THE WIDE WORLD OF eCommerce Fulfillment · 2020-05-11 · Camelot 3PL Software | The Wide World of eCommerce Fulfillment. 4. Introduction The wide world of eCommerce fulfillment

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THE WIDE WORLD OF eCommerce Fulfillment

Through the years, Camelot has been evolving its Warehouse Management Solutions to address the shifting landscape of the 3rd Party Logistics Industry. Having a culture of continuous learning, along with collaboration with our customers, Camelot has introduced many innovative tools to assist 3PLs with keeping up with the advanced demands of eCommerce fulfillment operations.

The purpose of this eBook is to prepare you with the concepts, terminology and operational guidelines that warehouse operators should be considering for a successful fulfillment operation. Feel free to share your experiences with Camelot so that we can learn how to assist you better.

Table of Contents

Introduction The Wide World of eCommerce Fulfillment ............................04

Chapter 01 The Principles of Successful eCommerce Fulfillment ..........06

Chapter 02 Receiving eCommerce Orders ................................................08

Chapter 03 Order Planning and Batching ..................................................10

Chapter 04 Picking Orders .........................................................................12

Chapter 05 Pick Aisle Slotting ...................................................................14

Chapter 06 Pick Aisle Replenishment .......................................................16

Chapter 07 Packaging and Shipping .........................................................18

Chapter 08 Label Printing ..........................................................................19

Chapter 09 Exception Handling .................................................................21

Chapter 10 Backorder Management .........................................................22

Chapter 11 Returns Management .............................................................24

Chapter 12 Inbound Receiving ...................................................................25

Chapter 13 eCommerce Fulfillment Charges ............................................26

Appendix A Glossary ...................................................................................28

Appendix B Questionnaire ..........................................................................30

Camelot 3PL Software | The Wide World of eCommerce Fulfillment 4

IntroductionThe wide world of eCommerce fulfillment

Although, with total retail sales in 2018 at $3.628 trillion, eCommerce is still only 14.2% of overall retail purchases. In 2017, eCommerce represented only 12.9% of retail purchases. So this shift of 1.3% to eCommerce this past year is a sign that eCommerce is continuing to grow. Although we may feel that eCommerce has already taken over all retail, these statistics still shows that eCommerce has a lot of room for growth.

With the ease of setting up shopping carts, payment programs, and small parcel shipping services, it’s never been easier for products to find their way to consumers by way of alternate channels rather than traditional brick and mortar retail stores. This shift in purchasing has a massive impact on the supply chain and creates new opportunities for 3rd party providers to get involved in this modern-day gold rush.

Consumers have put a huge emphasis on convenience, where they can order products from the comfort of their home or on-the-go from their phone and they know the items will be delivered directly to them as quickly as they need it.

2017

12.9%

2016

11.5%

2018

14.2%

eCommerce overall retail purchases

The retail landscape has been undergoing a massive transformation for the past decade. Online purchases have hit an all-time, with consumers purchasing $517.36 billion worth of goods and services online with U.S. merchants in 2018. This is a 14.2% increase over 2017, showing that it’s not about to go away any time soon.


Are you fulfilling online orders from shopping carts? Are you expecting 100s, 1000s or 10,000s of orders per day? Are you stuck wondering how to process all of those orders efficiently and accurately? This eBook will walk through the key concepts of eCommerce fulfillment for a 3PL, and discuss the decisions that will need to be made to implement an efficient process flow.

The 3PL industry appears to be the primary benefactors of this eCommerce shift as many merchants and marketers have products to sell, but they don’t have elaborate logistics supply chains to move the products to the consumers. 3PL Warehouses provide the storage and services to fulfill these orders on-time and with greater accuracy. But most 3PLs aren’t stopping there, by providing a slew of Value-Added services, such as Backorder Management and Returns Processing, they can increase their value and create long-lasting business partnerships.


Chapter 1The Principles of Successful eCommerce Fulfillment

The principle of Driving System Automated Decisions indicates an autonomous program that is repeatable. A series of pre-defined decisions based on common factors will drive efficiency, which is needed for profitability.

As this book goes through the various components of eCommerce fulfillment, the six principles listed below will be the focus. We must constantly work on creating a smarter, repeatable process to become successful in eCommerce.

Reducing Manual entry of data is paramount to automation. There are only so many hours in a day and one person cannot be punching data into a system. Humans are way too expensive and unreliable for data entry. Therefore, the reduction of manual input is the key to accuracy and long-term efficiency.

Each decision that is made needs to respect and adhere to the following principles:

1 Drive System Automated Decisions

2 Reduce manually entered data

3 All work is performed in batches

4 Find opportunities to consolidate steps together

5 Account for value-added services

6 Isolate exceptions


Performing work in batches is important because it saves time if you do the same series of steps for a group of tasks, rather than perform the same series of steps for each individual task. By doing tasks in batches drives volume efficiencies and allows the cost of labor to be spread out over a larger array of tasks.

By Consolidating tasks from 6 steps to 5 steps, you’ve reduced one step in each transaction. Over 1,000 transactions, you’ve saved 1,000 steps. Therefore, finding 1 small step to merge or eliminate will add up over the full volume of transactions.

Providing Value-added services cannot be discussed enough. This is where 3PLs can get creative in the types of services they can offer that drive real value and profitability. Simple things such as QA inspection and re-labeling, or more complex tasks such as Backorder Management and Reverse Logistics (Returns Management) can be major feathers in the cap for a 3PL.

By isolating exceptions, you lower the risk of work stoppages due to order discrepancies allowing you to move them aside and process separately. This allows you to handle the exceptions in a careful and tactful way while avoiding any slowdowns allowing the bulk of the error-free orders to flow smoothly through the system.

Order Fulfillment

InventoryManagement

Process Pack ShipPickReceive


Chapter 2Receiving eCommerce Order Information

The two leading methods of obtaining high volume order information into the warehouse management system is via EDI or a Web API.

Electronic Data Interchange (EDI) has been around forever, so just about every system should handle it, and handle it well. If not, that should be a red flag to evaluate your software. When exchanging data through EDI, there are various formats including X12, XML, CSV, and JSON with more showing up all the time. Typically, one party in the EDI exchange may dictate the format, and the rest must follow suit, or a consensus is chosen based on what each software uses most often. EDI is great for its simplicity, cost to implement, and wide-range of resources in the market that are familiar with it.

In order to begin fulfillment, the warehouse must have a way to get the order information. With the growth in technology, electronic transfer of data is the preferred method for obtaining orders. The first 2 principles of handling high volume eCommerce fulfillment are to Establish System-Driven Automation thereby Reducing Manual Entry of Data into the system.


eCommerce may often demand a faster pace, more real-time exchange of data, and that is when a Web API may be required. A Web API is similar to EDI in that data is still organized into a file format such as XML or JSON, but the communication happens in real-time using a protocol such as SOAP or REST so that both software systems immediately know the result of the transaction. Most eCommerce orders are sourced from a shopping cart web ordering system, and these systems usually are built with a standard open API for interacting with the orders in the system. If the warehouse management system has a Web API, a service can utilize these Web APIs to quickly move orders between the shopping cart and the WMS. This service that moves the orders may be written by a developer of the WMS, the shopping cart system, or a growing industry of 3rd party developers whose role is to build integrations between systems. Since the transfer of data is in real-time the shopping cart software can get immediate feedback on the status of orders in the warehouse and reflect current inventory balances to reduce out of stock events.

Sometimes a request is made to source orders in a different method. For example, if a single one-off order needs to be added to the system by the client, could it be manually typed in? This violates the first principle and the recommendation would be to still enter the one-off orders through an automated method to standardize the data into the system. An order entry portal can be made available for these exception scenarios. Another request could be to manually alter order information that came in incorrectly. Again, the EDI or API should be developed to handle “change order” requests. Manual entry may not be eliminated, so being able to change or add an order in an extreme situation is a good idea, but focus on reducing this option. There are also risks with allowing changes or cancellations to orders in-progress and some 3PL companies may disallow changes or charge hefty cancellation fees to modify an order after certain progress has been made.


Chapter 3Order Planning and Batching

Batching orders together is a base principle of eCommerce fulfillment, and batching similar orders together is a key to improving efficiency. Optimally batching orders together on the front-end, leads to more efficient pick paths on the back-end. Batching rules from one client to the next may never be the same, and so defining those rules is a part of the discovery and implementation of the client.

Each order planning method is achieving a specific goal and we can explore a few examples here:

1 Grouping single line orders together separately from Multi-Line orders

2 Grouping orders together by Same SKU

3 Grouping by Carrier

4 Prioritizing by Zone/Bin

5 Prioritizing by Carrier Service such as Next Day Air, 2nd Day Air, and Ground

6 Prioritizing by Client importance (or consignee importance, such as Amazon gets priority over eBay)

The ultimate magic in efficient operations happens during Order Planning and is the next principle: All work is done in batches. A warehouse may receive orders all day long (or overnight for 24/7 Ops) and must determine when an order is “Ready to Process”. The client may explicitly dictate the date to ship, or a service level agreement may be in place where the date to ship is calculated when received by the warehouse based on pre-defined rules. As an example, one such rule may be that orders marked with a status of “priority” and are received by the warehouse before 12 PM must ship same-day. There are various ways to decide when an order is “Ready to Process”. The rest of this chapter will be discussing how to efficiently organize orders that are deemed “Ready to Process”.


Notice that each method either starts with the word Grouping or Prioritizing. This is an important factor in batching. Once the key factors of batching have been agreed upon with the client, each factor will either be a criteria for grouping or prioritizing.

Grouping is defined as orders that should be batched together, and should never be batched with items outside the group. For example, the warehouse will often need to keep UPS and FedEx orders separated in the staging areas. If UPS orders and FedEx orders are picked and fulfilled simultaneously, a worker will have to separate the boxes on the back-end for staging, so grouping by carrier will reduce the need to separate the orders later in the process. By choosing carrier as a group criteria, batches will only be made with 1 carrier for the entire batch.

Prioritizing is defined as orders that should be batched together or near each other, but do not have to be on the same batch. For example, if a client only has 10 SKUs and they are stored in the warehouse in bins A through J, then it would make since to put orders for bin A together with orders for bin B, C, and D for most efficient picking. However, if so many orders come in for bin A and bin B that we can make a batch for just those two bins, then it is OK to not include C and D. Prioritizing by bin/zone will keep similar orders closer together, but still let the system split into separate batches as necessary based on volume or orders.

This leads into the final criteria of batching, which is optimal batch size. Batch size is often based on the picking or packing operation, and how many orders can optimally be processed by a single resource or team simultaneously. If you’re using a cart system for picking, the batch

size would be the number of bins on the cart. If the packing station is stacking finished boxes onto a pallet, the batch size might be the number of boxes that will fit on that pallet. Batch sizes may even be an intangible concept, such as the amount of orders that a team should be able to process in a 1-hour shift. These sizes could be rigid, meaning a batch will not be made until a certain number of orders are ready, or dynamic batches will create a batch up to a max limit but allow for smaller batches.

There is no universal answer for grouping, prioritizing, and batch sizing. These factors are decided based on the requirements set forth by the warehouse manager, their clientele, the types of products being handled, the average makeup of an order, or whatever makes the warehouse the most efficient. The ultimate goal is to create the batches in such a way that will eliminate as many steps as possible in the fulfillment process.

“Because single-line batches contain only one item per order, once you’ve picked the item you’ve completed the order. You can place it in a pick cart and move on to the next order. With multi-line orders, you generally run out of space with your batch carts much more quickly. Say you have a 1,000-order day; if the batch size was 10 orders per batch, with each batch including both single-line and multiline orders totaling 40 items, there would be 100 batches in the day. But if 20%, or 200, of those orders are single-line orders, you could store on one cart 40 single-line orders. There would be five batches of single-line orders and 80 batches of multiline orders for a total of 85 batches for the day, a reduction of 15 batches. And, Teres says, fewer batches translates to less time required to pick the orders, increasing productivity and reducing costs.”3


Chapter 4Picking Orders

Batch Picking is defined as picking a collection of orders together, bringing all of the products to a central staging area, and then sorting each product per order at a packing station. In this method, a single picking ticket is printed per batch and a group of packing lists are also printed for that batch. It is also possible to batch pick a group of batches together. For example, the warehouse may determine it is more efficient to pick an entire shift worth of orders in a single coordinated batch, and then the packing stations would separate the picks into separate smaller batches and then single orders.

Cluster picking is a methodology of grouping orders together, pre-assigning an order to a pick container/tote, grouping a batch of order totes onto a cart, and subsequently picking one product at a time, and placing the item into the respective order containers as needed, before moving on to the next item in the batch. In this method,

The next step in the fulfillment process is to pick the inventory for the orders. The process of picking orders from storage may vary. This process will happen after the orders have been batched.Some operations may use a pick aisle as the packing station, where the timing can be more independent. However, for the purpose of this chapter, we will assume the picking is happening after the batches are created. Picking eOrders from storage locations into a staging area can be done in a few ways.

a combined packing list/picking ticket is printed, assuming the packing list ships with the product, the client may require approval of a combined format. If not, then separate picking ticket and packing list documents may be printed. In cluster picking, the picker is performing some of the work for the packing station to reduce steps later.

Wave Picking (3) is the methodology of batching orders together and then splitting the picking into different zones. Each picker will pick the products that are within their respective zone, and return all of the products to the packing station, to be combined with the products from other zones, to complete their orders.


The decision for choosing a picking method is decided by the third principle: Combine similar steps together.

You may choose Batch Picking if the orders have low variability, meaning that there are few items and many orders may have the same types of items. The pickers are able to make just a few picks to satisfy a large number of orders and reduces the need to perform sorting at the pick aisle.

Wave picking combined with multiple pick aisles may be the preferred method when dealing with high variability orders with a high SKU count.

Cluster Picking to a cart is helpful when dealing with high SKU variability which can helps avoid having to re-sort the products at a packing station a second time, letting the pickers handle the inventory just once.


Chapter 5Pick Aisle Slotting

Regardless of the picking method, if a warehouse is fulfilling less than full carton or Pallet quantities, then the warehouse will likely opt to utilize a pick aisle configuration. Most eCommerce fulfillment operations would benefit from maintaining a pick aisle for some or all of the products being fulfilled. Pick aisles provide benefits across many of the eCommerce principles, such as batching picks together, and combining steps with effective pick aisle

eCommerce fulfillment has shifted demand from Retail storefronts to warehouses which indirectly has put a strain on available warehousing space. With the increased demand for Warehouse space, this has increased the cost of adding more warehouse space. In order to keep storage costs affordable and delay the need to expand warehouse space, warehouses may choose to optimize their warehouse configuration. This is important to avoid having to seek out additional space in a low-supply, high-demand, high-price market.

slotting. Pick Aisles allow a warehouse to achieve High SKU Density in a smaller area, thus allowing for more efficient storage configurations and more efficient picking methods, from a “total distance traveled” standpoint.

Implementing a pick aisle may not always be optimal for your picking operations, and may not always provide an increase in efficiency, such as operations that have extremely high SKU counts, with very high order variability and very little overstock. The first exercise is to determine if a warehouse should have a pick aisle, by analyzing order history/product demand, and the second exercise is to architect the appropriate slotting (positioning of the product) within that pick aisle. By performing an analysis of the top products by average daily / weekly demand, it is possible to determine the fastest moving items that should be allotted prime accessible pick locations.


Slotting a pick aisle is the exercise of determining the proper position for each specific product based on various parameters to optimize picking efficiency. However, slotting is not just dedicated to Pick Aisles, but Bulk Storage too.

Slotting bulk storage is the exercise of determining the proper position for each specific product based on various parameters to optimize storage capacity.

Pick aisles should have a goal of positioning the fastest moving items to the most accessible pick locations. Complementary items that are commonly ordered together may also be preferred to be located near each other, such as chargers and case accessories for a popular phone or tablet. Slotting effectively allows for the most optimal picking process by minimizing the total distance traveled for all pickers to fulfill all orders for a given order batch.

Products come in all shapes and sizes. Depending on the size of the product, the space to store it can vary. Dedicated Pick Bins are typically quite small and are only intended to

hold enough product to satisfy average daily or weekly demand, depending on how often you desire to replenish. Some products have a higher SKU velocity / avg. daily demand, so they either need additional space for more stock or more frequent replenishment.

The smaller the footprint of the pick bins, the higher the SKU Density of the aisle, which leads to more SKUs that can fit in the same amount of space. A warehouse storing suitcases will require larger pick bins, therefore fewer different SKUs in the pick aisle. This is a low SKU Density configuration. Alternatively, a warehouse storing sunglasses can store a much larger variety of different SKUs in the same amount of space. This is considered a high SKU Density configuration.

Slotting a pick aisle should take the SKU Velocity (Avg. Daily Demand), Size of the product, and total number of SKUs into account to plan the proper configuration of the pick aisle. It’s also important to re-evaluate SKU velocity weekly, monthly or quarterly as seasonality of products may change slotting requirements.


Chapter 6Pick Aisle Replenishment

The minimum quantity required before triggering a replenishment is called the Safety Stock. Safety Stock is determined by taking into account the lead time to replenish the pick bin, and the average demand over that lead time. If it takes 2 hours to trigger and complete a replenishment run, and the average demand for an item is 3 pieces per hour, then the safety stock for that item should be set to 6 units, upon which the replenishment is triggered for that item.

Top-Off Replenishment looks at each pick location’s maximum quantity and assigns the replenishment of product up to that maximum. This is typically run at the end of each shift, the beginning of each shift or the end of the day. This prepares the pick aisle for the next shift or the next day of picking. Since the replenishment plan is only allocating the exact quantity to replenish up to the pick aisle bin maximum, partial quantities of product may be left behind in the Bulk storage location.

With the configuration of the pick aisle now complete, there needs to be a plan for the flow of products from bulk storage to the pick aisle. This process is called Replenishment. The timing and exactness of replenishment is key. Replenish too early or too much and there is wasted space which leads to inefficient storage usage over time. Replenish too little or too late and order fulfillment can grind to a halt. The pick aisle should be designed to handle an entire shift’s worth of picking, so analyzing the average and peak demand for orders to ensure no stockouts occur is important when first designing the pick aisle slots.


Fixed Replenishment looks at the quantity in each pick location and only generates a replenishment request if the pick bin has gone below the minimum set for the item. The system will then request a fixed quantity for replenishment, such as one full case of product, to replenish the bin location. Fixed replenishment is very similar to top-off replenishment, except where top-off replenishment will break cases or pallets to ensure the pick aisle is kept at maximum, a fixed replenishment will only move full cases or pallets. By design, a fixed replenishment would be more efficient for those doing the replenishment at the cost of potential stock-outs in the pick aisle. Because fixed replenishments are more efficient for those doing the movements of bulk to pick aisle, they can sometimes be executed on-demand during a shift in addition to the traditional replenishment at the beginning or end.

Demand Replenishment is determined by looking at the upcoming known orders for a time period and calculating the amount to replenish the pick aisle to have enough to fulfill all the orders. Demand replenishment can be done similar to the top-off method where the exact amount is picked, or similar to fixed, the demand

replenishment can round up to the nearest case or pallet. Since the demand replenishment is aimed at fulfilling a set of orders, it needs to be completed before the picking of those orders begins.

Batch Replenishment is the plan to move just enough product from bulk to the pick aisle to fulfill a single batch of orders. Unlike demand replenishment, batch replenishment does not look at orders over a given time, but only at a single batch and the quantity picked matches the quantity required for the orders exactly. The timing of a batch replenishment is usually done immediately before the orders are packed and shipped, however, batch replenishment can also be done as a way to keep the pick aisle stocked, but replenishing what is being depleted concurrent with the packing.

Top-off or fixed replenishments are ideal for fulfillment operations that need to maximize the efficiency in the packing station, usually due to a high velocity and high variability of orders. Batch or demand replenishment may be the preferred method when dealing with lower variability, or batches of orders that are easier to plan out a day ahead.


Chapter 7Packaging and Shipping

If there is low variability within an order batch, a packing station may just be a simple area where packages are organized and labels are affixed, while a visual inspection is done on an entire batch to confirm the products look correct for the batch. However, if each order can have different types and quantities of items, a software-driven packing station may be recommended.

At a software-driven packing station, a user will be interacting with a packaging screen in their WMS software. The user will scan a barcode that identifies the order to see what needs to be placed in the shipping container. The items may be scanned as they are packed to ensure accuracy. The packaging screen can record details about this interaction for auditors to check later. As the boxes are complete, the system can generate packing lists, retailer compliant labels, and carrier shipping labels.

Considering that the packers are one of the few resources in the process that will be required to touch each item of every order, software-

Packaging and Shipping is often the most critical step of an eCommerce Fulfillment operation. Any inefficiencies in ordering, batching, picking, pick aisle design, or replenishments will have a ripple effect that slows packaging. The packers are the last line of defense when ensuring the correct products make it to the client on-time and accurately, so it is recommended to design a packing station that allows for checking and verifying accuracy of orders while organizing products into shipping containers and printing labels.

driven packing stations need to be optimized to synchronize with the exact details of the packers’ movements. Those movements are unique for each client, product type, and warehouse, which means that the software will often have to be configured or possibly programmatically customized for the operation.

If inefficiencies are found during packaging, it is recommended to not only review the packaging procedure, but also look upstream at batching, picking, and all earlier processes as possible areas for improvement.

For example, if a packing station finds that they are having difficulty matching the products to the orders because each subsequent packaging request seems to be for a different SKU, reworking the batching and prioritization rules to keep similar items together would improve packaging efficiency. Or changing from a batch replenishment to a pick aisle with more optimized slotting would be more appropriate due to the variability of the orders.


Chapter 8Label Printing

Another scenario that is a good fit for batch printing shipping labels is for a batch of Clone Orders. Clone Orders indicate that every order in the batch has the same order type and quantity of SKUs but each order goes to different customers. For example, an internet subscription service that sends the same product to thousands of consumers every month. The orders would all be identical except for the final ship-to address. Since all the orders are identical, it doesn’t matter which label or packing slip is paired up with each package.

Most eCommerce operations have higher variability, which would require a packing station software solution that would allow scanning information about the order to upload to the small parcel carrier and generate the shipping label at that time.

Unless you’re doing ship-to-store type fulfillment, the warehouse will almost always be required to handle printing the small parcel carrier shipping label. In some simple scenarios with low variability, a warehouse can batch print a group of shipment labels for a batch before the picking and packing has commenced. The shipping labels would then be organized and sorted with the picking ticket or packing lists to be manually confirmed and affixed during packaging. Generally, this is reserved for shipments where the client orders full cases of the same product and there is no pick-pack required for different order configurations of items going out.

When shipping to a retail store, a UCC-128 retailer compliant label may also be required. In accordance with the fourth principle, to combine similar steps, it is recommended to generate these labels at the same time as the shipping labels if possible. This package will be assigned a unique SCC-18 CSN (carton serial number) which in turn gets printed on the UCC-128 carton label.


Retailers who require UCC-128 labels will usually also be transacting over EDI with an ASN (advanced shipping notice). The ASN will need to communicate information about each shipping container identified by the SCC-18 CSN number and the contents of that shipping container, so a software-based packing station would then be required, and both the retailer label and the carrier label should be generated at the completion of the packing station scanning. When the product arrives at the destination, the retailer will scan the SCC-18 barcode on the label and their system can then identify exactly what contents and quantities of the products have arrived in that specific carton.

If the retailer finds discrepancies between the label and the ASN, or if the format of the label does not match their strict requirements, the store receiving the goods will issue a chargeback . To avoid these chargebacks, it is recommended that a warehouse allot additional time and resources at the beginning of the project to allow for development and compliance testing. A go-live should not be scheduled until the retailer has received real data tests of the EDI and the labels from the WMS software, and has signed off their approval of the tests. The additional care required for retailer compliance labels is considered a value-added service.


Chapter 9Exception Handling

An exception can occur at any stage of the process, from batching, picking, packing, or labeling. An exception could occur to an entire client, a single SKU, an entire batch of orders, or a single order. Most exceptions will be localized to a single order, and those smallest exceptions affecting other processes can cause a disproportionate amount of failure. No matter what step in the process an order is in, the warehouse staff and software should be able to quickly pull the order into quarantine, and then process that order by itself, or optionally in a batch with other similar exceptions.

For example, missing or damaged product causes an unexpected shortage on the pick aisle, and the ripple effect could mean that the entire batch of orders can’t be sent to the packing station. It is costly for the warehouse to initiate a replenishment effort in the middle of a busy picking or packing effort, and all the while the current batch may be missing a shipping deadline requirement. The warehouse should pull that order into an exceptions area for a separate resource to resolve the issue, and the

The one principle that is commonly overlooked is: Isolate Exceptions. When handling such a high volume of orders, any kink in the chain could have a ripple effect on other orders or processes. Having a good exception handling process is key to keep the mainstream of orders flowing smoothly to maintain a higher percentage of successful orders.

WMS software should be able to quickly transfer that order from the current batch to a new exception batch.

The exercise of handling exceptions at every level of severity and step of the procedure should be planned for in advance of going live. Being prepared for exceptions can be the difference between 99.9% On-Time Shipping performance and 80%. It’s important to meet with your client to discuss various exception scenarios and how they wish for you to handle them. And, most importantly, TEST, TEST and TEST some more.


Chapter 10Backorder Management

Short Ship The warehouse is expected to ship what they have, never ship the remainder, close the order.

Short Cancel The warehouse would not ship anything unless the whole order could be fulfilled. If any product is unavailable, the whole order is canceled.

Backorder Partial Ship short what you have now, then create a separate backorder transaction to ship the remaining items at a later date.

Backorder Full The warehouse would not ship anything unless the whole order can be shipped complete. Instead of canceling, the order is put “On Hold” and the warehouse will keep track of the order and watch for inventory to arrive that allows the system to fulfill the order at a later date.

One of the most common exceptions that occurs most frequently is a Stock-Out. When an order cannot be fulfilled in its entirety, a decision needs to be made on how to handle the order, and there are many outcomes. Some of these outcomes include:

Shortage scenarios, whether short ship or short cancel, are usually trivial for the warehouse to handle in a normal process flow. It should be negotiated with the client which option they will do in advance and it is expected that the warehouse will communicate these shortage opportunities back to the client. Often times the client will manage the outcome of the shortage on their side and may reissue the order when more stock arrives in the future. Essentially, the client is handling their own backorders in their own order management software.


In traditional pallet in and out warehouses, backorders can be managed with little additional administrative work, so it is often an expected service of the warehouse. In eCommerce Fulfillment, the process of handling backorders is not trivial, and should always be considered a value-added service. The client can always opt to receive short ship notifications from the warehouse and handle the backorders within their own software, so asking the warehouse to handle that backorder process is offloading the requirement from their own software to the warehouse. This premium service comes at a cost and should be baked into any fulfillment contract.

It is also recommended that the warehouse consistently communicates stock balances back to the client to avoid allowing over-ordering of products. For example, an API connection can be made from the shopping cart software to the WMS for real-time inventory balances. Of course, missing or damaged products can always happen, which is why the warehouse will still need to have a procedure for communicating shortages, and the shopping cart may be setup to undersell or oversell based on tolerances and forecasting from the client.

If the warehouse has agreed to handle the backorders from their WMS, there are many parameters that need to be negotiated and will vary greatly from one client or warehouse to the next. Some of these topics include:

• Partial or Full backordering

• Priority of backorders against live orders or other backorders

• Optimizing the commitments of inventory to reduce backorders

• Communicated backorders to the end consumer

• Forecasting backorder fulfillment

• Abandoning a backorder

• Reporting on backorders

• Alerting and handling backorders when product becomes available


Chapter 11Returns Management

The retailer or manufacturer may issue an RMA (Return Merchandise Authorization) to the customer and typically a return shipping label. The retailer/manufacturer may electronically send an advanced EDI notification to the warehouse informing of any inbound returns.

Returns Management, also known as Reverse Logistics, is another value-added service that the warehouse may handle for an eCommerce client. There are various Returns Management programs that a warehouse can establish. Some warehouses process all returns for all sales channels for a retailer or manufacturer. Others may only manage returns for the orders that they originally shipped.

At a base level, returns management can be viewed as just another channel for inbound inventory, as many aspects may function like a receipt of inventory. The key differences are that the product will come in at a lower volume, it will require inspection, and the WMS software can aid in connecting the return to an original order to improve reporting back to the client.

Once a return has been received, products go through a Quality Control inspection process. Depending on the reason for the return and the product condition, a disposition code is assigned to the product indicating whether the product should be:

• Repackaged

• Refurbished back into regular stock condition for re-shipping

• Discarded / Thrown Away / Destroyed

• Returned back to Supplier

• Held in quarantine for further instructions


Chapter 12Inbound Receiving

Receiving stock typically follows a normal receiving, sorting and putaway process. Various suppliers may establish EDI integrations for Advanced Receipt notices of inbound stock, others may transmit a simple email. Oftentimes, a warehouse must blindly receive a trailer with nothing more than a Bill of Lading from the truck driver.

Product may be neatly palletized and stretch wrapped, with full skids of a single SKU. Other times the pallets will be mixed with multiple SKUs grouped together. International containers may contain product in cartons that are floor loaded and strewn about haphazardly from their ocean voyage, with no palletization. Due to the variation, the inbound receipt process may vary considerably for each warehouse.

Upon unloading, products need to be sorted, identified either by visual means or via scanner, counted, and optionally labeled if labels are not already present.

During initial sorting and inspection, any stock that appears damaged or in poor condition should be set aside for further review. A work

Receiving product that will be used in eCommerce Fulfillment is often no different than traditional pallet in and pallet out warehousing. However, depending on the operation, there can be a few differences in process flow and opportunities for Value-Added Services to expedite fulfillment.

order process can optionally be established to inspection, repair, rework, refurbishment, repackaging, relabeling, or other value-added services.

Optionally, a notification during the receiving process can alert an operator if a product actively being received is currently backordered. A portion of that stock can then be split and immediately assigned to those backorders for immediate packing and shipping.

Additionally, if a pick aisle has a stock out, a replenishment notification can indicate a stock request for immediate replenishment to the pick aisle.

Otherwise, all remaining stock should be put away as regular stock in good condition.

System-Directed putaway can be used to assign destinations to products as they come in. Typically, fulfillment warehouses receive product into bulk storage locations first to avoid disrupting busy picking operations, unless a shortage requires immediate attention.


Chapter 13eCommerce Fulfillment Charges

Value-added services are important in 3PL Fulfillment warehouses as they differ within their respective market. These services may be charged separately, including Backorders and Returns Management. Other scenarios that can come up which would warrant their own charge may include kitting, parcel packaging supplies, repackaging services, retailer compliant labels (CSN), customized packing lists, and technology fees for supporting various EDI integrations.

Storage charges can also be handled similarly to non-eCommerce clients in most scenarios. Since products move quickly through an eCommerce warehouse, many clients may opt for shorter storage cycles, such as daily, weekly or bi-weekly storage computations. Other clients may still charge monthly storage, but they may choose to charge the Peak Storage used for the prior month. That way if the warehouse was full at the beginning of the month, and it’s nearly empty at the end of the month, the warehouse

There are many types of eCommerce fulfillment charges that a warehouse may offer. Many of them are tied to simple order processing fees, including per order charges, per line item charges, qty break charges over a certain # of line items, % of the sales price of each order, or various accessorial charges. An increase to the volume of orders can drive an increase to the cost to the warehouse, therefore it is recommended to have some component of charges tied directly to the number of orders and/or line items fulfilled.

can still be compensated a fair amount for the storage space it had to guarantee to their customer for the entire month.

It is not typically recommended to design a storage charge around location utilization (billing by bin) for eCommerce clients. The warehouse needs to be able to organize the locations of inventory in a way that optimizes order fulfillment, and that may mean that products may be split across different areas of the warehouse. The client may then be charged extra for that required efficiency, or they may refuse to pay for additional locations, thus dictating inefficiencies in the warehouse based on their storage contract.

The goal is to find an equitable contract for the services provided that are fair for all parties and captures the true value and effort required to perform fulfillment services.


Conclusion

As reviewed throughout this eBook, there are many decisions that a warehouse operator can make to optimize various processes within their fulfillment operations. Each tactic serves a specific purpose, so it’s important to determine what the organization’s strategies are before making key process decisions. Once a strategy has been determined, put together a plan of action and test! Proper discovery and planning will lead to successful results.

If you need assistance with planning a project, refer to Appendix B for a checklist to start your process evaluation. You may not get it right on the first try, or even the second try, but keep iterating your plans until you achieve desired results!

If you need help figuring out the right plan for your operations, Contact Camelot 3PL Software to explore how you can take your 3PL fulfillment operations to the next level.

Authors:Geoffrey P GreenhillTyler Overcash


Appendix A Glossary

Backorder Full – The warehouse would not ship anything unless the whole order can be shipped complete. Instead of cancelling, the order is put “On Hold” and the warehouse will keep track of the order and watch for inventory to arrive that allows the system to fulfill the order at a later date.

Backorder Partial – This is where a warehouse will Ship Short, meaning ship what you have now, then create a separate backorder transaction to ship the remaining items at a later date.

Batch Picking – Also known as Wave Picking, it is the process of organizing groups of orders to be picked together.

Batch Replenishment – The plan to move just enough product from bulk to the pick aisle to fulfill a single batch of orders. Unlike demand replenishment, batch replenishment does not look at orders over a given time, but only at a single batch and the quantity picked matches the quantity required for the orders exactly

Bulk Storage – An area of the warehouse dedicated to bulk products on pallets. These locations are not typically used for high-volume picking, but rather longer-term storage. This stock is used for replenishing to a Pick Aisle. Chargebacks – Financial penalties for non-compliance with a supplier or retailer’s standards and requirements. Frequently assessed chargebacks in warehousing are due to EDI Invoice/ASN errors, mistakes in labeling, pricing errors, incorrect or insufficient product sent to the retailer, and early or late shipping arrivals.

Clone Orders – A series of orders that are placed that are identical in SKU and qty, but shipped to different consumers. This is common in direct response marketing (infomercials) or monthly subscription packages (i.e. Dollar Shave Club, Birchbox or Loot Crate).

Cluster Picking – A specific type of batch picking that involves clustering orders together based on a location of the warehouse or a particular SKU. This is also typically combined with a “Pick to Cart” process.

CSN – Carton Serial Number. These are used for UCC-128 Retail Compliance labels.

Date to Ship – The Date that a warehouse is obligated to ship an order based on the Service Level Agreement in place between the 3PL Warehouse and their customer. This is typically determined on an order by order basis per the Shipping Method requested when an order is placed.

Demand Replenishment – This is determined by looking at the upcoming known orders for a time period, and calculating the amount to replenish the pick aisle to have enough to fulfill all the orders. Since it is calculated based on demand, it typically occurs before picking begins.

SKU Density – When looking at the specific footprint of a pick aisle, SKU density is a measure of how many SKUs can fit in a specific area. This is a relative term. A pick shelf that is 10 feet long and contains 10 different SKUs is less dense than a pick shelf that is 10 feet long that contains 50 different SKUs. The higher the SKU density, the more product that can be positioned in the pick aisle, thus optimizing storage capacity to support a high volume fulfillment operation without unneeded extra storage space.

EDI – Electronic Data Interchange is how systems communicate information with each other electronically. Various types of EDI are available including X12, EDIFACT, XML, CSV and other formats.

Fixed Replenishment – This is where the inventory control manager looks at the current quantity in each pick location and generates a replenishment request only if the pick bin has gone below the minimum set for the item. The system will then request a fixed quantity for replenishment, such as 1 full case of product, to replenish the bin location.

Grouping – The process by which the system determines which order attributes to use to combine similar orders together within a batch.

Kitting – Also called Light Assembly, this is the process by which a Bill of Materials for a finished product consists of various components. The kitting process involves picking the individual components and combining them into a single finished Parent item.


Orders: High Variability – When a warehouse account has a relatively large catalog of SKUs, the orders may vary widely. It’s less common for orders to come in that share the same SKU, thus making it harder to batch orders together by SKU, rather than by Location.

Orders: Low Variability – When a warehouse account has a relatively small catalog of SKUs, the orders may have very little variance. It’s more common for orders to come in that share the same SKU, making it easier to batch these orders together by SKU. Packing Station – The area within the warehouse where product that has been picked is sorted and packed into individual order cartons.

Pick Aisle – This is an aisle within the warehouse dedicated to order fulfillment picking. The bin locations are optimally configured to make product readily available for picking individual parts quickly.

Pick Path – The singular path that a warehouse worker follows in order to complete the picking of a single order, or a single batch of orders.

Pick to Cart – This is a process by which a WMS system pre-determines a batch of orders are going to be picked and assigned to individual totes on a cart. This batch pick process will typically sort the items in bin location order, for 1 efficient pick path through the Pick Aisle. The system will direct the user to pick the first item, and display each order tote that requires that item, and the quantity of that item to place within the order tote. The pick user will proceed with picking all items for the batch until all totes on the cart have been fulfilled. The cart can then move to the next staging area for packing and shipping.

Prioritizing – Determining the importance of each batch of orders and when they need to be assigned for picking.

Safety Stock – The minimum amount of inventory in which to cover the average demand over the lead time to replenish the pick location.

Service Level Agreement – A contract in place between a 3PL and their Client that outlines the obligations of the 3PL Service provider in the context of the following (but not limited to): How quickly Receipt of inventory can be made available for shipping, What the order cutoff is to determine the turnaround time to ship a newly placed order, or how often inventory must be cycle counted.

Short Cancel – The warehouse would not ship anything unless the whole order could be fulfilled. If any product is unavailable, the whole order is cancelled.

Short Ship – The warehouse is expected to ship what they have, never ship the remainder, close the order.

Stockout – The point in which a pick location has run out of available pickable inventory. Orders that require this product must either wait for the pick location to be replenished, re-assigned to pick from a bulk location, or if no product is available in the warehouse at all, the order must be placed on Hold or Backorder status until product has been sufficiently restocked/replenished.

Top-off replenishment – This process is where the system looks at each pick location’s maximum quantity and assigns replenishment of product up to that maximum amount.

Total Distance Traveled – In the context of Warehouse Picking, it is the distance that a picker travels to complete all the picks within a given batch.

SKU Velocity – This is a relative calculation based on the average demand of a particular product. The more times the product turns, or the more units of the item that ship within a timeframe, the higher the SKU velocity.


Appendix BSample eCommerce Questionnaire What type of product are you storing/shipping?

What units of measure do you track for this product?

What units of measure will you ship for these products?

Do you track lots for this product?

Do you track Code Dates (Exp. Date) for the product?

Are you expected to ship by specific Lot #, by oldest Exp Date or by oldest Receipt Date?

Do you need to capture Serial #s on outbound?

What type of integration will you need to import orders? - Shopping Cart API, X12 EDI, Flat-file EDI?

Will eCommerce customers be B2B, B2C, or both? What is the average number of small parcel

shipments per day?

What is the average number of small parcel shipments per week?

What is the peak number of small parcel shipments on your busiest day of the year?

Is there any seasonality with peak order volume? - How many SKUs per client, on average?

What is the most # of SKUs for your largest client?

Will there be any products shipped that have certain restrictions? (e.g. controlled substances cannot be shipped to certain states or countries)

In the event of a stock-out/shortage, will orders be:- Short Ship- Short Cancel- Backorder Partial- Backorder Full

Will customers or the warehouse require rounding, such that an item can be allocated for more than what was ordered? (e.g. customer orders less than a full carton, but warehouse only picks/ships in full cartons)?

How will warehouse workers be notified to pick items: Scanners or Paper Pick Tickets?

Will there need to be a scan gun at the packing station?

Do you expect to ship standard pack or pick-pack? - Standard pack is full carton shipping. - Pick-pack is where cartons received are broken

to pick individual pieces to build a carton

Which carrier(s) will be used for parcel shipments?

What 3rd party software integration (e.g. DesktopShipper, UPS WorldShip, FedEx Ship Manager, Stamps.com, Endicia) will be used for communicating orders to the carrier(s)?

Are custom Packing Lists required?

Are Commercial Invoices required (for International Shipments)?

Are email notifications required?

What information will get communicated back to the customer?


Appendix CReference Material1) https://www.digitalcommerce360.com/article/us-ecommerce-sales/2) http://www.mwpvl.com/html/warehouse_slotting_optimization.html3) https://multichannelmerchant.com/operations/batch-vs-wave-picking/

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THE WIDE WORLD OF eCommerce Fulfillment · 2020-05-11 · Camelot 3PL Software | The Wide World of eCommerce Fulfillment. 4. Introduction The wide world of eCommerce fulfillment