The True Cost of Picking & E-Commerce Order Fulfillment

The True Cost of Picking & E-Commerce Order Fulfillment

E-commerce is a game of inches, and the margin for error is thin. Success depends upon providing customers fast, free shipping on a wide and ever-changing variety of products while keeping costs under control.

Many companies monitor a set of key metrics to evaluate their operations and benchmark performance, particularly units picked per hour (UPH). And while that does provide a base level of measurement of the time it takes to pick orders, it barely scratches the surface in revealing the true cost of picking.

In order to know precisely how much it costs to process customer orders, you need to take a deep dive into your warehouse operations and decide if investing in robotics and automation is right for you.

Warehouse Workers

People are the backbone of any fulfillment operation, and in today’s tight labor market, they can be hard to find and retain. That means relying on temporary workers. In addition to the cost of paying this transient labor force on an hourly basis, you are also incurring the cost of training them on your systems and processes. Once they are up to speed, you’ve still got to account for a number of variables, including absenteeism and injuries. And when people quit, the cycle begins again.

Even when you’re fully staffed, something as fundamental as walking can weigh you down. The time workers spend walking from location to location throughout the warehouse picking items can account for 50% of total pick time and represents more than half of operational costs.

Order picking strategies are also important. Discrete picking, in which a worker picks all the items for a single order, is the most straightforward picking method. It’s also the least efficient as it requires pickers to zig-zag throughout the warehouse in search of individual items. Batch, wave or zone picking strategies are more effective depending on your product mix and warehouse configuration, but that requires additional training, as well as investments in technologies such as pick-to-light systems.

And no matter how well-trained your people are, mistakes will inevitably be made—creating a ripple effect of lost time when an order is missing an item or a duplicate product needs to be removed and returned to the shelves. That process is known as triage. The triage area is like the ER of a fulfillment warehouse—it’s where orders go to get repaired. It’s also the source of many hidden costs that quickly add up over time.

One of the primary benefits of investing in robotics and automation is that the right system can provide solutions to all of these potential pain points. Autonomous mobile robots work for hours on end, traversing the warehouse via continually optimized routes and picking with 99.9% accuracy. Highly-accurate picking means far fewer orders need to be triaged, and you spend less time and resources on quality control. 

Inventory Issues

A complete and accurate inventory is the only way to know what you have, what you’re about to run out of, and what’s been misplaced or lost. Maintaining accurate data can help you minimize safety stock and, therefore, money tied up in inventory.

In addition to the more obvious costs of inventory inaccuracies, there are subtle ones you’ll uncover when you take a more granular look at your processes. For example, if your inventory isn’t where your system says it is, the costs to your business can pile up. There is the time your picker wasted performing a picking cycle that ended without a product for the customer, the time spent investigating why the pick was missed, and the lost opportunity cost of fulfilling the customer’s order. 

A robotics management system (RMS) that integrates with your warehouse management system (WMS) can help you more efficiently manage inventory and eliminate the costs of inaccurate counts and shrinkage. Robots bring the totes directly to warehouse workers for cycle counting, eliminating errors and walking time.

More Touches, More Errors 

Conventional wisdom dictates that the fewer hands that touch a product as it makes its way to a customer the better. Every touch consumes time and creates an opportunity for mistakes. Evaluate the flow of inventory into and out of the warehouse to see how many steps and how much time it really takes to pick, pack and ship orders. 

Picking robots reduce touches and provide an unparalleled level of efficiency and precision.

Space Optimization

Running an e-commerce order fulfillment warehouse means stocking a wide array of products that fill a fixed amount of rack space. This creates a problem for managers who may be hesitant to bring in new SKUs due to space concerns.

A unique advantage of deploying an RMS is that the software can analyze your entire warehouse space and bin or tote location and make consolidation adjustments that result in free shelf space for new products that will increase revenue.

Returns

Just as customers have come to expect fast, free shipping, they also expect free, no-hassle returns. It’s not uncommon to see return rates of up to 30% for items bought online. And clothing retailers can see return rates of 40% or higher as customers tend to select a variety of sizes or colors with the intention of returning what they don’t like.

Most companies factor return rates into the mix and keep a reserve of cash on hand to cover refunds and shipping fees, but seasonal swings or an economic downturn can deplete those reserves quickly. And then there is the labor-intensive issue of handling all those items and returning them to their proper place in the warehouse, part of the process known as “reverse logistics.”

Fortunately, technology can ease many of the pain points of the returns process. An AI-driven warehouse management system and the same robots that help speed goods to customers can also streamline the flow of merchandise back into the warehouse, reducing errors and updating inventory in the process.

Why Does It Matter?

When you put your warehouse operations under a microscope, you’ll discover variables and inefficiencies you never knew existed—things that cannot be solved by simply throwing more people at the problem and can lead to potential losses. 

For example, if your inventory is inaccurate or products are improperly stored, you risk customers abandoning their online shopping carts because items do not show up as available. Even worse, products that are genuinely out of stock go through to checkout, forcing you to contact customers with the bad news.

Adding a robotics system to your warehouse will help you run faster and more efficiently while keeping your valuable employees from getting burned out by repetitive tasks. And with the Robotics-as-a-Service (RaaS) model, you pay for the services the robots provide, not the robots themselves. So, you can easily have additional robots added to your warehouse, giving you the flexibility to increase throughput as needed during the busiest times of the year.

Ready to start transforming your warehouse? Please give us a call – we’d love to hear from you.