The speed of delivery or return are fundamental to the success of e-commerce sites, which is why warehouse organisation is the first step in launching an online sales operation: without an excellent logistics system, an e-commerce business will never fulfill its potential.

E-commerce customers expect home delivery without additional costs and with short shipping times, sometimes even on the same day, and preferably with the option of choosing the time-band when the courier makes the delivery.

People talk about “time-based competition (TBC)”, a model in which time is the only competitive factor between different businesses. This implies profound changes in time-scales and there have been drastic changes to products’ life cycles.

Lockdown & E-Commerce: Boom of online sales and of new customers

Earlier this year, when the entire world faced a lockdown, the concept of e-commerce underwent an evolution, going from being an alternative to a physical store to becoming a real necessity.

Starting from mid-March 2020 there has been a double-digit surge in the turnover of consumer goods, reaching a maximum peak of +28%. In the week between 20 and 26 April 2020, the online market of large-scale distribution achieved an all-time three-digit record (+ 305%), stabilizing in the following days at an outstanding +150%. In other words, digital went from Nice2Have to MustHave.

Precisely in this period, it is estimated that there were about 2.5 million new digital users (1 out of 5 of the total of so-called “web shoppers”) who, thanks to the closure of most of the physical shops, made purchases via the internet. The data also show that the tendency to rely on online channels for purchases is constantly increasing: 64% of users believe e-commerce is essential to shop efficiently.

The Click & Collect method, that is, the possibility of ordering a product online and picking it up at the store, experienced a +349% growth and according to sound estimates, this method will increasingly become a well-established habit.

It is predicted that e-commerce will reach 55% worldwide in 2020 and for this reason it seems wise to review one’s own strategies to efficiently manage the logistics of an online business.

How is the management of logistics changing?

Logistics, initially merely the storage and transportation of goods, has now also become a fundamental ally of customer care in the achievement of customer satisfaction. This is because the e-commerce market requires products to meet demands for guaranteed, punctual delivery and a drastic reduction in lead time.

Until a few years ago, delivery of the product in 24 hours was a plus factor, but now it is almost de rigueur.

PwC reports that 88% of consumers are willing to pay for same-day or faster delivery. From Amazon Prime Air, which uses drone technology to deliver orders in 30 minutes or less, to the rise of delivery robot start-ups, delivery is becoming ever faster because the return on experience is one of the parameters on which consumers rate their brand experience.

The same applies to returns: customers expect rapid service with no extra additional costs. In practice, the successful management of an e-commerce business from the logistic point of view implies the management of what is actually a second retail store, better organised than a “real” store.

What are the strategies for the efficient management of e-commerce logistics?

Let’s take a look at Amazon, leader in the e-commerce sector. The company was the first to invest in the strategic role of logistics by opening huge warehouses across the world to cut the distance between the product and the customer. Products are subdivided by object size, grouping together all the units containing several products of the same size but which are never similar in type (the same cell will never contain two products of the same brand but different models). This helps to prevent human error but also increases proximity to the customer.

Businesses have to consider several factors when they decide to review their logistics model, such as:

The time needed to complete an order cycle. From an order delivery time of 48 hours, today to be competitive same-day delivery is the aim. This means having a vast assortment of articles, an extremely well stocked warehouse, an inventory that is always up to date and a fixed location for every type of product.
Another important factor is precision: orders must be complete, correct and, of course, not damaged. Usually, the online channel is required to handle several orders at once and preparing a number of orders at the same time may be complex, especially if the products are not placed inside the warehouse on the basis of a standardised logic. It may be useful, for example, to move goods with a high turnover to areas easily accessible to the operator.

It goes without saying, that redesigning not only the warehouse’s infrastructures but more importantly its organisation, is a crucial step in the field of e-commerce. One of the first choices to be made is the picking method: “man to goods” or “goods to man”?

Picking method: man to goods and goods to man

The “man to goods” picking method is still the most widely used, but it has a huge weak point: time. Everything depends on the operator’s speed and precision. How long will he take to move from one point to another in the warehouse to pick the article?

With the automatic vertical warehouse, this problem disappears, since the goods “travel to” the operator. Its operation is based on mobile trays which can move vertically and horizontally by an elevator. A control software contains the exact location of each article: the operator just types in a code and the goods he requires are delivered to his workstation.

HOW TO SOLVE WAREHOUSE WORKER SAFETY AND PRODUCTIVITY PROBLEMS POSED BY THE PANDEMIC

As the pandemic has swept across the world in the past few months, the necessity – and the dangers – of fully operational warehouses have come into public view as never before. Consumers have come to appreciate the critical role that a well-functioning supply chain plays in getting the items they need. And they’ve learned that items they want, but deemed “non-essential,” may not be available for months.

At the same time, news accounts of problems at warehouses, such as those at Amazon and Safeway, are getting attention due to worker concerns about their own safety. Unions are calling for strikes in response to employees being infected by the virus while on the job.

Is there a way that warehouses can protect workers and, if necessary, stay just as productive even as some employees are unable to work? Absolutely.

THE SAFETY ADVANTAGES OF A VERTICAL LIFT MODULE

In a traditional warehouse, workers are sent to retrieve items stacked on shelves across a massive facility, passing each other many times a day.

With the pressures added to ship more items to keep up with demand and meet production quotas, warehouse managers are likely to hire even more workers if they can.

This makes a bad situation worse in terms of COVID-19. Having more and more people scrambling up and down aisles makes it all but impossible to maintain six feet of distance between them without drastically reducing productivity.

What if instead of the workers going to the goods, the goods came to the workers?

This is the basic idea of a vertical lift module or VLM. Items are stored in a tall, efficiently packed machine, and a worker touches a screen to withdraw the required items. Now a worker can stand at the machine and retrieve all the parts needed without walking around the floor and passing by other workers — making it easy to adhere to the six-foot minimum distance.

Besides the advantage of social distancing, workers are safer using a VLM than they are in a traditional warehouse. The goods are delivered to them at chest height – there are none of the ergonomic problems caused by reaching high or low to pull a heavy item from a shelf. This enables workers to avoid injuries that would force them to leave the workforce temporarily or even permanently. The experience is far more pleasant for workers overall, making job turnover less of a factor than it tends to be in warehouses.
(Reported turnover averages are typically 30% or more annually even without the effects of a pandemic!)

REDUCES PICKING ERRORS

With the high pressures to boost productivity that many warehouses are now feeling, another weakness of traditional warehouses is exposed: mispicks.
Sending customers, the wrong item, too many items, a damaged item, or failing to send one at all is expensive. Estimates are that each mispick costs a company between $25 and $100. Add it up and it can represent the loss of tens or hundreds of thousands of dollars a year.

A VLM eliminates that issue. Pick-to-light systems and laser pointers quickly guide workers to select the right item, cutting out common errors that arise when humans have to make repeated judgment calls all day.

As long as information about an item has been entered accurately when it’s placed in the VLM, a worker will get the right item each time the order is fulfilled.

CUT WAREHOUSE SIZE WHILE MAINTAINING PRODUCTIVITY

Additionally, employing VLMs instead of traditional shelving in a warehouse can reduce the total footprint by 90 percent. So a much smaller warehouse is just as productive as its larger counterpart. Companies that have the option of downsizing to a smaller space can save on fixed as well as variable costs. Conversely, existing warehouse space can be far more productive by replacing a shelf system with VLMs.

OVERCOME STAFFING SHORTFALLS

And finally, the pandemic is creating disruptive forces that are hard to control now and may continue to be challenging in the future. In recent years, it’s been tough enough to hire and retain warehouse workers, and that isn’t likely to abate. So automated systems such as VLMs and accessories that connect them digitally with the rest of a supply chain can make a warehouse more efficient, even with staffing shortfalls. The health and safety of workers will continue to be a concern for warehouse managers, and the need for greater productivity is never going to end.

Good warehouse organisation is a critical success factor for your business strategy and can be a competitive advantage over the long term. The aim of this management is to be able to optimise three main aspects in order to ensure maximum accessibility to each item and reduce administrative costs.

These aspects are:

use of space
use of equipment
management of human resources

An effective warehouse is organised in such a way that each operator can quickly find the desired item and proceed to prepare the order quickly and without errors, thereby increasing customer satisfaction and optimising order preparation and delivery times. Let us look into four main aspects one needs to address while improving the warehouse efficiency.

How do you optimise warehouse space?

Warehouse space is an integral part of the production and / or sales processes, so it has an economic value tied to infrastructure, dedicated resources and invested capital that you need to manage to best minimise the related costs.The main challenge is to proceed towards stock optimisation. Directly related to supply chain complexity and demand fluctuation, it includes all activities aimed at maximising the financial return of inventories to the company with stock inventory as its starting point. The first step to creating an efficient and effective organisation of your warehouse space, which then has effects on the entire organisational system, is in fact to have an awareness of everything that needs to be stored. By comparing the inventory and studying the characteristics of demand and volumes of goods being handled, aggregate levels of stored products and their resulting position in the warehouse can be determined.

Generally, modern warehouse management is complemented by warehouse management software that facilitates optimisation by providing an electronic representation of the space used, based on the goods database. Without fuss, the software allows very quick picking actions because it eliminates the normal lengthy searches carried out by your operators. In order to be able to fully control inventory management, it is advisable to keep track of all the operations, so as to have as accurate data as possible.

To facilitate what is, in essence, the insertion of all goods into a database and to simplify their management, the SKU code of each storage unit must be determined. This is a unique product identifier, a code that generally identifies different versions of the same product. Starting with single SKUs, aggregation volumes and a study of loading/unloading cycles, you determine the criteria for storing goods according to the available space. Based on the most suitable model for the company, the technologies available and the handling systems used, you increase the surface space yield (a ratio that indicates the space occupied by goods in relation to the total available surface area).

What are the traditional warehouse management models?

Depending on the type of storage units to be stored, be they pallets or small items, the infrastructure that is most often used to organise goods are the following six. In order to optimise your space, each type of warehouse should be analysed taking into account the type of goods to be stored (obsolescence, rotation, etc.).

1. Stacked warehouse

This is the simplest type of warehouse, and involves the stacking of goods. Individual storage units are placed on top of each other leaving adequate space for handling the pallets with forklifts or trolleys.

If the goods do not suffer from high-obsolescence and pallet ventilation is not required, this model allows optimisation of the surface area used and ensures a high stock saturation.

2. Shelving warehouse

Suitable for non-stacking products, this allows the depositing of storage units on shelves that allow maximum selectivity. The unit height of the shelves is directly related to the height of the infrastructure, while the layout differs depending on the means used for handling the goods; accordingly, the width of the access aisles is predetermined, limiting the surface yield. It is a model that by its nature does not allow for optimisation of space and time.

3. Drive-in and drive-through warehouse

This system involves the use of structures made up of shelves on which the pallets are placed and which allow the carts used to enter into the structure. This works with non-stackable goods with a limited number of product reference numbers but a high number of pallets for each product number. The drive-through method allows you to have one side for storage of goods and one for picking, but you need to evaluate whether the available space permits this. Determine if storage and picking actions must occur at the same time and whether LIFO (Last In First Out) or FIFO (First In First Out) logic is to be used.

4. Cantilever warehouse

Suitable for the storage of bulky goods and non-standard shapes, this allows storage to be developed vertically with the resulting saving of dedicated floor space.

5. Compacting warehouse

Unlike the previous options, the compacting warehouse eliminates aisles and maximises the volumetric return and surface yield but only if goods can be organised according to their frequency and picking order. Otherwise opening up the aisles unnecessarily will waste a lot of time.

6. Shelving and tray units for small items

Where it is necessary to store small storage units, traditional organising methods involve the use of shelves or trays and an operator engaged in picking. To make the most of the available space, the products should be stored according to their picking order and according to size, so you can use every tray or shelf and avoid empty spaces.

Automated warehouse management models

Warehouse automation is a very hot topic when it comes to logistics and space optimisation; the mistake to avoid is to consider it as the only solution to a company’s multiple problems. The adoption of advanced warehouse management systems can certainly bring many benefits but not without oganisational change to integrate new synergies between man and machine.

1. Automatic warehouse with stacker cranes

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These are automatic warehouses for pallets and large boxes comprising shelves that are interspersed with spaces wide enough to allow stacker cranes to move along the aisles of the warehouse. This system is operated by means of a centralised computer unit that propels the stacker cranes along the rails. They then carry out the picking actions even at great heights.

When small components, accessories, small and medium-sized items are stocked, the stacker crane is more accurately termed a Miniload and if this is the case, the storage units are typically crates.

How does the stacker crane warehouse work?

The central computer receives the order and automatically locates the position of the product that is to be picked using the stacker crane, according to the “goods to man” picking principle.

This kind of warehouse allows you to speed up your management time by means of automatic picking and even free up space because the cranes adapt to the aisles between the very narrow shelving units. The operator in this case does not have to look for the product or pick it using the forklift, which is a much more time-consuming activity that demands more space between the various shelving units than the automatic system.

Whenever you decide on the layout of the goods within the warehouse, the first action to be taken is to define the storage unit, even in the case of an automatic warehouse. In this specific type of warehouse the goods are located and picked using full storage units (pallets or trays). If picking is instead to be of a one-to-one type, the most efficient type of automatic warehouse, in terms of savings in both space and time, is as follows.

2. Automatic vertical tray warehouse

The Vertical Lift Module (VLM) consists of a single vertical block with movable trays inside. This is the ideal solution for those who need to store a lot of goods but have more vertical than horizontal space available. In fact, this kind of warehouse is suitable for storing all types of material, bulk or packaged, even of very different sizes because it is possible to use Dynamic Tray Height Storage. For even more effective savings, we recommend using each tray to store goods of a similar size to minimise any waste of space.

The two main variables to consider when deciding whether to buy an automatic vertical tray warehouse are:

size: it is also possible to store very bulky goods but if the goal is to save space you should be very precise when deciding on the layout of the materials
weight: get information beforehand about the capacity of a single tray

Optimisation does not necessarily mean you need to acquire more space or increase dedicated resources. It’s more important to make the most of your available capital (physical and non-physical) and balance it in against your needs. Look at the types of operations that are to be carried out inside the warehouse, and your forecasts for demand.

Differences between automated management models

There are various automated warehouse management solutions; it is worth mentioning carousels (horizontal and vertical) and multi-column warehouses, as well as those already discussed. They are all systems which provide more efficient warehouse management and space saving compared to traditional solutions.

One specific type of automatic warehouse may not be suitable for all, and we will analyze the various types on the basis of the following variables: picking speed; space saving; maximum number of SKUs.

Picking speed: carousels and vertical buffer module (VLM) warehouses are the two types of automatic warehouse which maximize throughput times. To shorten times even further, it is possible to install several machines side by side so that the operator is no longer forced to operate with just one warehouse, and can speed up picking even more. On the other hand, miniload and stacker crane systems have lower throughput rates because the stacker crane creates a bottleneck.

Footprint: this is the ratio between the amount of space used and the total amount of material stored. Factors which influence the result are the maximum operating height of the system and the storage density. VLMs perform best, because the trays can be moved around inside the machine, minimizing the amount of unused space. Horizontal carousels and CarryPick systems are least effective in saving all possible space, since their operating height is limited.

Maximum number of SKUs: the maximum number of SKUs which can be handled depends to a large extent on the previous criterion. For all systems which have structural limits on their scalability (i.e. carousels, VLMS, multi-columns and vertical modules) there is a limit.

Flexibility: if your are seeking the utmost storage flexibility for your warehouse, then vertical buffer module (VLM) automatic warehouses are the solution you need. Thanks to the automatic organization of trays inside the warehouse on the basis of the products stored.

Ergonomics: with regard to ergonomics, the variables to be considered are the distance the operator has to move and the ease and convenience of picking operations. All the systems we have examined have similar ergonomics levels, with only two exceptions. On the one hand, horizontal carousels are the worst in terms of ergonomics because not all storage units are easy for the operator to reach. On the other hand, Vertical Buffer Module warehouses have been specifically developed with ergonomics in mind, and are therefore the best solution with regard to this criterion.