The pick-and-pack process in fulfillment was vulnerable to errors before COVID-19, but with brick-and-mortar stores closed and fashion shopping moving online, this piece of the e-commerce shopping experience is facing additional pressures. Since consumer buying behavior is expected to shift to digital channels for the foreseeable future, ensuring the efficiency and accuracy of these operations has become even more important.
Fulfillment centers that have stayed open during the coronavirus crisis are facing a twofold challenge, as e-commerce order volumes rise while their staffing potentially decreases. Workers who take off for illness, preventative measures or childcare might be replaced with temporary staff who aren’t as efficient, well versed in processes or familiar with merchandise. Meanwhile, other distribution centers that aren’t as affected by the virus are responding to the uptick in business by hiring new workers who need to be brought up to speed.
As opposed to anticipated peak times for e-commerce around sales or shopping holidays, companies have had little time to plan for this surge. “The volume is so high, and it just keeps going. There’s no end in sight,” said Jay Stamerro, vice president, general manager at third-party logistics firm USA Fulfillment.
The estimated rate of errors in the pick-and-pack process is in the low single digits, but the impact of these mistakes adds up quickly. A 2012 Intermec study by Vanson Bourne found that the average cost of a mispick is $22, and the average distribution center loses $390,000 per year due to fulfillment errors.
When the wrong item is shipped, firms have to pay return shipping and delivery fees to get the right product to the customer. Additionally, there is the cost of labor and time to restock merchandise received. In the event that the correct product doesn’t arrive, there is also the risk that a shopper will opt to void their transaction rather than go through the process of correcting the mistake.
From a retailer or brand perspective, a mispick could mean a lost customer if a shipment doesn’t live up to expectations. If a shopper shares their experience via an online review, this word of mouth could persuade others to avoid a particular store. “People are at home, they’ve got electronic devices,” said James Wilfong, business development manager at 3PL Verde Fulfillment USA. “If they have a bad experience, not only are they already stressed about the situation of life they’re in…but then they are dissatisfied with the experience they got from a product standpoint or not getting that product.”
Errors in packing also hurt inventory management accuracy. Fulfillment facilities are pushing inventory information to retailers and third parties such as drop-ship companies. If this record keeping is off, retailers might lose orders or face chargebacks.
Adding to the inventory challenges, fulfillment centers are often using technology that is not designed for pick and pack. Ben Eachus, founder and CEO of fulfillment technology platform Flowspace, noted that warehouse operators often employ software that is more geared toward wholesale shipping than tracking the movement of individual SKUs. “Now there is the need to track inventory on a more granular basis,” he said.
One of the top ways companies can avoid packing errors is by using barcoding and scanning equipment for all SKUs. Even with scanning, USA Fulfillment has its staff members each focus on one order at a time to avoid confusion. Checking package weight to see that it matches the product that is supposed to be shipped can also pinpoint potential mispicks before they leave a facility.
Some distribution centers are even moving away from human picking to take the potential for human error out of the equation. However, Steven Berkovitz, chief platform officer at supply chain software company Tecsys, noted that the biggest hurdle for warehouses in implementing artificial intelligence will be the cost. “I think it’s a Catch-22 situation where they all want it and need it, but in light of what’s going on, they might not have the capital to put up for it,” he said.
There are also limits to automation, as fashion inherently has the challenge that merchandise is constantly evolving. That means trying to teach artificial intelligence how to distinguish a wide range of items. Jeff Moss, chief commercial officer at software and technology company Dematic, said it’s easier when the item is “repeatable.”
“So if you have a bin of items that are gloves and scarves and shirts and shorts, all different kinds of things, saying that you’re going to automate that is easier said than done. Because now you’ve got to figure out how to identify each one of those items,” he said.
But outside of technology, there are steps that can be taken before products even reach a distribution center to raise the level of accuracy in fulfilling orders. According to Wilfong, fashion and soft goods such as home textiles could take inspiration from hard goods when it comes to packaging. Whereas hard-goods categories will ship identical items in a master carton with a set quantity, apparel units of different styles, sizes and colorways will tend to be grouped together in a mixed carton. To speed up receiving and ensure better accuracy of auditing, fashion companies can organize their shipments by polybagging and grouping the same SKU together in sets or clearly labeling product.
“As consumers are not accessing a storefront retail experience and they’re looking for an e-commerce retail experience, we want to make sure that they’re getting those products in a timely fashion, that they’re getting tracking very quickly, that they have clear expectations on when it should arrive,” Wilfong said. “But if the merchandise arrives, and it’s not appropriately labeled and/or appropriately organized, it results in delays in the process.”
Beyond warehouses, retailers need to think about how they are organizing their brick-and-mortar stores to balance visual merchandising needs with optimizing for pick and pack, because services such as buy online, pickup in store or curbside are going to be prominent during social distancing. During the shelter-in-place measures, some retailers including Nordstrom are also using their closed stores to fulfill e-commerce orders. But most retail locations are not designed to operate primarily as warehouses.
“Stores are set up to entice people who are in them to buy,” Berkovitz said. “They position high-margin products at the right eye level and low-margin products below the eye level. None of that stuff translates to being easily pick packable.”
In both warehouses and sales floors, item layouts can be optimized for packing by preventing confusion. For instance, keeping styles in similar colors separate from each other can help workers distinguish between two SKUs when they are picking based on an image reference on a handheld device. Meanwhile, stocking frequently purchased goods in an easy-to-access location can improve fulfillment speed.
Even with efforts to improve efficiency, during this unprecedented disruption, avoiding errors can also come down to patience and collaboration between a 3PL and its client to develop reasonable time frames. Stamerro noted that he’s talking to some of his customers on a daily basis to set priorities and expectations.
“Everybody’s being patient [with fulfillment delays], but it’s really on the retailers to say, we don’t want to rush orders out the door only to see a large increase in mispicks,” Stamerro said. “But there’s such a demand by the brands, by our clients, to get things out the door, so it’s a tough balancing act, but it’s conversations that should be had between the clients and the fulfillment company.”