decrease, as well as the flexibility to adapt the automation to changes in their clients’ fulfillment paretos.
The focus on automation for any 3PL should be to easily increase fulfillment throughput and SKU density over time. Such a system should enable 3PLs to pick, pack and ship orders and handle returns fast and accurately, while reducing labor costs and shipping errors, and realizing equipment ROI over the life of the contract.
Much of the recent investment in automation by 3PLs has been driven by a desire to improve order picking, packing and shipping processes, with a focus on expediency of order cycle time during critical pull windows. In most 3PLs, picking is the most labor-intensive and time-consuming function, and usually it can provide the most cost and time savings when automated. This is particularly true with e-commerce fulfillment, which is basically a piece-pick operation, and historically a hands-on procedure. The right automation facilitates the minimization of manual touches, resulting in more accurate orders and fewer returns, improved ergonomics, lower labor costs and worker travel time, and the fastest task times compared to humans as a way of answering the call for fast order cycle times.
Waveless, Pull-Driven Fulfillment
For order fulfillment, whether a 3PL provides single-brand fulfillment or it serves multiple brands from the same facility, a 3PL typically manages orders and inventory through a common warehouse management systems (WMS). A WMS is basically a planning tool that is coupled to an execution tool that drives or pushes the distribution processes. The WMS allows distribution executives to determine what work is going to be accomplished, and the sequence of that work, within the content of a fixed wave. The execution or processing of the wave is directed by the WMS by pushing the planned tasks to workers and associated equipment. But a wave plan is only as good as having the planned-for-conditions matching the conditions actually encountered during the execution. Distribution plans rarely execute exactly according to the plan. There are inevitably exceptions, and those exceptions must be addressed during processing.
WMS evolved to answer the call for efficiency not expediency. Expediency requires extreme and real-time coordination of each of the tasks in relation to the resources required to complete those tasks. Warehouse management systems, however, fall short of coordinating work execution across all work resources, both human and automation.
To meet the heightened demands of e-commerce and store fulfillment, 3PLs – and particularly multi-branded 3PLs – need a faster and more flexible level of fulfillment than what can be achieved with wave processing through a conventional WMS. Such demands require a streamlined, interconnected system in play, one that fulfills and tracks inventory in real-time throughout the entire 3PL distribution facility. This same system should facilitate optimized processing by assessing order parameters and delivery options for each order placed, and initiate an optimized solution for fulfillment and delivery in real time. It must include highly-scalable software architecture, providing functionality developed to deliver a higher performance of order fulfillment with process automation – managing material handling systems, robots and other complex automation technologies. Such a control system needs to contain automation modules developed to balance waveless order releases and work flows across the 3PL’s receiving, picking, packing and shipping processes.
As an order processing method, a waveless pull-driven operation permits new orders to be added seamlessly into the current batch of work. In the wave-based push-driven method, a wave of orders has a beginning and an end as the individual orders are processed, whereas waveless is continuous. A waveless pull-driven operation looks at the output, and automatically makes continuous adjustments to achieve the objective. When exceptions are encountered, those exceptions are accounted for in determining what actions to do next. If outbound processing is reduced, a pull-driven system will reduce the work being released to be pulled from inventory. As outbound processing is increased, the system will see the increase and adjust the picking to produce more to maintain the objective.
In a continuous order-release system some workflows are for expediency and others are for efficiency. These can, however, often be at conflict with each other. Therefore, a waveless, pull-driven system must establish a continual workflow balanced between all processing steps to match the total available labor. More specifically – the system must maximize utilization of resources, and minimize work in progress to dynamically adjust work priorities, which is accomplished by establishing a steady and continually balanced workflow using lean principles.
Warehouse Execution System
WMS architecture adds unnecessary complexity with its compartmentalized views of automation and labor. Warehouse execution systems (WES), however, permit the synchronization and sequencing of work across all work resources within the 3PL, for both people and automation. Using a waveless pull-driven operation, the latest WES focus on meeting production objectives, as opposed to following a production plan. It continuously optimizes the work to maintain a constant workflow, keeping all available work resources constantly working in the most efficient manner with minimal work queues. The WES organizes the work, as necessary, to meet production objectives. It assumes there will be exceptions encountered in the execution of individual work tasks, so it avoids planning ahead, knowing that the plan may need to be changed if an exception occurs. By minimizing the planned work, the WES can adapt quickly to changing conditions, critical to successful processing of e-commerce and just-in-time store orders. Synchronizing and coordinating all 3PL work resources is central to keeping the work constantly flowing.
One WES that embodies these attributes is COFE, an acronym for Continuous Order Fulfillment Engine, developed by VARGO. It is the first warehouse execution system that controls all work resources – automation and labor – and organizes, optimizes, sequences and synchronizes the work effort. It is also the first WES to process orders without waves. While the overall efforts of fulfilling many individual orders may be performed at the same time, there is no systemic requirement for the connection or dependencies between the efforts. The efforts for each order start and complete independently from the efforts on all other orders, versus traditional systems that can hold up many orders waiting on the completion of one task COFE’s processing of a continuously maximized pool of orders greatly reduces complexity and inefficiency compared to the wave-method of fulfillment. Its ability to use a revolving batch of work, coupled with a lean methodology, yields exceptional efficiency and expediency in order processing.
COFE orchestrates and balances the work across the 3PL’s various processes, simultaneously running a full mix of order fulfillment processes in real-time including: receiving, dynamic put-away, demand-based replenishment, picking, sortation routing, conveyor and sorting control, and the information required for packing. It integrates and synchronizes the 3PL’s workers with the operation of the equipment, with real-time system-directed labor balancing across multiple work zones.
Dynamic assignment of inventory optimizes inventory placement and ensures ready access to all items needed for orders. As soon as the inventory is inside of the 3PL, COFE knows where that inventory is located. Being real-time, the system uses all available sensory inputs to determine how to adjust the current operation to meet optimal performance. It knows where the workers are within the building, and it makes real-time decisions to move people and drive the processes.
COFE’s continuous fulfillment processing engine constantly monitors and adjusts as necessary to achieve the production objectives as specified by configuration. This engine is always aware of the current conditions, the work backlog, configured work prioritization rules, and available work resources. It always directs efforts to complete existing work before starting new work in order to achieve minimal order cycle times while reaching maximum production with available resources.
Universal Inventory and Labor Force for Multi-Brand Fulfillment
The inventory and distribution processes for handling e-commerce and retail store replenishment within 3PLshave usually been handled separately, frequently in different locations. The latest WES have eliminated this requirement, enabling a truly universal inventory for picking, packing and shipping processes. This permits universal use of processes and equipment across multiple distribution channels, and multi-branded clients serviced by the 3PL. It allows the infrastructure to be more fully utilized without the need for replication in a separate facility.
Retail replenishment and e-commerce typically work with separate workflows, but with the latest WES workers can pick orders for both, which downstream are then consolidated for e-commerce packing and shipping, or destined for retail store replenishment. This permits seasonal changes that influence e-commerce and retail to be normalized, reducing the overall required labor – a boon to the distribution center manager who has to compete for labor, especially at peak times. It also reduces training requirements, and improves overall quality as the procedures are common, reducing the probability of errors due to lack of training.
These latest WES are proving to be a smarter option for 3PLs, and particularly those handling multiple brands where the efficiencies of a universal inventory and labor force can be leveraged. By combining waveless fulfillment with a single inventory and labor force, 3PLs can more effectively orchestrate and balance their labor and machinery resources, and more cost-efficiently deliver the services expected for e-commerce fulfillment and retail store replenishment.