Jan 28, 2021 | Best Practices, Blog, Fulfillment, Warehouse Operations
Welcome to our Shipping Methods Explained blog series. In this series, we will deep dive into fulfillment methods – that is, how businesses fulfill their online orders and get products to their customers.Â
Sounds simple right? Well, in theory, it is. You could hop on your itty-witty bicycle and hand-deliver your product, mission accomplished. But consider the complexity when your company fulfills hundreds to thousands of orders daily, not to mention the skyrocketing shipping costs that could price you out of the market.Â
Managing inventory, navigating each carriers’ specific requirements, calculating the lowest cost from thousands of shipping options… it’s a daunting task. That’s why more and more businesses are outsourcing their fulfillment methods.Â
Are you ready to outsource your fulfillment? Let’s analyze your options to help you decide the best method for your business. In this second article, we’ll discuss Fulfillment-as-a-Service (FaaS). What is FaaS? What are the pros/cons? When is it right for my business? Let’s dive in.
(Check out our first article on Dropshipping here. And be sure to check back for future articles where we’ll cover even more fulfillment methods)
What is FaaS?
Simply put, Fulfillment-as-a-Service (FaaS) is where your company employs a third party company or warehouse to prepare and ship orders for you. This allows you to tap into fulfillment capabilities with no upfront investment of capital, and only pay for the services that you use.Â
Think about it like a subscription to Netflix. As long as you pay the subscription price, you have access to the content and services. Same with FaaS. As long as you partner with a third party logistics (3PL) provider, you can use them to pick, pack, and ship your product.
Now consider the alternative: in-house fulfillment, where companies must invest heavily in warehouse space, labor, management, and software to keep things running smoothly. With FaaS, this is all included in one subscription price, and you can pick and choose the specific capabilities that you need.
We wrote previously about how to choose which fulfillment method is right for you. Take a look here.
How to Start Shipping With FaaS
With seamless integration between your business systems and their fulfillment cloud-based platforms, getting started with a fulfillment provider has never been easier. All it takes is 3 easy steps to start delivering the goods.
Step 1: Find your Fulfillment Partner
The first step to outsourcing your fulfillment is to find the right FaaS partner for you.
There is an endless list of fulfillment companies vying for your business. So when you are vetting each, ask questions like:
- Does the 3PL provider have the capabilities to fit your business needs?
- Can the 3PL provider integrate with your business systems?
- Does the 3PL provider have a proven track record offering reliable services?Â
- What are the costs? Do they charge per hour, per unit or packet? Are there transactional fees or recurring costs?
Not all 3PLs operate the same way: some value customization over speed, some strive to be the low cost option at the expense of service, so be sure to select the fulfillment partner that aligns with your specific strategic goals.
Step 2: Integrate
Once you decide on a fulfillment provider, it’s time to integrate.
FaaS providers offer cloud-based software solutions so that your business can utilize their warehouse management capabilities to control the flow of your products. These solutions offer great value to your business because this allows for highly customized options when it comes to fulfillment – custom packing, custom unboxing, custom bundles – you name it. Â
Also, smart fulfillment companies like ShipHero provide you with the ability to create automated workflows and a frictionless return process through strategic partnerships with companies like Alloy and Returnly.
Step 3: Send Your Inventory
The final step is to send your inventory to your 3PL’s warehouses and get to shipping.Â
Once the inventory is received, the warehouse will begin to pick, pack and ship your products for you. If you picked a good fulfillment provider that is built for performance and scale, the 3PL will also disperse inventory across their network of warehouses, bringing the products closer to where the orders are coming from.
ShipHero is able to provide 2-day ground shipping for the contiguous US due to intelligent forecasting solutions powered by AI. We bring the products to where your customers are located, instead of a central fulfillment hub. This allows us to lower costs and our carbon footprint through an emphasis on ground transportation.
Fulfillment-as-a-Service Pros and Cons
Is FaaS right for your business? Or would you benefit from dropshipping or another fulfillment method? Let’s look at the pros and cons of fulfillment-as-a-service so you can decide for yourself.
FaaS Advantages
Business with big goals, fluctuating sales, and not enough time all find great value in the FaaS model. Beyond the obvious benefit of saving time and effort by having a third party fulfill your order for you, FaaS provides advantages in terms of skill specialization, agility, and scalability.Â
Flexible Pricing
As you grow, 3PLs are able to adapt to your needs and adjust costs accordingly. Conversely, when your business goes through a bit of a slow down (hopefully not), the costs can reflect this as well, and you won’t be weighted down with high overhead. FaaS allows you to forego the high costs, risk, and commitment of leasing and operating your own warehouse.
Skill Specialization
When you choose FaaS, you don’t just get a fulfillment provider, you get a business partner. Most 3PLs employ teams of logistics experts and support staff to help you with your shipping needs, and this comes standard with years of experience with fulfillment best practices and software solutions.Â
Not only do they provide shipping expertise, but also when handling the dirty business of returns. As online shopping continues to grow, so do the number of returned products. 3PLs can help you manage the nightmare of returns and offer a frictionless return experience for your customers.Â
Agility
If there is one thing that FaaS providers do well, it’s move quickly. Whether it’s shipping times or software development, 3PLs embody the spirit of agility. Many fulfillment providers like ShipHero offer 2-day shipping to anywhere in the US; this would require an immense investment from a business, so more and more retailers are partnering with 3PLs to achieve a level of agility they otherwise wouldn’t achieve.
FaaS Disadvantages
The advantages above explain why more and more retailers are partnering with third party logistics providers and fulfillment specialists. Despite the pros, FaaS is not right for every business.
Need Consistent Orders
If you are a startup or a small business still getting their feet wet, it may be better to handle your orders in-house due to the costs associated with fulfillment-as-a-service. But when customers are knocking down your door and you can’t handle the growing number of orders, 3PLs are standing by to help you as needed.
Lose Full Customization and Control
You’d be surprised with the range of customization that 3PLs can offer, but still there is a limit when compared to the full autonomy that you would have with in-house fulfillment. So if you have very detailed and highly specialized requirements when it comes to fulfillment, handling your fulfillment in-house may be a better option.
So, is FaaS right for your business? If you’re not sure, stay tuned for our next article as we dive into Fulfillment by Amazon (FBA).
Learn more about ShipHero’s industry-leading warehouse management software.
Apr 21, 2023 | Blog
Your customers expect their orders to arrive faster than a halftime pizza during the Super Bowl. But don’t worry, eCommerce enthusiasts! Whether you’re just starting out or aiming to refine your delivery process, this guide will equip you with essential insights to elevate your ecommerce business. With the rise of online shopping, mail services and stores have had to adapt in every way to meet the demands. For example, many businesses have turned to 3PL (third-party logistics) services to handle everything from inventory to shipping, ensuring that all aspects of the fulfillment process are managed efficiently. One of the questions that often arises is how these costs are determined and how they impact the overall price for the consumer.
Shipping vs. Handling: What’s the Difference?
While often used interchangeably, shipping fees and handling have distinct roles in the delivery process. Shipping encompasses the fees businesses incur when sending packages to shoppers, factoring in postage, location, and the number of packages. Handling, on the other hand, pertains to the expenses businesses face in readying packages for dispatch, including labor, packaging, and employee resources. Sometimes, handling fees are bundled with shipping costs, but some companies might offer free and discreet shipping and list handling costs separately. The distinction between these costs can influence a product’s perceived value. Hence, businesses should thoughtfully devise their shipping and handling strategy to optimize customer satisfaction and control expenses. For example, some businesses might choose to send items via traditional mail, using stamps, while others might opt for different forms of delivery. One question that often arises is how these costs are determined and how they impact the overall price for the consumer.
How Is Shipping Calculated?
Shipping costs hinge on various factors, such as the weight and amount of ordered goods, the customer’s destination, and the chosen carrier. Companies might also levy handling fees to offset expenses tied to packaging and warehouse inventory management. The final price for shipping services to the customer is derived by summing up company expenses like employee salaries and delivery charges, then adding a markup. For example, if a company uses a 3PL (third-party logistics) service to ship orders, they might have additional costs or savings depending on the efficiency of the 3PL. The location of stores and their proximity to delivery locations can also influence costs. Everything from the way employees handle products to the form in which they’re packaged can influence these costs.
How Is Handling Calculated?
Handling costs are determined similarly to shipping costs. While shipping costs relate to the actual product delivery, handling costs revolve around product preparation for dispatch. This encompasses expenses like labor, packaging, and warehouse operations. For instance, businesses must account for packaging material costs and the time employees spend preparing items. Moreover, businesses might allocate handling costs based on product storage, shipping methods, or order frequency. The size and dimensions of the package, as well as the number of items, can also play a role in determining these costs. Everything from the way employees handle products to the form in which they’re packaged can influence these costs.
Shipping and Handling Strategy for eCommerce
A robust shipping and handling strategy for eCommerce ensures a smooth process that bolsters the brand and delights customers. Offering free shipping for specific purchases or discounted rates for bulk orders is one effective approach. Leveraging technology, like automated shipping labels and tracking tools, can further enhance the customer experience. It’s crucial to consider product weight and dimensions and to present diverse shipping options catering to varied needs and budgets. Providing resources, such as articles, podcasts, or FAQs, can address common queries about the shipping and handling process. By utilizing zip codes and state data, businesses can fine-tune shipping cost estimates and minimize errors. Lastly, ensuring ample stock and collaborating with reliable carriers like the post office can guarantee timely and cost-effective deliveries. Taxes and other additional charges should also be considered in the overall ecommerce shipping guide and strategy too, as they can significantly impact the much-needed profits.
5 Factors to Consider in Your Shipping Costs
Carrier selection: Different carriers, whether it’s UPS, FedEx, or others, offer varied transport options and rates. By evaluating these, businesses can identify the most cost-effective and quality-driven shipping carrier of choice.
Packaging materials: The choice of packaging materials, be it boxes, envelopes, or stamps, can influence shipping costs. It’s essential to select materials that ensure product safety during transit while also being cost-efficient.
Shipping destinations: Different destinations might entail various shipping speeds or varied fees and resources. Additional taxes or import charges might also come into play.
Order volume and frequency: Handling large or frequent orders might qualify for discounts but could also necessitate more resources, impacting storage or kitting processes.
Customer expectations and preferences: Catering to specific customer shipping preferences can enhance satisfaction. Offering incentives like free shipping can also provide a competitive edge in the bustling eCommerce landscape.
Sustainable Shipping: Navigating the Eco-Friendly Path in eCommerce
In today’s environmentally conscious landscape, sustainability is no longer a choice—it’s a responsibility. The eCommerce industry, known for its global reach, has a unique role to play in minimizing its carbon footprint. Sustainable ecommerce shipping options and practices are becoming a competitive advantage for ecommerce shipping solutions, resonating with environmentally aware consumers and reducing operational costs.
Sustainable Shipping Strategies
Sustainable shipping encompasses various strategies, including optimizing delivery routes to reduce fuel consumption, adopting energy-efficient vehicles, and investing in renewable energy sources. Moreover, businesses can transition to biodegradable and recyclable packaging materials to minimize waste and reduce the burden on landfills.
Eco-Friendly Packaging Solutions
By integrating eco-friendly packaging, businesses can save money, enhance brand reputation and appeal to a growing segment of eco-conscious customers. From corrugated boxes made from recycled materials to biodegradable bubble wrap, the possibilities are endless. Implementing green shipping products and practices not only demonstrates corporate responsibility but also contributes to a cleaner planet.
Mastering eCommerce Returns: A Guide to Efficient Reverse Logistics
Returns are an inevitable aspect of eCommerce, yet they often challenge businesses to strike a balance between customer satisfaction and operational efficiency. An efficient return process enhances customer trust and loyalty, making it a critical factor in the success of online retailers.
Automating Return Processes
To master reverse logistics, consider implementing automated return processes that streamline the handling freight shipping of returned items. Restocking strategies, such as inspecting returned products for resale, can minimize losses. Additionally, offering customers convenient return options, such as drop-off locations or shipping option with prepaid labels, can enhance the return experience.
Turning Challenges into Opportunities
Reverse logistics also offers ecommerce stores an opportunity to identify trends in returns, providing insights to improve product quality and customer satisfaction. By embracing returns as a chance to refine processes, eCommerce businesses can turn challenges into competitive advantages.
Global Shipping: Navigating Cross-Border Challenges in eCommerce
Expanding into international markets can significantly boost an eCommerce business’s growth, but it comes with complexities that require careful navigation. Global ecommerce shipping strategy involves more than just sending products overseas; it involves understanding diverse customs regulations, taxes, and import duties.
Navigating Customs and Regulations
To excel in global shipping, businesses need to invest time in researching and complying with local regulations. Accurate and detailed documentation is essential for smooth customs clearance. Choosing reliable international shipping carriers that specialize in navigating complex international logistics can significantly reduce delays and ensure timely deliveries.
Localization for International Success
Localization is also crucial in global and shipping solutions. Tailoring the shipping service options, language, and payment methods to each market enhances the customer experience and encourages international customers to make purchases with confidence.
The Final Stretch: Enhancing Last-Mile Delivery in Online Retail
The last mile of delivery—the final leg between the distribution center and the customer’s doorstep—is a make-or-break stage in the shipping process. Innovative solutions are transforming last-mile logistics, shaping customer expectations and raising the bar for exceptional service.
Innovative Delivery Methods
Drone deliveries are on the horizon, promising swift deliveries to urban and remote areas alike. Autonomous vehicles are also emerging as a potential solution, offering the potential for efficient and cost-effective deliveries. Crowd-sourced delivery networks leverage local resources, ensuring rapid deliveries within neighborhoods.
Real-Time Tracking and Communication
Real-time tracking and communication are cornerstones of last-mile success. Providing customers with precise delivery windows, live tracking, and delivery notifications reduces anxiety and enhances the overall shopping experience.
Shipping 4.0: Transforming eCommerce with Cutting-Edge Technologies
Advancements in technology are reshaping the way eCommerce businesses approach shipping and handling. Shipping 4.0 harnesses the power of AI, IoT, and automation to optimize every aspect of the ecommerce shipping process itself, from inventory management to delivery.
Predictive Analytics and Demand Forecasting
Predictive analytics leverage AI to forecast demand accurately, ensuring optimal inventory levels and minimizing overstocking or stockouts. IoT-enabled smart packaging monitors temperature, humidity, and shock during transit, guaranteeing products arrive in pristine condition.
Automation and Efficiency
Automation accelerates order fulfillment, with robots and conveyor systems streamlining picking, packing, and shipping tasks. Machine learning algorithms continually refine routes for deliveries, optimizing fuel consumption and reducing delivery times.
Shipping 4.0 not only enhances operational efficiency but shipping software also elevates the customer experience through accurate tracking, reduced errors, and expedited shipping options.
Safe and Sound: Navigating Shipping Insurance for eCommerce Success
Shipping insurance is the safety net that protects an eCommerce site, businesses and customers from the uncertainties of the shipping journey. It’s a vital consideration for ecommerce stores, especially when high-value products or delicate items are in transit.
Types of Shipping Insurance
There are various types of shipping insurance, each catering to specific risks. Cargo insurance covers losses due to damage, theft, or accidents during transit. Liability insurance provides protection against legal claims arising from accidents caused by the delivery process.
Assessing the Need for Insurance
Assessing the need for shipping insurance involves evaluating the value of the goods being shipped, the shipping method and route’s complexity, and the potential financial impact of losses. Selecting the right insurance provider and coverage level ensures that businesses and major shipping carriers are adequately protected against unexpected shipping incidents.
Green Packaging: The Role of Sustainable Design in eCommerce
Eco-conscious consumers expect businesses to take responsibility for their packaging choices. Green packaging not only aligns with environmental values but also enhances brand reputation and customer loyalty.
Eco-Friendly Packaging Solutions
Eco-friendly packaging options are diverse, ranging from biodegradable materials like cornstarch-based plastics to post-consumer recycled cardboard. Minimalistic packaging designs reduce waste and create a positive unboxing experience for customers.
Efficient Packaging Design
Beyond materials, efficient packaging design can lead to space optimization, reducing shipping costs and minimizing the carbon footprint of each shipment. By integrating sustainability into packaging choices, eCommerce businesses can make a positive impact on the environment while resonating with customers who prioritize green initiatives.
Supply Chain Resilience: Adapting to Global Disruptions in eCommerce
Global supply chains are susceptible to disruptions ranging from natural disasters to geopolitical events. Building supply chain resilience is vital to mitigate risks and ensure business continuity in the face of unexpected challenges.
Diversification and Risk Assessment
Diversifying suppliers and distribution networks is crucial to reducing dependency on a single source. Risk assessment helps identify potential vulnerabilities and implement proactive measures to counteract disruptions.
Contingency Planning and Flexibility
Having a well-defined contingency plan and a flexible supply chain allows businesses to respond quickly to disruptions. Establishing alternative routes, stockpiling critical components, and fostering collaboration with suppliers are essential elements of a resilient supply chain.
Shipping and Handling FAQs
What is dropshipping?
Dropshipping is an online business model where online stores sell products without maintaining inventory. Instead, they forward orders to the manufacturer or supplier, who then dispatches the product directly to the consumer. This approach allows businesses to concentrate on marketing and customer care without the overhead of inventory management. Some suppliers might even manage shipping via carriers like FedEx, further simplifying operations for online store’ owners.
What is the basic handling fee?
This fee is levied by sellers to cover product preparation and packaging costs for shipment. It’s influenced by factors like the number of shipped items, box dimensions, and required labor. This fee aids sellers in covering their expenses and their profit margins, ensuring profitability.
Does shipping and handling include customs?
Typically, the shipping rates and handling don’t encompass customs fees. These are charges levied by governments on imported goods and are distinct from the ecommerce shipping rates and handling fees. While some carriers might offer customs brokerage services, customs fees are generally borne by the buyer.
Aug 3, 2023 | Blog
A warehouse management system improves your eCommerce business by helping your team pick, pack and ship more items faster. It also provides real-time visibility into your supply chain to give you a full picture at any moment.
If you want to learn more about warehouse management systems, you’ve come to the right place. Read on for a complete guide on warehouse management systems (WMS).
Here’s a breakdown of what you can look forward to while reading ShipHero’s Guide to Warehouse Management Systems (WMS):
Jul 14, 2023 | Blog
One of the easiest ways for fulfillment centers to run into trouble is through an inefficient returns process. Your outgoing fulfillment can be as optimal as any brand on the market, but without a way to communicate and complete returns, warehouses can quickly become overwhelmed and disorganized.
While a product return might mean the customer is dissatisfied with what they received, returns offer a key opportunity for brands to showcase their quality customer service and encourage them to return in the future.Â
Conversely, an overly complicated returns process leaves buyers feeling unappreciated, frustrated and unwilling to visit the online store again. By creating an easy-to-use returns management process, you can ensure your customers walk away feeling positive and satisfied with their buying experience.
Here’s a breakdown of what you can look forward to while reading ShipHero’s Guide to Returns in eCommerce:
Jul 14, 2023 | Blog
Pick and pack fulfillment is a major part of your order processing and inventory management efforts. Improving your picking and packing process means improving your warehouse operations’ speed and accuracy. Better speed and order accuracy, in turn, leads to fewer returns and happier customers.
In this guide, we’ll cover everything about achieving business success with pick and pack fulfillment. Read on to learn more!
Here’s a breakdown of what you can look forward to while reading ShipHero’s Guide to Picking & Packing in an eCommerce Warehouse:
Aug 3, 2023 | Blog
Inventory management is essential for smooth order fulfillment, and it directly impacts your online store’s efficiency and growth potential. What exactly is inventory management, and why should you, an eCommerce business owner, focus on optimizing it? In this guide, we’ll go over the ABCs of inventory management, detailing the terms and formulas in this field and how you can optimize inventory management for your online store.
Here’s a breakdown of what you can look forward to while reading ShipHero’s Guide to Inventory Management for eCommerce Warehouses:
Mar 29, 2023 | Blog
The Objective of Warehouse Managers
Warehouse managers strive to fulfill customer orders promptly while ensuring the safety of their employees. Efficiently utilizing the warehouse area and available tools is paramount. For example, while technology plays a significant role, sometimes the hands-on approach, using one’s own hand, is needed. At times, the old-fashioned way of organizing can be just as effective. Although many emphasize the importance of warehouse management software and technology for optimizing tasks like packing and picking, the putaway process is equally significant. By enhancing your putaway strategies, you can optimize storage areas and streamline the flow of products from the manufacturer to the customer. An effective putaway process offers a solution to various other warehouse processes challenges. There are times when the need for manual intervention arises, and understanding these moments is crucial.
Understanding Putaway in Warehouse Management
Putaway is a crucial part of warehouse operations. It involves moving newly received products to their final locations in designated storage areas within the warehouse, preparing them for the picking process and subsequent order fulfillment. Some warehouses use a staging method, temporarily holding new shipments before organizing them in the designated areas or shelves. The difference in product size and weight can dictate the putaway criteria. For some products, the final destination elsewhere within the warehouse might be predetermined based on their demand. An example of this would be high-demand products being placed closer to the picking area.
Diving into the Putaway Process
When trucks laden with shipments arrive, the putaway process begins. Each warehouse has its distinct workflow, which includes the movement and verification of goods, and tracking their storage locations. This might involve scanning product labels, labeling items, or manually noting each product upon arrival using one’s hand. Essential steps include loading and unloading goods, stacking, palletizing, sorting, and organizing. The criteria for storing items can differ based on product type, its size, and available storage or warehouse space. Errors in this process can lead to significant delays, so it’s crucial to have a robust system in place.
Exploring Putaway Methods
There are three main putaway methods, and the best way to choose depends on your specific needs:
Direct Putaway:
Products are immediately moved to their final location or long-term storage area upon arrival. This method is ideal for smaller warehouses with high order turnover, ensuring efficient handling and storage inbound inventory.
Dynamic Putaway:
A warehouse management software assigns a unique storage location for each product before the shipment arrives. The warehouse efficiency software updates the storage requirements and space availability in real-time using data analytics.
Fixed-Location Putaway:
Warehouse managers set a predetermined layout, allocating areas to specific product types or brands. The number of products, their weight, and available space determine optimal storage location decisions for warehouse workers, reducing the risk of errors.
The Significance of Warehouse Putaway
While putaway might seem like a minor part of warehouse operations, its importance in increasing warehouse efficiency cannot be overstated. Proper planning and task delegation can virtually eliminate confusion regarding product locations. Investing in a Warehouse Management System (WMS) with optimized putaway process optimization offers numerous benefits:
- Optimizing Warehouse Layout: Efficient putaway practices can streamline the warehouse layout, minimizing the distance employees travel to retrieve frequently ordered items. Data from the WMS can guide these decisions.
- Accurate Inventory Management: A significant challenge in warehouse operations is tracking stock quantities. Efficient putaway ensures products are stored correctly, reducing errors.
- Enhancing the Picking Process: A well-organized putaway process ensures employees can quickly locate items, expediting order fulfillment.
- Prioritizing High-Value Stock: An organized warehouse provides more space for valuable inventory. Effective putaway processes can drive business growth by ensuring optimal stock availability.
Factors Influencing the Putaway Process
Several elements impact the putaway process, including the volume of merchandise, shipment frequency, and available storage equipment. The number of employees, the technology used for tracking and labeling, and the type optimal location of products stored can also affect the efficiency of the putaway process. It’s essential to recognize the difference between various storage methods and select the best solution for your business needs.
Best Practices for Putaway
For an efficient putaway process, consider the following best practices:
- Stick to a timeline: Maintain a consistent schedule for shipments, recurring orders, and stock checks.
- Utilize data and analytics: Opt for a WMS with robust data analytics capabilities.
- Minimize travel time: An efficient putaway process reduces the distance covered during product storage.
- Upgrade your WMS: A modern WMS is vital for managing putaway processes, especially in larger warehouses.
- Reduce errors: A streamlined putaway process, aided by WMS, minimizes risks across all warehouse operations.
Key Takeaways
Optimizing the warehouse putaway process is a pivotal step towards enhancing order fulfillment and supply chain logistics. Various warehouse processes and software solutions can assist businesses in this endeavor. Remember, there’s no one-size-fits-all way to optimize the warehouse putaway itself, and sometimes, a combination of ways can be the most effective.
Warehouse Putaway FAQs
What is Putaway in Inventory?
Putaway refers to staging phase of the warehouse process where warehouse employees store newly arrived stock in its designated area.
What are the Putaway Steps in a Warehouse?
The process starts with recording the incoming inventory, often termed as warehouse staging. After taking stock of all the differences in shipment, items are organized in their order volume and respective locations.
What are the Putaway Strategies?
The primary strategies are direct putaway, dynamic putaway, and fixed location putaway.
For more insights on warehouse management, explore articles on warehouse bin storage system best practices, types of storage availability, dynamic locations of warehouses in supply chain management, and warehouse automation costs.
Oct 17, 2022 | Blog
Understanding the contrasts between push and pull supply chain strategies is key to effective operations, especially in a world of fluctuating customer demands. As the scale of these demands grows, the question arises: which strategy is most effective for my operation? Â
This article discusses the importance of these strategies, their impact, and real-life examples.
What is a Push System?
A push system anticipates supply chain operation plans, inventory levels and activities in advance, based on forecasts and projections. It represents the initial point of the supply chain cycle, focusing on the warehousing and transportation of goods. A push system helps you anticipate future demand and manage inventory accordingly.
The push strategy focuses on predictions. It uses forecasts to plan inventory levels, procurement, and the distribution centers’ activities. While this supply chain strategy still requires a level of predictability, it is robust against demand uncertainty and maximizes capacity utilization in the best warehouse fulfillment centers. This strategy is an innovation in the supply chain and production process that helps in solving the problem of demand uncertainty. However, its effectiveness depends on the accuracy of methods of how to forecast demand and the data used.
What is a Pull System?
A pull strategy, on the other hand, responds directly to customer demand, ensuring flexibility and efficiency. Both strategies aim to deliver the right products at the right times. Read more about push and pull strategies here.
In contrast, the pull strategy is customer-first. It bases operations on actual customer demand rather than predictions, offering flexibility in response to changes in immediate consumer demand and patterns. This strategy plays a key card in meeting immediate customer needs, hence enhancing customer experience. It provides solutions to the problem of sudden changes in demand.
Pull Supply Chain Strategies
Pull strategies are a form of stock management in just-in-time. They aim at minimizing stock and focusing on last-minute supply. Under this strategy, the product is pushed into the supply chain whenever customer demands justify it. Those companies that operate under this strategy are examples of companies that wait until they have received an order to build their own computers and sell the product. A pull strategy can help businesses minimize costs by carrying as much inventory that can’t be sold. If a company doesn’t increase production in definite quantities, it risks losing the supply and demand for fewer products.
Real-World Example: How Walmart’s Supply Chain uses a hybrid push-pull system
Walmart provides an excellent example of the use cases of both push and pull warehousing strategies at scale. Their utilization of a hybrid push-pull strategy with data insights for inventory management and demand response illustrates the importance of these strategies in different steps for enhancing customer satisfaction, reducing waste, and increasing revenue. This is a use case that shows how these strategies matter in real-world situations.
Impact of Push and Pull Strategies on the Bullwhip Effect and Consumer Demand
The bullwhip effect describes the magnified fluctuations in orders that often occur in most businesses as customer demand ripples through the supply chain. Effective use of push and pull strategies can help mitigate this effect, creating a more balanced and responsive supply chain. This is where the goal of these strategies comes into play.
Impact of Technology on Both Push vs Pull Systems in Supply Chain Strategy
Technology is an instrumental tool for both push-and-pull supply chain strategies. Under a push supply chain strategy, technologies like AI and machine learning can improve the accuracy of forecasting, helping businesses better anticipate customer demand and plan their inventory accordingly.
On the other hand, in a pull strategy, technologies like IoT can enhance real-time visibility into customer demand, triggering the production or delivery of goods exactly when needed. Also, technologies like blockchain can provide a secure and transparent way of tracking goods in both pull systems and strategies, thereby reducing risks and improving trust.
How do Inventory Management Strategies Change Between a Push and Pull System?
In terms of inventory management and manufacturing processes, a push strategy often relies on maintaining safety stocks to buffer against forecast inaccuracies and sudden demand changes. Techniques like the Economic Order Quantity (EOQ) model can be used to balance order size and frequency, minimizing overall inventory costs. Conversely, a pull production strategy typically employs methods like Just-in-Time (JIT) inventory, where goods are produced or ordered to meet actual demand. This approach minimizes stockholding costs but requires accurate demand sensing and quick response capabilities.
Risk Management in Supply Chain
Risk management in a supply chain varies between push strategies and pull strategies. A push strategy can guard against supply disruptions by maintaining a safe stock, but there is a risk of overproduction if demand forecasts are inaccurate. On the other hand, a pull production strategy, relying on actual demand, can minimize overproduction and stockholding costs. However, it requires a more robust system to prevent stockouts during sudden demand surges or supply interruptions.
Choosing Between Push and Pull Strategies
Choosing between a push and pull strategy for your own supply chain management strategy involves considering several factors, each with its unique impact on your supply chain efficiency and operation:
- Business Model and Product Nature:
The nature of your products and your business model plays a significant role. Are your products long-lasting, or do they have short lifecycles? Is your market stable, or does it fluctuate frequently?
- Demand Predictability
If your business experiences predictable demand patterns, a push strategy could be effective. It allows for accurate forecasting, efficient inventory planning, production scheduling, and engaging with distributors. However, the risk here is overproduction if demand is overestimated or changes unexpectedly.
- Market Volatility
On the contrary, if your market is highly volatile, a pull strategy might be better. This strategy is flexible and customer-centric, enabling you to respond swiftly to demand changes. By focusing on customer demand sensing, real-time communication, just-in-time inventory, and strong supplier engagement, waste can be significantly reduced, and customer satisfaction can be improved.
- Real-Time Data Management
The pull strategy’s effectiveness largely depends on your ability to manage real-time data and ensure supplier flexibility. Thus, your infrastructure capability to handle real-time data should be a key consideration.
In summary, the choice between push and pull-based supply chain management strategies should be made after carefully analyzing your capacity for demand forecasting, understanding the volatility of your supply chain partners and market, considering your product lifecycle, and assessing your capability to manage real-time data. Such comprehensive analysis can guide you in implementing the most effective strategy for your supply chain.
Implementing a Push Strategy in Your Supply Chain
Implementing a push strategy in your supply chain inventory system can be an effective way to control your inventory and manage demand. Here are some steps to a push system to follow:
Accurate Demand Forecasting
Use historical data, market trends, and predictive analytics tools to generate accurate demand forecasts. Understand the patterns, peak times, and seasonality in your business.
Inventory Planning
Based on both production and demand forecasts, plan your inventory. This includes determining safety stock levels to buffer against unexpected changes in demand or supply.
Production Scheduling
Schedule production to match the forecasted demand. This ensures that sufficient goods and raw materials are produced in advance to meet customer needs.
Distributor/ Retailer Engagement
Engage with distributors or retailers to ensure that products are delivered at the retail store at the right time. This requires effective communication and coordination.
Monitoring and Adjusting
Regularly review the forecast accuracy and make necessary adjustments. This ensures your push strategy remains effective even as market conditions change.
A push strategy requires a robust infrastructure for data collection, storage space analysis, and communication with production processes. Also, it requires a certain level of predictability in future demand itself. If implemented effectively, a push strategy can help you maximize your supply chain’s efficiency and utilization.
Implementing a Pull Strategy in Your Supply Chain
A full pull system and strategy is driven by actual customer demand, allowing for a more flexible and responsive supply chain. Here’s how to make pull systems and implement it:
Customer Demand Sensing
Implement real-time data collection systems to sense and meet customer demand more accurately. This data integration ability could involve point-of-sale data, online traffic analytics, or customer feedback.
Real-time Communication
Set up real-time communication with suppliers and manufacturers. When a sale is made, the information is instantly relayed, triggering a replenishment order.
Just-in-Time Inventory
Adopt a Just-in-Time (JIT) inventory approach. Produce or order goods as needed based on actual or anticipated demand, reducing costs and minimizing inventory costs.
Supplier Engagement
Establish strong relationships with suppliers. The pull strategy requires suppliers to be flexible and responsive to changes in demand.
Continuous Monitoring and Adjusting
Keep track of key performance indicators such as lead times, order fulfillment rates, and stockout rates. Use this data to continuously optimize your pull strategy.
While a pull strategy requires a significant level of coordination and real-time data visibility, it can reduce waste, minimize stockouts, and improve customer satisfaction. Implementing a pull strategy is particularly effective in highly volatile markets or for products with short lifecycles.
Concluding Thoughts
In a rapidly changing world, it is essential for retailers to adapt their supply chain strategy strategies to stay ahead in their operations. With careful planning and capacity utilization, supply chains can effectively meet customer demands. The result is a more efficient and responsive supply chain that benefits economies at large. After all, in the world of supply chain management, retailers hold the cards and everything counts.
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About ShipHero
ShipHero is a US-based, leading solution provider in the fast growing eCommerce fulfillment space. ShipHero served over $5 billion of eCommerce orders in 2020 and is growing rapidly. ShipHero provides warehouse management software for brands that operate their own warehouses as well as outsourced fulfillment as a service from ShipHero owned and operated North American warehouses. Some notable customers include Universal Music Group, Glossier and Canadian Tire. ShipHero is a Shopify Plus partner and more than 10% of Shopify Plus stores globally use ShipHero.
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Apr 21, 2023 | Blog
Picking: The Essential Step in Order Processing
In the world of e-commerce, picking items from your warehouse is a pivotal part of the order fulfillment process. Without a reliable picking list, there’s a risk of sending products that might be out of stock or on backorder. Delays in generating pick lists can also postpone customer orders, especially when items are requested for delivery by a specific date. Dive deeper into the world of picking lists and discover ways to enhance their creation. Read more about warehouse picking strategies here.
Understanding the Picking List
A picking list is a vital document used by warehouse personnel during the order fulfillment phase of ecommerce businesses. This list provides the necessary information to find the items ordered within your warehouse or fulfillment center. In the fast-paced manner of e-commerce operations, it’s essential to have accurate picking lists. Relying solely on memory can lead to errors, especially when dealing with a high volume of orders or when items are on backorder. For example, if one product is out of stock, the system can flag it, ensuring that available alternatives are considered.
Distinguishing Between the Two Types of Picking Lists
With the rise of e-commerce, picking lists have evolved. These digital pick lists are accessed via devices like smartphones, tablets, or even more advanced tablets with specialized software. They’ve become increasingly popular due to their convenience. With digital lists, warehouse managers can automatically generate order details, including the quantity and bin location, and forward them to pickers. These lists can also provide comprehensive product information, ensuring pickers don’t mistakenly select the wrong item. Discover the best practices for warehouse bin storage systems here.
Key Components of a Picking List
A picking list should contain specific details about the customer order to guide warehouse pickers. Here are the crucial elements of pick tickets:
- Order Number: This auto-generated number offers transparency, allowing you to trace any issues back to the picker responsible. It’s especially crucial when handling purchase orders or when items are requested for delivery by a specific date.
- Product Details: The SKU, quantity (qty), and warehouse location, down to the specific bin, are paramount. Detailed location data, such as aisle, shelf, and bin, should be included. Regular inventory counts by hand ensure that items needed soon are available and those nearing their reorder point are flagged.
- Customer Information: While this isn’t essential for pickers, packers and shippers need the customer’s name and shipping details to verify order specifics and generate a packing slip. This section might also include special delivery instructions provided by the customer.
Optimizing the Picking and Packing Process
To enhance your picking and packing operations:
- Organize Your Warehouse: Minimize movement within the warehouse for increased productivity. Consider zoning and clustering frequently purchased items together. This not only reduces travel time but also minimizes errors. Regular inventory counts by hand can help maintain accuracy, especially when determining reorder points.
- Evaluate Your Picking Method: There are various picking methods, like batch picking, zone picking, and wave picking. The ideal method depends on factors like order volume and warehouse layout. For example, batch picking might be best for high-volume operations.
- Embrace Automation: Implementing a warehouse management system (WMS) can offer real-time insights and improve staff performance. Other automation options include warehouse robots and conveyor belts.
- Prioritize Packaging: Selecting the right box size and packing materials is crucial. Cartonization, a process of determining optimal box sizes based on product dimensions, can be beneficial. Learn about the different types of warehouses in supply chain management here.
The Role of Picking Lists in a Warehouse Management System (WMS)
Integrating picking lists with your WMS offers numerous advantages. A WMS can auto-generate picking lists when a customer places an order, eliminating manual creation. It also tracks stock movements in real-time, enhancing inventory management. This real-time data ensures that manual stock checks aren’t required after each order. A WMS digital picking list can also suggest temporary containers for pickers to place items before forwarding them to packers.
Optimal Picking Routes: Enhancing Warehouse Efficiency
Imagine a dance of efficiency within the warehouse – the art of optimal picking routes. Just as choreography guides dancers, optimized routes lead pickers through a symphony of productivity. By sequencing the order of item retrieval, businesses can cut down on unnecessary travel, decrease aisle congestion, and create a ballet of streamlined warehouse operations.
Picking List Customization: Tailoring to Uniqueness
In the vibrant tapestry of business, no two threads are alike. Extend this notion to picking lists by exploring the realm of customization. Unveil the power of tailoring lists to specific orders or customer quirks. Whether it’s prioritizing high-value treasures or grouping similar gems, customization of pick lists adds a bespoke touch to the art of order fulfillment.
Real-time Inventory Updates: Navigating the Now
In a world where seconds matter, the magic of real-time inventory comes alive. Dive into the fusion of picking lists with real-time updates, ensuring that pickers aren’t led astray by phantom stock. Imagine a harmony where customers access real-time product availability, enhancing transparency and trust.
Multi-Location Picking: Across Warehouses and Beyond
Imagine a puzzle where pieces reside in different realms. This is the essence of multi-location digital picking lists. Illuminate the complexity and benefits of managing inventory across diverse warehouses or fulfillment centers. From warehouse to warehouse, the orchestration of picking lists shifts to encompass a world of diverse storage landscapes.
Picking List Visualization: A Picture of Precision
In the sea of text, visuals emerge as guiding stars. Welcome the concept of visually enriched picking lists – a world where images and QR codes guide the pickers’ hands. Like an artist’s palette, visual aids simplify the picking process, and reduce errors born from similar-looking items.
Picking List Auditing: The Rhythm of Accuracy
In the symphony of the order fulfillment process, harmony is maintained through routine audits. Envision the rhythm of picking list audits, where meticulous checks ensure alignment between paper and reality. Uncover how these rhythmic checks keep the performance accurate and the applause unmarred.
Picking Metrics and KPIs: Measuring the Symphony
Amid the crescendo of picking, metrics emerge as the scorecards of success. Enter the world of measuring performance with KPIs – pick accuracy, pick to order, fill rates, and picker productivity. This is where numbers paint a vivid picture of efficiency and guide the melody of improvement.
Voice-Powered Picking: Commanding Efficiency
Imagine a world where words hold the power of action. Enter voice-powered picking, where spoken commands guide the hands of pickers. Unshackled from screens or paper, pickers navigate the warehouse with seamless commands, like a symphony conducted by speech.
Picking List Integration with Customer Experience: Beyond the Box
Extend the narrative to a realm where accuracy becomes synonymous with customer delight. Showcase how precision in picking list details translates to seamless order fulfillment. This journey uncovers how accurate and discrete picking list also influences the chorus of customer satisfaction.
Picking List Adaptation to Seasonal Demand: Shifting with the Seasons
In the tapestry of commerce, seasons cast their spell. Unveil the art of adapting picking lists to the ebb and flow of demand. As seasons change, picking lists transform, ensuring that both the quantities and right products dance forward in sync with customer desires.
Picking List Training and Onboarding: Nurturing Expertise
In the realm of order fulfillment, pickers wield expertise. Explore the significance of training and onboarding, where pickers master the art of deciphering picking list details, navigating warehouse maps, and finding their rhythm in the symphony of operations.
Picking List and Returns: The Echo of Efficiency
As the curtain falls on order fulfillment, returns take center stage. Extend the spotlight to picking lists in the realm of returns. Unveil how a well-crafted pick list, guides the choreography of return processing, ensuring that items find their way back to the warehouse with grace.
Picking List Beyond Warehousing: Unveiling Possibilities
From warehouses to the world, the concept of picking lists journeys beyond your own warehouse. Embrace the broader canvas, where picking lists guide not only warehouse staff but also retail employees replenishing store shelves or orchestrating in-store pickup experiences.
Take a look at what a picking list in our ShipHero software looks like!
Key Takeaways
- Picking lists guide warehouse staff in retrieving customer-ordered items.
- They detail product codes, warehouse location, and quantities.
- Properly crafted picking lists reduce errors and offer pickers a clear tool for their daily tasks.
Picking List FAQs
What is a picking list?
A document detailing a customer’s order, aiding warehouse staff in selecting the right items for shipping.
What’s the purpose of a pick list?
It helps locate the correct items in the warehouse to fulfill customer orders.
How does order picking affect profitability?
Efficient order picking ensures order accuracy, leading to fewer returns, reduced costs, and enhanced customer satisfaction.
Dec 9, 2022 | Blog
A lot goes on in a warehouse beyond just shelving products and loading them onto trucks. One important process is order picking, which happens when employees select the items that go into order. It’s an essential part of making sure customers get the products they need, and it’s a job that takes precision and care. In this blog post, we’ll take a closer look at what order picking is and some of the factors that go into it. We’ll also explore how technology changes how orders are picked in warehouses today.
What Is Order Picking in a Warehouse?
Order picking is the crucial activity that pulls individual items from a fulfillment center to create an order. It’s a labor-intensive and costly operation that accounts for over 50% of total warehouse costs—so it pays off to get picking right! That being said, with customer satisfaction, business reputation, and profitability all hanging in the balance, managing picking operations effectively can be no laughing matter.
Picking Methods
When it comes to picking in the warehouse, there are several picking methods to consider. The four top picking strategies for order picking are batch picking, zone picking, discrete picking, and wave picking. All four strategies have advantages and strategies tailored to optimize performance and reduce bottlenecks at different supply chain stages.
1. Batch Picking
Many different order picking methods can be used in a warehouse, but batch picking is often the best option when fulfilling multiple orders that use the same SKUs. This way, pickers only have to travel once to a location for a SKU to fulfill multiple customer orders. Batch picking aims to improve productivity as it reduces repeated trips, steps, and time. In addition, it is often more accurate than other picking methods since pickers are less likely to make mistakes when picking items for multiple orders simultaneously.
2. Zone Picking
Zone picking is an order picking method used in warehouses where pickers are each assigned to a physical area, or zone, of the warehouse. It is only responsible for picking the SKUs from that area. This strategy is often used for complex or multi-item orders to improve efficiency. To fulfill customers’ orders, the picker(s) assigned to a zone is responsible for picking all the SKUs from that zone.Â
This means if an order has items in another zone, a different picker will pick that portion of the order, working like an assembly line. Zone picking is best suited for warehouses that fulfill complicated orders with many units or at least a combination of complicated and simple orders. The warehouse itself must be organized and optimized to make this model work. An order picking method like this can help save time and money while improving accuracy and order fulfillment rates.
3. Wave Picking
Wave picking leverages scheduling windows to group and prioritize orders based on time and importance. This picking method is a variation of zone or batch picking that is best for warehouses with large numbers of SKUs. Rather than picking orders chronologically, wave picking allows businesses to evaluate all orders together to determine an optimal picking strategy. By considering factors such as labor, delivery times, and ship dates, businesses can ensure that orders are fulfilled promptly and efficiently. This picking method is ideal for businesses that must quickly and efficiently fulfill many orders.
4. Piece Picking
If you’re running a small business with limited SKUs, piece picking or discrete picking is the way to go. This picking strategy refers to when a picker works on one order at a time, retrieving all the necessary SKUs before moving on to the next order. This method is best for small businesses with low SKU counts and/or small warehouses or storage facilities.
While piece picking requires a lot more movement than other picking strategies, it makes sense to use it until a business hits a certain scale that warrants one of the picking methods above. This strategy makes it easy to track order picker accuracy and enables rapid response time for order fulfillment.
Warehouse Picking Optimization With Technology
Warehouses are a critical part of the supply chain, and optimizing them can significantly impact your business. There are many factors to consider when optimizing your warehouse, from the layout of your storage shelves to the route your picking staff takes. Introducing new technologies can also help to optimize your warehouse, such as automated order picking systems. By constantly evaluating and improving your warehouse operations, you can ensure that your business is as efficient and effective as possible.
- Barcode Scanners: Barcode scanners are a simple way to improve warehouse operations. They allow for accurate identification of products, locations, and more while speeding up the process with near-zero errors!
- Wearable Computers: Wearable computers are a must-have for any warehouse, with the ability to provide real-time feedback and orders while picking. The small screen, keyboard docks, or gloves allow pickers hands-free access, reducing accidents and product damage because they can work from anywhere in your store without having an assistant around!
- Voice Picking: Voice Picking is an invaluable tool for operators. With voice picking, they’re equipped with a headset and microphone connected to the WMS over local wireless warehouse networks! They also interact verbally through commands which provide detailed instructions about where products need to be picked up or what kind of inventory you have available.
- Collaborative Mobile Robots: In the past, workers had to move their picking carts manually, but now mobile collaborative robots have been introduced to supplement the work done by human warehouse associates and automate movements throughout facilities.
Some of the benefits of doing this include increased accuracy and productivity, multi-language capabilities, reduction of data entry errors, improved safety through hand and eye-free technology operation, and increased availability of picker time.Â
Warehouse Efficiency Hacks
Nothing is more frustrating than searching through a warehouse for a particular item. That’s why it’s important to have a good picking strategy in place. The best strategies minimize picking times by making the most frequently picked items more accessible. Doing so will save time and money in the long run.
Implement a WMS like ShipHero
Implementing warehouse management software can improve picking methods and picking in the warehouse. This allows your team to pick and pack more in the same amount of time and train recruits faster. ShipHero’s Warehouse Management System simplifies eCommerce picking, packing, and shipping. By auto-generating pick lists, accurately displaying product availability, providing real-time insight into order status, forecasting when to replenish inventory through reorder point notifications, and even assisting with planning staff labor, a WMS like ShipHero can take your warehouse to the next level.
Use the Right Equipment
If you’re looking for ways to improve picking methods in the warehouse, you’ll need to invest in the right tools and equipment. There are many types of picking carts available, each with its own benefits. For example, some picking carts are designed for conveyor systems, while others are specifically for barcodes and inventory scanners. But no matter what picking system you use, the most important thing is ensuring you have the right equipment for the job.Â
Track Your Warehouse Productivity
If you’re running a warehouse, keeping track of your productivity is important. You need to know how long it takes to ship an order, how many units are in storage, and how accurate your pickers are. You should also monitor your inventory turnover and average warehouse capacity used. By understanding these metrics, you can help your pickers be more productive.Â
For example, suppose you know that it takes your pickers an average of two minutes to find a unit in storage. In that case, you can improve their productivity by ensuring that the units are stored in a more easily accessible location to them.
Why Warehouse Picking is Important
Warehouse picking is selecting individual items from a fulfillment center to fill customers’ orders. It might not sound glamorous, but it’s essential for any e-commerce or retail business that wants to thrive. That’s because picking directly impacts customer satisfaction, business reputation, and profitability. In other words, your business will likely suffer if your picking operation isn’t running smoothly. So how can you optimize your picking operation and ensure it runs like a well-oiled machine? Following these tips ensures that your picking operation is efficient, accurate, and cost-effective.
How ShipHero Can Help
As anyone who has ever worked in a warehouse knows, picking is one of the most important, and also one of the most tedious, tasks. It’s also crucial to the success of any eCommerce business. That’s why ShipHero created a Warehouse Management System (WMS) specifically designed to make picking faster, easier, and more accurate. Our barcode scanning system cuts error rates by 99.9%, and our built-in reporting features cover everything from COGS to Picker/Packer Efficiency to Replenishment. Best of all, ShipHero is easy to use and integrate, so you can be up and running in no time. So if you’re looking for a picking solution that will save you time and money, ShipHero is the answer.
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For More Information About ShipHeroÂ
Whether you want to let go of running your own warehouse or run your warehouse better, you can do both – and so much more – with ShipHero.
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