Automation can help streamline your Distribution Center (DC)-to-store processes, unlocking many benefits that are not typically considered when evaluating warehouse solutions. In this two-part blog, I'll discuss ways to optimize store replenishment, highlight the numerous benefits, and discuss how technology can help.
In today's fast-paced retail environment, speed and efficiency are paramount. To meet the ever-increasing demands of customers and optimize their supply chains, retailers are turning to automation to help. No matter where on the automation scale retailers land, from simple RF picking with a cart to a fully automated, lights-out picking and packing operation, the benefits and justification typically center around space savings, error reduction, and efficiency improvements inside the four walls of the distribution center (DC).
But retailers need to view their supply chains more holistically and consider the impacts to brick-and-mortar stores. Adopt a mindset that the people receiving, stocking, and selling your products are as much your "customers" as the people who buy them. They play a critical role in generating most, if not all, sales for many companies. With their significant headcount and involvement in curating the experience for shoppers, they greatly impact your business' success and reputation. The more the supply chain can do to help alleviate their pain points and improve their merchandising efficiencies, the more time and energy they can put into serving customers and generating sales.
While there are many ways to accomplish this, two strategies are especially effective:
These two changes can greatly improve store efficiencies by pre-sorting product before stocking it and reducing the amount that returned to storage.
In this first article, I'll explain the numerous advantages of delivering a "store-friendly" carton to retail stores and explore how automated technology, such as AutoStore, can enable and enhance this capability. Stay tuned for the upcoming part 2 of the series, where I'll explain why split-case picking can be more effective than a full-case fulfillment strategy.
The concept of "aisle ready" or "store-friendly" is where product is selected and prepared within the distribution center in a manner that enables seamless and efficient processing upon arrival at the store. While there are numerous approaches to storing and consolidating items at the warehouse, the primary objective is to pick items into a single carton to reduce the need for subsequent handling at the store level. Sorting options include separating products based on product categories, planograms, department adjacencies, specific aisles, or a multitude of other criteria.
No matter what the picking strategy at the distribution center— batch, wave, or zone — , with traditional split-case picking methods, the ability to dictate precisely which items get into a given shipping container can be complex and challenging. Often, items that belong to the same aisle or are located on adjacent fixtures aren’t stored or picked in close proximity to each other.
Typically, product can be picked from different “zones” or “areas” as a strategy for dividing the work over a wave or schedule. For example, similar SKUs may be located on separate floors, picked from different storage locations like shelving or case flow areas, or separated by long distances. Various factors, including the physical product dimensions, varying levels of item demand or velocity, or inadequate slotting rules and upkeep practices can cause this type of operation to naturally occur.
While this practice isn't inherently bad and is done for efficiency, it can lead to bad consequences. Stores, for example, can receive a mixture of diverse items grouped together in a single container, creating a hodge-podge effect. Conversely, if these items are picked separately and not consolidated back into the minimum number of outbound containers for that store, it can create additional cube loss in trailers and handling time for both warehouse staff and store workers.
Without a distribution center sorting process, store employees unload mixed assortments and bring them to a pre-sort staging area, such as a receiving dock or stockroom. Stores with limited space sometimes need to sort within shopping aisles, which can be unsightly and detract from the customer’s experience. On the sales floor, cartons are opened, and products are sorted onto a cart or other apparatus equipped with multiple shelves or bins. This process ensures that adjacent or similar SKUs are brought together before getting displayed. Lastly, the products go through one more hands that place them according to the appropriate planogram or fixture. This ensures that items are organized and conveniently arranged for shoppers.
This two-step sorting process requires a lot of handling and employees need a deep awareness of layout and product arrangement to ensure accurate and appropriate placement. A well-trained and seasoned employee might only need 3 to 5 seconds of touch and sort time per item. But, newer employees may take considerably longer as they familiarize themselves with the store's layout and product organization.
While the time difference per item between the seasoned and new employee may appear insignificant, it can be quite costly. If a store receives an average of 3,000 items per week, it accumulates 173 additional hours to sort at that store over the course of a year. For a retail chain with over 1,000 stores and an average wage rate of $15 per hour, this could lead to over $2.6 million in annual labor costs.
This hypothetical example highlights the potential impact of operational inefficiencies on a larger scale, underlining the importance of optimizing sorting processes and minimizing handling time to reduce overall labor costs
In a pre-sorted, “store friendly” process, products can be grouped into as narrow or as broad of a category as desired. At the most granular level, you can consolidate every product destined for a particular fixture into one shipping carton. While this seems ideal, there are negative trade-offs, such as increased warehouse picking labor, more materials cost (cardboard, tape, etc.), and underutilized shipping containers. The goal is to find the right balance between minimizing empty space within shipping cartons and organizing products enough to make it worthwhile for store receivers and stockers. The sweet spot is generally at the aisle- or product category-level but will vary by the size of the business, their number of SKUs and product categories, and store replenishment cadences.
Warehouse automation technology can help you remove many of the barriers to creating an aisle-friendly operation by pre-sorting like-items into the same outbound carton. A robotic good-to-person (GTP) system like AutoStore's automated storage and retrieval system (AS/RS) eliminates a warehouse picker's walk time and consolidates items in a cubic storage Grid, making inventory highly accessible at all times. Digitalization is another key part to creating an automated, aisle-friendly distribution center system. A warehouse management system (WMS) or warehouse execution system (WES) does the work for you by specifying precisely which items go into each shipping container. This enables all piece-picked products to be accurately sequenced and cartonized in any possible way, allowing products that would have otherwise been stored in different zones or areas to be picked sequentially and shipped together in an outbound carton.
When building a business case for automating your warehousing and fulfillment operations, it’s easy to operate in somewhat of a silo and fail to consider the full picture. Remember — you need to think of your “customers” as both the people buying your products and the people selling them.
When constructing a comprehensive justification model, take a holistic view and understand all the puts (and the takes) of all potential solutions considered. Benefits like store labor reduction need to be accounted for in the overall model, alongside all the other benefits realized within the supply chain. Often, due to the overall footprint and magnitude of headcount, what seem like relatively small benefits realized at one store can be significantly amplified throughout an entire retail chain. Storefront benefits, coupled with those inside the distribution center network, will help offset the initial cost of automation, deliver continuous upside, and strengthen the business case for automating your fulfillment operations.
By creating an aisle-friendly distribution center-to-store supply chain, the process of restocking and replenishing shelves becomes faster and more efficient. Instead of spending valuable time sorting and organizing products, staff can focus on quickly restocking shelves and assisting customers. This results in improved customer service, reduced wait times, and a more pleasant shopping experience overall.
Moreover, it allows you to sell more products. Stores sometimes shy away from rushing the replenishment process because of the additional effort, resources, and time required to sort the inbound shipments. But making it easier to get things out to the sales floor logically increases profit potential. After all, unorganized inventory sitting on the dock or staging area in of your backroom won’t sell, either at the register or online through a buy-online-pick-up-in-store (BOPIS) system.
Adopting an aisle-friendly management philosophy can be challenging without the right tools, but with the right planning and investment in automation, it can be a lot easier.
"With their significant headcount and involvement in curating the experience for shoppers, (store workers) greatly impact your business' success and reputation. The more the supply chain can do to help alleviate their pain points and improve their merchandising efficiencies, the more time and energy they can put into serving customers and generating sales."