Rise of online fulfillment.
Online volumes from a supply chain perspective are now reaching critical tipping points for Australian retailers – where key investment decisions are required – in order to support sustainable and efficient competition into the future.
Australia Post -eCommerce Industry eCommerce Industry Report 2023
Some example questions emerging for Australian retailers include:
Centralised or Decentralised?
To what degree should we centralise our online fulfilment physical network?
Together or Dedicated?
To what degree should we bring together our store and online fulfilment operations?
Manual or Automated?
To what degree should we automated our online fulfilment – given volumes, product profile, etc.?
Push or Pull?
What is the optimal inventory operating model for online fulfilment?
It is only once an organisation has a relative feel for the above that specific technology options should be considered.
What are the strategic online fulfilment options?
A key strategic decision for retailers is choosing the right online fulfilment channel, be it traditional stores, dark stores, dedicated online centres, or shared distribution centres.
How can online fulfilment channel achieve faster and cheaper online fulfilment whilst avoiding the “white elephant” when making strategic investment decisions ?
Finding the optimal channel will come from balancing factors such as range, responsiveness, product complexity, market maturity, set-up costs, and operating costs. By carefully assessing these elements, retailers can establish an efficient fulfilment system tailored to their needs, boosting customer satisfaction and driving long-term success.
It is never one consideration in isolation – the challenge is to overlay the considerations and identify the optimal point when balancing trade-offs.
Dedicated Online HUBs
The visual below highlights the fulfilment options across two dimensions. On the Y-axis, level of centralisation and on the X-axis, level of automation.
What are the key supply chain considerations?
How can retailers shortlist online fulfilment options for consideration?
It can be daunting knowing where to start. At trace. we recognise it can be difficult to understand the strengths and respective trade-offs of common approaches to online fulfilment. This is why we offer a simple questionnaire to support our clients translate what they know of their existing business strategy, and targeted customer offer, into a shortlist of potential Online Fulfilment Models.
This hypothesis driven analysis simplifies the path forward by ruling out options that are not complementary to your strategic considerations.
Deeper analysis is often required, however this table can highlight the relative trade-offs to help shortlist scenarios for modelling.
Is your business transitioning from store fulfilment to dedicated or co-located fulfilment?
How to find the right online fulfilment option.
Below is an example 3 phase approach for this type of project.
1. Analyse & Design 2. Scenario Modelling 3. Business Case & Implementation
Our approach to helping our clients identify, select, design and implement the optimal online fulfilment option is hypothesis driven, structured and fact-based. We utilise a range of in-house developed tools for this analysis.
The objective is to design a network and online fulfilment capability that is able to deliver on the target customer promise at the optimal operating costs – whilst also providing a level of resilience to changing operating conditions – for example, as customer demands, product profiles, volumes, etc. continue to change and evolve.
Selecting Online Fulfilment Technology
Highly interrelated to the strategic direction is the selection of the technology to support the fulfilment solution. Below are some example options to consider – each with varying trade-offs that require balanced assessment.
Core Picking Technology
Person to Goods (PTG)
Popular & Emerging
Goods to Person (GTP)
Goods to Robot (GTR)
“…GTP and GTR can be 6 to 16 times more productive than traditional PTG…”
Picking Support Technology
Picking Methods: Cluster Picking, Batch Picking, Zone Picking
Popular & Emerging
Mobile Autonomous Robots
Vertical Lift Modules (legacy)
Mini Load ASRS (legacy)
Order Consolidation and Unit Sortation
Put Walls (Batch to Order)
Popular & Emerging
Sure Sorter (Automated Put Walls)
Unit Sorters (Tilt Trays, Cross Belt, Bombay)
Pocket Sorter (Overhead Sorter)
Don’t let inventory be an after-thought.
Inventory management can be complex…
Extensive SKU Ranges
Multitude of Stocking Locations
Service Level Targets
Working Capital Targets
Large Vendor Lists
Varying Product Profiles
Demand Patterns & Variability
Lead Time Variability
Storage Capacity Constraints
Returns & Excess Stock Mgt
Below we have listed a few drivers for the ‘big’ inventory questions – this assumes a co-located facility with a level of automation