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Eight signs you’ve reached the tipping point for goods-to-person order fulfillment

Monday, September 16, 2013

By Gordon Hellberg

One of the most common cautionary adages in business (and in life) is, “If it ain’t broke, don’t fix it.” In other words, if you have something that’s working well for you, keeping doing it that way.

The problem with that adage is it doesn’t account for external factors that may seem insignificant at first, but that will eventually change the way you do business when they reach what Malcolm Gladwell calls “the tipping point” – that point where seemingly small changes in the world around us become so pervasive they completely disrupt the old, comfortable way of doing things. Like the effect PCs had on computing.

Up until the mid-1980s, computers were large boxes that filled rooms. Companies that wanted to outfit their employees with computers had to purchase the large boxes and the terminals to access them from a single company. With the introduction of the PC, however, all the computing power was brought to the user’s desk. And companies could purchase those PCs from any vendor they chose, mixing and matching at will based on features, functionality and (of course) price. The old model may not have been broken in a lot of organizations’ minds, but it got fixed anyway.

There is a similar tipping point happening in the world of warehouses and distribution centers today, and it’s causing management some sleepless nights wondering whether their current model needs fixing. Traditionally, picking orders has involved sending pickers out into pick zones full of shelves and racks containing all of the SKUs required for an order. Order pickers would pick full cases, split cases, or pallet loads and route them accordingly on conveyors, carts or fork trucks to the loading dock for shipment. Built to manage large volumes of a limited number of SKUs, it’s a system that has worked well for years and may not seem broken.

The reality for many organizations, however, is that it actually is (or soon will be) broken. They just don’t realize it yet. But with the move to eCommerce, SKU proliferation, smaller and more frequent orders, increased requirements for traceability, shorter fulfillment windows and other factors, having personnel go out into a vast warehouse to pick orders is rapidly becoming inefficient and costly. Instead, it’s starting to make much more sense to use technology to bring the SKUs to the picker.

So how do you know if your warehouse or DC is in need of fixing? There are some pretty obvious signs; and a few subtle ones as well.

1. You have started selling via eCommerce. This is probably the biggest sign. eCommerce orders generally only have a few products in them at most, and often involve a mix of SKUs. For example, rather than ordering a carton or a pallet of men’s running shoes in size 11D the way a store replenishment order would, an eCommerce order will more likely look like one pair of men’s running shoes size 11D, one pair of women’s running shoes size 7, a package of white crew socks and three blue headbands. Having a picker go into a vast warehouse to pull together that small order is inefficient, time-consuming and expensive. Even an automated DC requires product “touches” from pickers in multiple zones to satisfy a single order But if an AS/RS can pull the cartons with those products, load them onto a conveyor and deliver them to a picker at a permanent station, the products can be quickly removed from the various cartons, put into a tote, and sent down the line to be labeled and shipped. The remaining products in the carton can be placed back into inventory until the next order arrives.

2. Orders are coming more frequently. This issue often goes hand-in-hand with a move into eCommerce. Rather than servicing a dozen or a few hundred stores during normal business hours, you may now be receiving orders from thousands or (if you’re lucky) millions of customers all through the day and night. Repeatedly backtracking over the same ground to fulfill a large amount of small orders day in and day out is hugely labor-intensive. If the products are brought to the picker, however, those orders can be fulfilled in as much time as it takes to reach into the carton, count out the number of SKUs of each and place them in the tote.

3. You have a larger, more diverse number of SKUs than you had before. More SKUs means a need for more space to store them, which means your warehouse/DC has become much larger, increasing the time required to complete an order A good rule of thumb is if you have roughly 15 full time employees picking slow items – those with fewer than 150 picks per hour per person – it’s time to look into a goods-to-person system. Another tipping point is the number of SKUs jumping to more than 5,000.

4. You don’t have enough skilled labor to keep up with demand. Finding good people with the right skills to handle a traditional warehouse picking process is becoming increasingly difficult. If you’re finding you don’t have personnel needed to keep up with demand, you may want to look into goods-to-person technology, perhaps coupled with some of the advanced light- or voice-based picking systems now available. In some cases, you may also want to investigate fully automating the picking process, i.e. using the new generation of robotic technologies to supplement your employees. Some high-efficiency workstations can pick 800-1,000 SKUs per hour, versus 100-150 with manual workers, which can quickly solve a labor shortage problem. The one caveat with robots, though, is you will need to do some extra planning to ensure that the SKUs are brought to them in the exact order in which they need to be picked. Because unlike humans, at this point robots cannot distinguish between products such as a box of pencils and a stapler. They will simply pick the quantity of whatever comes down the line next. That will change in the future as visual recognition technology becomes more sophisticated and less costly. But for now, you need to feed the robots properly.

5. You face traceability requirements. This issue primarily affects the pharmaceutical and food/beverage industries, but it could end up affecting others as well. By nature, since it’s all about automation, a goods-to-person system requires the logging of more data regarding where a SKU came from, where it was stored and the path it followed all the way out the door. Should you need to trace a SKU backwards through the shipping process you will have a large and easily verifiable footprint that can be pulled up instantly in the WMS or WCS system.

6. Your business has seasonality. It doesn’t make good economic sense to staff full-time during non-peak seasons. Yet when the peak hits, efficiency and order accuracy are at a premium because there is literally no time for errors. Using goods-to-person technology gives you the flexibility to scale throughput up and down without adding personnel (and the subsequent labor costs that go with it). In other words, once the technology has been paid for the only cost you incur is for maintenance, giving you a more predictable profitability throughout the year.

7. You’re consolidating warehouses/DC. This again is a question of size and scale. What you used to be able to accomplish easily in several small warehouses or DCs may become far more difficult in one or two larger ones. Since you will be redesigning the facilities and workflow anyway, it makes sense to see if goods-to-person technology can provide significant ROI – especially if consolidation means the loss of skilled labor.

8. You’re expecting rapid growth. Those other factors may not have hit yet. But you’re anticipating they will. If you expect to see rapid growth in the next two years, you’ll need to scale up somehow to service the additional business. A goods-to-person system can deliver incremental improvement today while preparing your organization for the future by providing faster, more flexible workflows.

If you’re seeing any (or all) of these signs, it’s a good indication you’re either approaching or have reached the tipping point. At which point the question is how do you go about fixing it?

The key is assembling the right project team, starting with your IT group. Back in the day, warehouse/DC problems were more mechanical, requiring mechanical solutions – such as upgrading the conveyor or sortation equipment. Today, you have to make sure your warehouse management system (WMS) is tightly integrated to the warehouse control system (WCS) so you have better management of your inventory and can adjust your workflow to fit the demands of the business.

Along with IT, you’ll want to be sure you have a strong project/program manager, one who understands the nuances of the supply chain overall as well as your operation. And you’ll want a cross-section of smart people from other areas. You’ll also want to work with an integrator that is focused on creating solutions rather than simply selling equipment or software. If you’re building a greenfield facility, you’ll need to include someone (either internal or external) who is familiar with the requirements for new construction.

Moving to goods-to-person is not an overnight change. In fact, it can take anywhere from a year to a year and a half to complete the transition, so you should really look to get out ahead of the trend rather than react to it when it becomes critical. The return, however, is worth it.

A successful goods-to-person implementation will result in a 40 to 50 percent savings in labor costs. Just as important, it gives you the ability to grow at a much lower cost than you would have with a traditional picking operation, rewarding you for being successful by yielding greater profitability.

Change can be difficult to justify, especially when what you’re doing seems to be working just fine. But you need to remember that just because it doesn’t appear to be broken doesn’t mean it “ain’t.” Or won’t be soon.

By recognizing the approach of the goods-to-person tipping point you can improve your operation today while preparing your organization to compete in the future. And avoid becoming an object lesson on the importance of change for future generations.

Gordon Hellberg is Executive Vice President, Sales of Wynright Corporation, a leading, independent U.S.-based provider of intelligent material handling systems. With more than 200 engineers in-house, Wynright designs, manufactures, integrates and installs a full spectrum of intralogistics solutions, offering both Wynright-branded and third-party equipment to meet client needs. He can be reached at ghellberg@wynright.com.

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