Distribution Centre & Demand-Driven Supply Chain

Content By | RIS News

Omnichannel retail is well known for its disruptive forces and tremendous opportunities. On the disruptive side of things, the rise of e-commerce has driven huge changes in the way of retail products must be distributed to the end consumer – not just through stores anymore but also straight to the shopper’s home. The operational challenges to adapt and compete have been immense. However, that transformation has come with the opportunity for double-digit e-commerce sales growth for many brands and merchants, plus the chance to establish even closer consumer relationships.

Adjusting the supply chain to meet omnichannel demand is not easy, and there are unique complexities facing every part of the chain, including product development, merchandising, sourcing, and fulfillment. This post will discuss some challenges and opportunities specifically related to the final links in the chain, from receiving goods at the distribution center (DC) to responding to orders.

The Efficiency-Expediency Balancing Act

The modern retail DC is a hive of multifaceted activities, all centered on moving product inventory where it needs to go as quickly, accurately and cost-effectively as possible. Traditional wave-based fulfillment processes have emphasized efficiency when it comes to picking, packing and shipping large batches of the same items. All hands on deck, so to speak, would focus on moving the batch from one process to another until it went out the door and onto the truck. There were buffers between processes and if all of the hands, from pickers to packers to loaders, were full of work. the whole wave would need to slow down or stop for a while until they were caught up and could let more of the batch’s items into the flow. But the work usually got one in an efficient manner because the facility was built from the ground up to support this type of flow.

Today’s e-commerce orders complicate things. Getting an online order out the door requires more of an assembly mentality and process flow. So how does a retailer coordinate all of those same “hands” to do all of the same processes when the “batch” is now a single unit or maybe two to three units? “They may as well be from different ends of the earth.” That’s how one seasoned distribution executive summed up the vast difference between the efficiency needed to handle traditional retail store fulfillment and the expediency so critical to filling e-commerce orders. The former requires workforce skills, systems, machinery, processes and infrastructure to move large quantities of items, in bulk. For example, a DC might process orders of thousands of items each multiple times daily, sending them off in large truckloads to stores. On the other end of the spectrum, expedient fulfillment also requires specialized processes, equipment, and technology, but this time focused on picking, packing and shipping thousands of orders of one or two items, each heading to a different destination.

Polar opposites indeed. It’s no wonder many retailers initially opted for separate e-commerce fulfillment centers. However, it’s now widely considered to be best practice to co-locate fulfillment operations for stores (retail) and e-commerce (online), with all their yin-yang differences, into DCs that can literally do it all. But to do it well, warehouse technology hs to let inventory flow efficiently or expediently when need be.

Like many leading fashion retailers, Gap Inc. has been investing in its warehouse management and fulfillment infrastructure to evolve with today’s omnichannel demand. In particular, the retailer has gotten away from having silos of distribution for different channels. It’s distribution network services the entire Gap Inc. family of brands, across both online and in-store channels. “Like our customer, we think about the omnichannel experience,” says Kevin Releford, regional director, global supply chain and product operations, Gap Inc. “Previously, Gap Inc. operated retail and online distribution centers separate channel operations, but our capacity and workforce have allowed us to flex to the growing shift toward omnichannel shopping by combining both channels into single facilities. This increases our efficiency to deliver inventory to our customers by having a more effective regional network.”

Strategies for the Demand-Driven Supply Chain

Warehouse execution systems (WES) are designed to organize, sequence and synchronize a DC’s resources, including people and machines, to adjust to real-time demand conditions and reprioritize work accordingly. They serve as a sort of connective tissue between order/inventory systems of record (WMS and ERP) and warehouse control systems (WCS) that drive material-handling equipment (automatic storage and retrieval systems, conveyors, sorters, and, increasingly, robots).

Retailers can leverage WES automation to prioritize the day’s shipping volume with minimal staff intervention, freeing DC management and team members to focus on making sure everything gets packed properly and out the door on time. They do not need to be concerned with scheduling the next batch wave or determining when DC resources will be able to handle time-sensitive e-commerce orders. When it makes sense to do so, batches of orders can still flow through the facility, but these batched do not prevent other orders from being introduced into the flow. Work on each order starts and finishes independently from the work on all other orders. In this way, the WES enables a blend of wave and waveless processing to provide more dynamic order fulfillment and to prioritize the most important orders at a given time.

Sometimes, this means identifying synergies among multiple e-commerce orders so that they can be processed with batch-like efficiencies – just in time to make the last truck pickup of the day. The WES knows exactly which orders are in the queue and how long it will take to process them from the time they are released until they exit the DC.

The latest warehouse technologies are leveraging artificial intelligence (AI) to analyze customer orders as well as the productivity of associates and material handling equipment, says Steven DeNunzio, a senior lecturer and director of the Master of Business Logistics Engineering Program at The Ohio State University’s Fisher College of Business. “More and more solutions in the WMS/WES/ERP space are moving toward the concept of lean fulfillment and away from traditional batch waves,” he says. “All of this is in response to an increasingly sophisticated and difficult-to-predict customer and the need to remain agile and adaptive.” “It’s not always about speed,” says DeNunzio. “I think the buzzword today is ‘precision’. Do we meet the omer’s expectations? That may include speed. Today, it usually does. But it also includes things like getting it to them precisely when they want it, or packaged exactly the way want it, or delivered on the other side of their garage or front door.”

DeNunzio offers an example of Amazon Day. Amazon customers select a day that’s most convenient for them to have their Amazon purchases delivered. “Unless you specify otherwise, everything’s delivered on that day. This concedes that while a customer wants something fast, they don’t want to be peppered with deliveries every day. That may not be their definition of ‘service’. They also need delivery convenience,” he says.

Gap Inc.’s investment in warehouse-related software and automation is helping the retailer respond better to quickly changing fashion trends. This includes fulfilling the demand from its expansive store network and individual consumers’ online orders. “Knowing that we must serve both channels (retail and online) seamlessly, the tools we use need to be flexible and focus on speed and scale. That allows us to react quickly to demand and keep our service levels high,” says Releford. “At Gap Inc., we are always looking to serve our customers better and will continue to invest in automation that allows our teams to move faster and remove friction.”

Finally, there is a trend among retailers towards using regional satellite DCs to better respond to localized demand. Such smaller urban and pop-up DCs will continue to become more common, says DeNunzio, who also expects to see the repurposing of unprofitable retail stores into points-of-presence for distribution. This might include part of an unprofitable store or the entire store. “This is just the continued evolution of true omnichannel/unified retail,” he says, as retailers focus on “finding better ways to shorten the last mile and improve service levels to customers.”

Conclusions

The time is ripe for retailers to leverage technology to fulfill orders, regardless of channel, from a common inventory pool within the same DCs, rather than trying to manage separate stockpiles and DCs for their e-commerce orders. By doing so, they optimize warehouse capacity, machinery, and labor and can often respond more quickly and cost-effectively to consumer demand.

It’s true that fulfillment requirements for these different channels – shipping in bulk to stores vs. shipping one or two items to individual consumers – can seem at odds with each other. But the technology exists today to efficiently – and expediently when necessary – flow both types of orders through the same facility. It’s not magic, but WES technology advances can make it seem as if the right products are making it to the shelf or to the consumer’s doorstep “automagically.”

Check out LS Central, an ERP system designed for retailers. Along with Dynamics 365 Business Central, all your warehousing, inventory, and distribution needs will be taken care of. If you would like to speak to a consultant please call allonline365 on  +27 (21) 205 3650 or email us on info@allonline365.com. 

What Kind of Distributor Are You?

Blog Written By | ERPFocus

Distribution ERP – What Kind of Distributor Are You?

Evaluating advice and information relating to ERP and distribution requires first that you understand exactly what portion of the distribution spectrum you are interested in, and then, what portion of the information – vendor claims, ERP implementation consulting experience. etc. – your evaluation is referring to.

Distribution can refer to channel – retail or web or wholesalers, for example. It can be shorthand for the primary function of administering transportation routes and freight management. If the distribution is used in the context of manufacturing, then it may be limited to getting finished inventory off the loading dock and on to a truck. In all of these cases, the functionality requirements of distribution ERP software are significantly different, and the vendor selection process can and should be different.

Channel Distribution

Managing channel distribution is largely a matter of marketing strategy. How you choose to sell your products, and to whom, must be a well thought out approach, or you can end up alienating your customers. For instance, if your primary channel strategy is to get your product to market via regional distributors, then later decide to also offer your product directly to consumers via a website, that could put you in direct competition with your distributors. The types of ERP solutions that help manage this sort of distribution have more elements in common with customer relationship management (CRM) than traditional supply chain management.

Logistics Based Distribution

Companies which make their money primarily from the transportation of goods from one point to another are dead center in the distribution spectrum. These companies deal with a very unique set of business problems and need a very unique set of ERP utilities as a result. Distribution companies are extremely sensitive to fuel costs and fuel consumption, and the effect changes in either can have an effect on costs and productivity. Transportation companies operate in a highly regulated arena, in which the hours drivers can work is rigidly specific, and can sometimes complicate the planning for long hauls. Truck and trailer (asset) management requires its own unique math formulas and logic. And all of this occurs in an environment that is chronically short of qualified drivers. Distribution ERP software for this segment needs to integrate smoothly with these business problems.

Manufacturing Distribution

Manufacturing operations often have a distribution function that is almost entirely a warehouse function, whether the warehouse exists as a part of the factory, or as a separate distribution center facility. Warehousing issues typically involve picking strategies, inventory movement, financial control, cycle counting, bin location, safety management, and document creation for bills of lading, shipping labels, and packing lists. Again, the ERP packages that handle these things effectively probably aren’t effective at handling the previous two categories of distribution.

The conclusion is to be well versed in what distribution requirements you have as you do your research for the right ERP vendor. No distribution ERP system on the market is all things to all organizations, and finding out the right fit for you will take self-knowledge and patience.

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Looking at Warehouse Management in ERP

warehouse management

Blog Written By | ERPFocus

ERP for warehouse management

If you are a manufacturing company that engages in distribution as a sideline, simply as a means of delivering your manufacturing output to customers, then you are likely to be both appreciative of and possible overwhelmed by warehouse management functionality in ERP. On the other hand, if you are primarily a distribution company, then you likely know how and why you make money and, when choosing distribution software, will emphasize the features warehouse management that contributes the most to your operation.

Labor efficiency in warehouse management ERP

If labor efficiency is the key success factor in your distribution operation, you will want ERP to deliver a warehouse management system that has a robust capability to optimize pick-and-pack strategies. One strategy might be to simply minimize pick time, while another if space is limited and trailer turnover is critical, would be picking and staging complete orders most efficiently. The right warehouse management ERP should offer different picking options, allowing you to experiment and find the one that suits your company.

Levels of control

For some distribution operations, labor costs associated with picking, staging and loading a shipment are minuscule compared to the cost of an incomplete or erroneous shipment. Imagine that you were responsible for shipping the lighting and wiring kit for a new restaurant. The truck arrives on site, the wire is there, the light fixtures are there, the switches are there, the circuit breaker is there, but the electrical conduit…somehow didn’t get on the truck. The electrical crew just stands around waiting while the project manager desperately scrambles to postpone the arrival of the flooring and furniture, In this case, your warehouse management system needs to have strong controls and redundant verification loops.

  • Did everything for the order get picked up?
  • Did everything for the order get staged?
  • Did everything for the order get on the truck?

Bin Control

Another facet of warehouse management ERP is bin control and your required level of sophistication. When designing your controls for inventory control in ERP, you will learn that if you put generic inventory into a bin location, and then remove it in its entirety and ship it, you probably need a different level of bin complexity than if you remove 100 units of inventory from a bin, count out forty units for an order, and return sixty units to the bin. And that is a different level of sophistication from being easily able the forty-unit order, and return forty previously allocated units to the original inventory location.

At the end of the day, using warehouse management effectively within (or without) ERP is about emphasizing capability when it aligns with your business strategy and simplifying as much as possible the features that are not mission-critical. If you are not able to do this effectively, you may end up with a warehouse operation that is more complicated than you want without any additional benefits. If distribution is not your primary source of profit, then you may have to take what you get; the ERP package will be decided on for reasons other than warehouse management. If this is the case, be prepared to overman in the short term, and figure out how to automate in the long term.

Dynamics 365 Business Central, on the other hand, offers a wide range of modules for businesses to grow into. You can keep your finance, sales, operations, and warehouse management under control – all in one system. This adaptable ERP offers a wide range of benefits for small to medium enterprises. To find out more, contact allonline365 to speak to one of our consultants. Call us on +27 (21) 205 3650 or email  info@allonline365.com.

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