Recently we were approached to share our thoughts on what should be the significant considerations and approach to consider when reviewing an eCommerce distribution operation. In this situation we would suggest that applying an enhanced adaption of the classic 5P framework is a useful place to start. So here are our ‘6Ps’, which variously relate to Product, Prediction, Promotion, Place, Picking and People.
Product
Conduct a pulse check of the SKU portfolio from the perspective of confirming if your overall solution remains relevant to the volume and dimensional profile. Has the Sales team taken you outside of a particular SKU activity profile and by doing so markedly shifted the underpinning logistics cost drivers. Through the pulse check, seek to identify how the cost needle might be shifted back into positive territory.
Prediction
Also known as forecasting. True to any business, accurate demand forecasting is crucial for an e-commerce businesses if it is to optimise inventory levels, reduce costs, and enhance customer satisfaction. However, outside of the now familiar major promotional calendar dates such as Black Friday, forecasting in the Ecommerce space can be incredibly difficult to get right given the inherent randomness of online consumer behaviour. Hence the areas we’d recommend to review relate to understanding the capability and strength of the analytics team and ensuring they are backed up with modern forecasting techniques that combine traditional algorithms with the newer ‘social media’ digital information feeds.
Promotion
Check to see if you have the right promotional pick strategy? How well are promotions handled in the DC and have you tailored the right solution to the promoted range of event? Best practice suggests that for high volume promotions pulling the SKU from the standard storage slot and temporally moving it to a ’promotions’ area can yield a demonstrable improvement in picking performance. After the promotion ends, return the SKU to its standard solution and move onto the next event.
Place
Are products being slotted optimally? Often practiced as the slotting of high demand products in the optimal slot location we’d suggest that in an eCommerce environment additional dimension should be considered. An example of which is profiling your slotting to account for what items typically ‘get sold with’ a SKU and grouping them accordingly.
Picking
Potentially one of the most challenging areas to review within a DC, this area is also a leading source of benefit. The challenge in achieving this benefit comes from the necessity to extensively break down the picking process steps and then build the solution into one that is right for the work profile. Unless the base operation is woefully inefficient this is an area that rarely provide quick wins. However, the rewards can be big!
People
Lastly, and this holds true for both automated and on automated environments take a moment to review how, when and how often is labour planning being conducted. Check to see if the macro labour plan for a reporting period is supported on the shop floor. Check to see if the application of resources static to a task regardless of volume fluctuation or do resources get moved as needed to activity hot spots? Consider the need for labour planning tools to plan and manage large staff establishments. In these days of high headcount costs a series of 1% benefits can quickly add up to something meaningful in terms of cost savings.
Having worked extensively in the area of supply chain network design, DC optimisation and sales and operations planning the Siecap team is well equipped to support you on the journey to building an efficient eCommerce Distribution Centre operation. You can find us at Siecap.com.au or call 07 3157 4400 to be put in touch with our nationwide team.