Big Internet Retailers Demand Partner Companies Advance their Supply Chains
Internet retailing giant Amazon forces other companies to optimize their own supply chains to remain competitive as partners. Learn about how companies are making improvements, such as automation, by following Fulfillment Marketing.
Fulfillment Marketing1 is a privately- held global marketing fulfillment company based in the Midwest. The core of Fulfillment’s business model is that of an intermediary; they purchase inventory from manufacturers, store it and send it direct-to-consumers based on orders from retail consumers or to retail locations in a traditional B2B model. Fulfillment stocks nearly 200,000 unique SKUs and carries large inventory, especially during peak holiday season. The consumer Fulfillment supplies is do-it-yourself crafters, purchasing items like yarn, scrapbook paper, stickers etc. They also carry a large array of children’s crafting items and games. Amazon and JoAnn Fabrics are two of Fulfillment’s largest customers, but they also serve independent small businesses across the globe.
As we take a step back and look at the broader context in internet retailing, fast, direct-to-consumer shipping is table-stakes today. In order to fulfill Amazon’s orders from a consumer, a fulfillment company likely has to be able to pick and ship those orders within hours to meet the 2-day shipping window guaranteed to Amazon’s prime customers. Players in the online retailing space are being driven by large companies, specifically Amazon, to improve speed. This the at the crux of why companies like Fulfillment Marketing need to optimize their supply chains by implementing digital solutions.
While they are literally hundreds of ways that digitization and smart use of data are driving changes in the supply chain at Fulfillment in the short and medium- term, I will touch on only a few here2.
Supply chains are starting to move towards the idea of more perfect information sharing; a small, but effective, example of this is sending and receiving Advanced Shipment Notices (ASN). Receiving an ASN from a supplier lets Fulfillment Marketing know exactly which items are coming in and allows them to schedule and staff docks accordingly, based on the composition of the shipment. They offer the same to their retail customers by sending them an ASN when a shipment goes out. This drives efficiency throughout the supply chain because entities are able to schedules docks and staff for the exact needs of a load. This then frees up logistics partners more quickly to move on to other loads/ customers. However, these efficiencies are all dependent on having useful, accurate data that informs the company’s actions and can speak to a customer’s information system.
Picking orders at Fulfillment Marketing, is transitioning from a fully manual process, starting with manual stocking, to an automated one. In a manual setting, you have employees spending nearly 90% of their time walking around the warehouse selecting items from inventory bins in the aisles. They will enter the same aisle several times in a row but for different orders and without foresight to inform a different behavior. In a facility that has implemented digital solutions, such as Fulfillment, a conveyor system carries totes for orders through the warehouse collecting the needed items from ‘stations’ where employees do centralized picking in a specific area. This saves time and helps manage out of stocks. Digitization at Fulfillment helped create a software with a Dematic partner that sequences orders and puts them in to efficient batches with like items for employees to select. They are also implementing iBot, a robotics solution by OPEX Corporation that further increases the efficiency of picking3. The robots will select from the aisles all over the warehouse and move those items to a central location where an employee can then do the final picking in to a ship ready corrugate package.
This leads to my recommendation for Fulfillment going forward. They are already building a new state-of-the-art warehouse facility, but they can take automation even further. There are some companies in the retail space leveraging systems like the Witron System that can allow for automated unloading, stocking and picking; there may be only one human touchpoint loading and unloading the conveyor belt for an entire order end to end process. I believe Fulfilment can continue to implement more automation in their facility and reduce human touchpoints throughout their processes, further increasing speed and flexibility.
While some of these solutions, seem to be focused on improving operations within the warehouse at Fulfillment, these advancements are critical to remain a competitive partner in the global supply chain conversation for it’s customers. The need for speed drives business partnerships throughout the supply chain and implementing digital solutions, as Fulfillment has, is an investment in the top and bottom line. They can meet tight customer deadlines without constant manual labor overtime.
Is the large financial investment that Fulfillment and so many other companies are making in their supply chains in order to partner with companies like Amazon the right decision? How should companies balance investing in automation in order to play with the big dogs, with the reality of significantly reducing human capital needs? (799)
- Fulfillment Marketing is a falsified name for the purposes of this research paper. The company highlighted is privately held and wishes to keep their supply chain initiatives private.
- Information in this section was gathered through a series of informational interviews and facility tours with the VP of Operations and Supply Chain for Fulfillment Marketing.
- Opex.com. (2017). Available at: https://www.opex.com/assets/documents/unique-approach-automated-order-fulfillment-small-to-mid-sized-ecommerce-businesses.pdf [Accessed 15 Nov. 2017].
Student comments on Big Internet Retailers Demand Partner Companies Advance their Supply Chains
Your last question speaks to an important discussion we had in class related to the IBM Watson case. With your proposal of having Fulfillment Marketing adopt even more automation at an accelerated pace, and the purported inevitability of the whole industry adopting automation, what is to happen to the human capital that was previously used for these blue collar positions? Our IBM Watson discussion centered around white collar responsibilities shifting to prediction/judgement while remaining in-demand. However, in the case of these logistics positions, the physical labor and limited judgement required for those positions makes the threat of automation more salient. While the onus does not need to rest on companies to self-regulate, it seems like the most commonly accepted solution for the problem you are posing is the introduction of a universal basic income. However, is that realistic given the reticence of (specifically in this case) American culture to accept welfare as a reasonable solution to societal ills? (https://theoutline.com/post/1120/ai-and-automation-are-about-to-implode-us-blue-collar-jobs-trump-has-no-plan)
Your first question is interesting especially because of the fact that Amazon has much deeper pockets than Fulfillment marketing. Yet, given the state of affairs, Amazon today will own a large wallet share of purchases and hence it is essential to keep in line with the technology upgrades and keep cost low. In upgrading their technology, one thing that they should keep in mind is what fraction of their investment are they doing to better systems and align with the supply chain as against investing in innovation to stay ahead of the curve. One example that comes to mind when you mention the employees entering the same aisle several times was the concept of Chaotic Storage, where products are randomly stored across the warehouse and identified by the unique storage location numbers. This distributes items across the warehouse and optimizes path of employees when looking for a new order without crowding the same aisles.