In the first part of our series, we delved into the concept of "aisle-ready" fulfillment, exploring how retailers can streamline their supply chains and enhance the in-store experience for both customers and employees. As we continue our journey of often undervalued benefits of automation, we now shift our focus to another pivotal aspect of modern retail operations: split-case picking.
Both "aisle-ready" fulfillment and split-case picking are value-driving concepts that are often overlooked and not fully considered while building a business case for automation. These strategies, when combined, stand as solutions that not only meet the challenges of rising e-commerce sales but also revolutionize traditional retail replenishment methods.
Split-case picking, often referred to as piece picking, each picking, break pack, or pick-pack, encompasses a range of terms that essentially describe the same core concept: receiving products from vendors in full cases and fulfilling outbound orders in quantities less than a full case. This process applies to various order types, including direct-to-customer (DTC), business-to-business (B2B), and store replenishment.
Unlike traditional full case picking, where entire cases are shipped to stores, split-case picking allows retailers to assemble customized orders, ensuring precise quantities of products are delivered to meet demand accurately. The methods of split-case picking can vary widely, encompassing different technologies, methodologies, storage media, and processes, ranging from manual picking with a cart to advanced automated systems like AutoStore's goods-to-person automated storage and retrieval system (AS/RS).
Automation is particularly advantageous for companies like Hayabusa, a Japanese fishing tackle retailer that distributes thousands of individual products such as small hooks, rigs, lures, weights, and general fishing gear. AutoStore has provided the company with a highly precise way of shipping custom orders, mainly to B2B customers.
Traditionally, split-case picking stands as one of the most labor-intensive processes within distribution centers. With e-commerce now constituting approximately 15% of all American retail sales and experiencing steady growth year over year, the demand for efficient and cost-effective split-case picking order fulfillment systems has never been greater. Distribution centers relying on traditional storage media, outdated software, primitive picking technologies, static wave releases, and static-routing conveyor systems are grappling to keep up with the increasing order volumes and evolving order profiles.
In the context of retail store fulfillment, while some retailers utilize this approach, many brick-and-mortar retailers continue to allocate primarily full-case quantities to their stores. This method simplifies the fulfillment processes, as there is a common handling unit, the case. The technology and processes surrounding case-level picking differ from split case, involving pallet-level storage, case-level selection and movement, and carton sortation.
The rise of e-commerce sales has ushered in a new era of retail, marked by unprecedented challenges and opportunities. As consumer preferences shift toward online shopping, retailers are faced with the complex task of managing inventory at the individual product level, commonly referred to as handling products at the "each" or “piece” level. This shift, driven by the demands of online orders, has significantly impacted retail supply chain fulfillment, necessitating advancements in supporting and enabling technologies.
While e-commerce giants have seamlessly adapted to picking products at the "each" level, many traditional “brick-and-mortar” retailers have been slower to embrace this approach, particularly when it comes to retail replenishment for their physical stores. The reason behind this hesitance lies in the perceived cost implications. Fulfilling orders at the “each” through split-case picking can be cost-prohibitive without the support of automation and technology. Consequently, numerous retailers continue to opt for the conventional method of picking and allocating products at the full-case level, assuming it to be a more economical choice.
In the past, they weren’t wrong. Traditional split-case picking is inefficient, with over 50% of operator time spent searching for products within the warehouse picking areas. However, recent advancements in technology have significantly narrowed the cost gap between full-case and split-case picking. Modern automated systems like AutoStore have streamlined the process, making it more precise and expediting the selection of individual items. With these advancements, the cost to fulfill orders at the "each" level has substantially decreased, making it a much more viable option for retail replenishment and not a solution exclusive to e-commerce fulfillment.
This adherence to full-case picking presents a multitude of challenges both upstream and downstream in the supply chain. On the downstream side, retail stores can find themselves inundated with smaller vendor boxes due to suppliers striving for low master carton quantities (MCQs). These smaller, lower-quantity cartons, while an effort to balance picking cost and allocation precision, have unintended consequences. They necessitate additional packaging, driving up the cost of goods purchased and create additional touches along every step of the chain, from vendor to the store shelf. These inefficiencies not only increase operational costs but also impact environmental sustainability by generating more waste.
The downstream ripple effect is further exacerbated by the limited space within typical store chains. With every inch of floor and stockroom space at a premium, the inefficiencies of handling surplus products become a significant obstacle. Retailers are forced to dedicate valuable sales floor and/or stockroom space to store excess inventory, hindering the seamless flow of products and impeding the customer shopping experience.
On the upstream side, the challenges are equally daunting. Allocators, tasked with allocating products to various stores and markets, find themselves challenged by the necessity to round quantities to the nearest case quantity. This lack of precision results in misallocations, where products may be sent to the wrong stores or markets, disrupting inventory balance and potentially leading to stockouts or overstocking issues.
This dichotomy between the demands of e-commerce sales and the limitations of traditional retail replenishment methods underscores the urgent need for a paradigm shift. Embracing split-case picking is not merely a choice but a necessity for retailers aiming to thrive in the digital age. By investing in automation technology, retailers can bridge the gap between individual product-level handling and cost-effective operations.
Precision in Order Fulfillment: Split-case picking allows retailers to fulfill customer orders with unparalleled precision. Individual items are carefully selected from various cases to assemble customized orders, ensuring that stores receive the exact quantities they need. This precision minimizes overstocking, reduces waste, and enhances customer satisfaction, as shoppers find the products they want, exactly as they expect.
Operational Consistency Across Channels: As e-commerce sales continue to account for an increasing share of overall revenue for omnichannel retailers, having consistent technology and methodologies across all channels has become imperative. A seamless approach to picking products at the "each" level ensures uniformity in operations, regardless of whether orders are destined for online customers or physical store shelves. This consistency not only enhances operational efficiency but also delivers a cohesive and satisfactory experience to customers, regardless of their shopping preferences.
Agility in Response to Demand: In the dynamic world of retail, consumer preferences fluctuate swiftly. Split-case picking provides retailers with the flexibility to adapt promptly to changing demands. By assembling orders with specific quantities of products, retailers can respond effectively to seasonal demands, promotional events, and emerging trends. This agility ensures that shelves are stocked with the right products at the right time, maximizing sales opportunities and enhancing the overall customer experience.
Optimal Inventory Management: Efficient inventory management is the cornerstone of successful retail operations. Split-case picking minimizes excess stock and prevents stockouts, enabling retailers to maintain optimal stock levels. By optimizing inventory, retailers can reduce carrying costs, minimize wastage, and allocate resources effectively, leading to improved profitability.
Streamlined Handling and Reduced Labor Costs: With individual items picked and packed based on specific orders, there is a significant reduction in handling time. This streamlined approach not only enhances operational efficiency but also leads to substantial cost savings in terms of reduced labor hours. Employees can focus on value-added tasks, such as customer assistance and merchandising, rather than spending time sorting and organizing products.
Sustainability and Environmental Responsibility: Split-case picking supports sustainable practices by minimizing packaging materials. Precise order fulfillment reduces the need for excessive packaging, lowering the environmental impact and promoting eco-friendly initiatives. By adopting split-case picking, retailers can demonstrate their commitment to sustainability.
In the ever-evolving landscape of modern retail, where e-commerce sales continue to surge, achieving efficient and cost-effective order fulfillment stands as a paramount objective. Automated split-case picking emerges as the linchpin in this pursuit, offering a solution that not only streamlines e-commerce operations but also unlocks many advantages for retail store replenishment. The reduction in operational costs brought about by automation is not only crucial for fulfilling online orders promptly but also paves the way for enhancing in-store restocking processes.
These dual benefits — efficient e-commerce fulfillment and optimized retail store replenishment — are pivotal considerations when crafting the business case for automation. The lowered fulfillment costs driven by modern technology, like AutoStore, present an opportune moment for companies that have deferred their investments in break-pack picking capabilities to explore automation solutions. By embracing automated split-case picking, businesses can ensure precise order fulfillment, real-time inventory management, seamless customer experiences, and streamlined in-store restocking.
The concept aligns seamlessly with the idea of "aisle-ready" fulfillment explored in my previous blog. Both approaches are crucial elements in modernizing retail operations, ensuring the swift and accurate movement of products from distribution centers to store shelves.
When contemplating automation, it's vital for retailers to thoroughly assess the pros and cons of each solution, looking beyond the confines of the distribution center. Creating a comprehensive financial model can be daunting, particularly when taking a holistic view of the supply chain. However, the effort is worthwhile for gaining a deeper understanding of the ripple effects of the chosen solution.
Often, benefits observed within the four walls of the distribution center alone may not justify significant upfront capital investment. However, including and accounting for all the benefits across the entire supply chain network will help offset the initial cost of automation, deliver continuous upside, and strengthen the business case for automating your fulfillment operations.