One giant leap for ecommerce SMEs

Published:  04 June, 2015

How can SMEs gear-up for e-commerce and take on the giants in their market? Consumers now expect everybody to offer next-day delivery, guaranteed time-slots, the right product every time, and no-quibble returns policies – areas that the larger companies are well tuned into. But with a little forethought it is possible for smaller firms to compete too. Ian Roper* explains.

Logistics companies are helping to bridge the gap. Big and small e-tailers often use the same carriers, with the same technology and very probably the same vans, drivers and delivery rounds. Once the order is despatched, the customer experience is essentially the same.

But that presupposes that orders are despatched correctly and on time. And any mispicks can have a disproportionate impact on a small retailer. Processes within the warehouse hold the key to gaining a competitive edge.

Start-ups may have the advantage of a clean sheet, but there are particular challenges for established, traditional, businesses moving, for example, from traditional b2b with small numbers of large orders to business customers who themselves are buffering stock, to servicing large numbers of small orders by consumers who want the product immediately. Traditional businesses are often shocked at how much time and effort is involved in picking orders for multiple single items, rather than by the pallet or case. These firms need to take techniques such as wave picking, tote picking, and order consolidation, much more seriously.

Then there is the challenge of determining the appropriate balance between manual and automated systems and technologies. This decision is not so much about the size of the company, but rather the complexity of the logistics. A retailer of very high value items may have an impressive turnover on an easily manageable number of orders; equally a single product company may be able to handle very large order volumes with little automation. It is the combination of product variety and order volumes that can become a logistical nightmare.

Most e-tailers experience an explosion in skus - mainly because it is so easy to add new products to the offer on the website. But businesses need to build into their systems and processes a far greater degree of scalability.

That doesn’t necessarily mean betting the farm on sophisticated technologies such as sortation systems or pick to light – you probably need a multi-million pound gross margin to justify the level of investment. But many technologies are becoming more affordable for smaller businesses and can offer scope for future growth. Voice picking is easily viable for high order volumes in the right environment.

However, what is undisputable for all but the simplest operations is the importance of an effective Warehouse Management System (WMS) – after the order is placed the whole customer experience around correct, timely, in-full delivery is down to the WMS.

Integration with other e-commerce systems, such as ‘financials’ is critical. Oxford Products, a leader in motorcycle and bike equipment, use a three-tier model: the website, an order processing and accounts package, and a WMS. But a viable solution for smaller companies can be to start with two tiers - the website and the WMS, and slot the middle layer of order management in later. Oxford Products has recently doubled its warehouse space and anticipates a rapid 50% increase in turnover – but with automation replacing paper systems and the ability to support hand-held scanning, they will save the equivalent of five full time employees, enabling the company to meet this growth without adding to headcount.

Other aspects of WMS for e-commerce include the production of advanced consolidated order picking notes; and a variety of pick and pack routines including the ability to create a box manifest so that the contents can be established without opening the box - which sounds obvious but not every system can do that.

Routines for breaking down bulk replenishment are also important, and increasingly, consolidated order picking is required to support multiple delivery options from home delivery to click and collect from a shop.

In conclusion, with some conditioning of customer expectations, sensible provision for sudden future growth, adoption of forward-looking WMS and financial systems, and appropriate support from carrier partners, new entrants to e-commerce can offer their customers an e-tail experience not discernably different from that of the ‘big boys’.

*Ian Roper is supply chain solutions divisional director at Access Group

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