By Grainger Editorial Staff 9/22/20
Between 2011 and 2020, the U.S. Department of Commerce estimates that online commerce has grown from 5% to 15% of all retail activity in the United States. The rhythm of ecommerce has also become highly seasonal. In 2019, online spending swelled by $48.6 billion during the holiday season, a 33% jump in volume. Spending could set new records this year: online receipts continue to reach new heights, setting the stage for a record-breaking peak as the holidays approach.
And, of course, every item ordered online must be picked from warehouse slots. Managing the seasonal spike in orders can be a major logistical challenge. Your ability to handle the holiday surge can make or break your business’s reputation. Customers count on their holiday shopping arriving on-time. The Fulfillment Lab found that 86% of online shoppers hesitate to order from a site with negative reviews—which are often caused by breakdowns in shipping and handling.
With all that’s riding on peak season, it’s important to start preparing now. These five tips will help get your warehouse ready to meet the demand.
In "Supply Chain Management: Strategy, Planning and Operation", Northwestern professor Sunil Chopra advises using data from prior years to help inform your holiday preparations. Although time-series forecasting grows less accurate as lead time increases, aggregated data from past years can reliably predict when volume will peak and how far shipping activity will climb above baseline levels. And a deeper dig can help you anticipate other changes in the warehouse operations:
Search for seasonal order cycles. Seasonal velocity will vary greatly between items. Some products, like office supplies and commercial equipment, may actually see a longer order cycle during the holidays, while the velocity on popular gift items will accelerate dramatically. Understanding how the order cycle changes across your inventory can help you set appropriate reorder points ahead of the holiday season.
Also, remember that not every SKU peaks during the holidays. Items like backpacks and notebooks may see their highest velocity in August, during back to school shopping. Orders for grills and coolers will likely start to accelerate around Memorial Day. Understanding how peak season varies by SKU can help you plan appropriate buffer stock levels and make slotting decisions through the year.
Does your order profile change during holiday shopping? You may need to prepare for a decline in the average number of pieces per order, an influx of rush shipping requests, and a proliferation of package destinations during holiday shopping. Anticipating the change in order profiles can help you adjust staffing levels, reduce lead time, and consolidate less-than-truckload shipments.
Examine last year’s issues. Chances are, your fill rate fell short of 100% at some point during the holiday rush. It’s time to analyze those breakdowns and understand the root cause of delays. Look for common signs of inefficiency:
Unplanned Overtime Were staffing levels insufficient during last year’s rush?
MRO Shortages Did your distribution center run short on packing materials, or did a key piece of equipment break down at a critical time?
Third Party Fulfillment Were certain orders outsourced to other distribution centers at the height of the holiday rush? Why were they not filled in-house?
Make sure your marketing department has full visibility to your distribution center. Supply Chain Dive warns against data siloing that can create misaligned forecasts. Inventory forecasts should reflect marketing and sales strategies for the holiday season. What products are expected to heat up?
Your company probably invests heavily in market research, but they may not realize that today’s trending social media posts could lead to empty warehouse slots in December. Set up lines of communication early so that the holiday ad campaign doesn’t catch your warehouse off-guard.
Prior to peak season, the arrival of buffer stock can feel like the warehouse is being deluged with new inventory. In the late fall, it can be tempting to focus on finding slots to get everything stored away, putting picking concerns on the back burner.
But that’s the opposite of what you need to do. iGPS Pallets recommends focusing on expected demand when considering how accessible a SKU slot needs to be. The challenge is maximizing density for storing low-velocity items while keeping high-velocity items ready on the pick face. Just because you suddenly have a huge volume of buffer stock for an item doesn’t mean that item is a good candidate to slot on push-back pallet racks.
If you expect an item’s velocity to accelerate during peak season, you should have a plan for keeping the pick face well stocked. That could mean investing in gravity-flow racks, which will allow full pallets to continuously flow to the pick face as needed. Or it could simply be a matter of improving your task interleaving to keep pallets flowing from high-density storage areas to the pick face.
Even the best forecast is going to have considerable room for error. As peak season arrives, expect to modify your operations to keep up with changing demand.
Float Some Slots: According to Li Yingde of the Zhejiang University of
Technology and Jeffery Smith of Auburn University, a dynamic approach to slotting can help your distribution center stay nimble as demand surges.
Nobody knows what this season’s breakout must-have gift item will be. Creating new floating slots ahead of the holiday peak will allow you to better handle an unexpected surge in an item’s velocity. Dynamic slotting run through a Warehouse Management System can allocate space to your highest-picked products in real time, keeping up with holiday ordering trends as they emerge.
Plan for Exceptions: Consider designating an area for handling exceptions—orders that can’t be completed, packages that exceed the volume and weight limits of handling equipment, or items requiring special dunnage. Routing special cases to their own area can keep the main conveyor line humming along through the holiday rush.
Strategic slotting will promote smooth flow of items from the shelves to the shipping dock. In "Warehouse and Distribution Science," Georgia Tech professor John Bartholdi recommends setting up zones that enable the "parallelization" of order picking: maximizing the proportion of orders that can be fulfilled within a single section of the warehouse, rather than having a carton’s pick path wind back and forth across the distribution center. The design of your zones should achieve three broad objectives:
Minimize Pick Paths If you’re using pick-to-carton, you’ll want to minimize the distance your pickers have to walk to fill orders. Items that are commonly ordered together should be slotted near one another. The zones’ organization should be based on patterns from past order data, as well as the online shopping layout: if your website’s algorithm often suggests paired items to shoppers, those items should be grouped inside the same warehouse zone.
Reduce Congestion A traffic jam is the last thing you want during the holiday rush. Wherever possible, zones should be designed so that pickers and trucks restocking the pick face are moving in the same direction down narrow aisles.
Optimize Conveyors Ideally, each warehouse zone should be served by its own conveyor line sending cartons to the shipping dock. By spreading out groups of popular items through different zones, the flow of cartons will not overwhelm the conveyor’s capacity.
Now is the time to be preparing your warehouse for peak performance over the holiday season. Order velocity will begin accelerating before you know it and Grainger can help. Find your warehouse essentials here.
The information contained in this article is intended for general information purposes only and is based on information available as of the initial date of publication. No representation is made that the information or references are complete or remain current. This article is not a substitute for review of current applicable government regulations, industry standards, or other standards specific to your business and/or activities and should not be construed as legal advice or opinion. Readers with specific questions should refer to the applicable standards or consult with an attorney.