In the face of changing consumer demands, retailers continuously strive to improve throughput in their micro-fulfillment and distribution centers. The downside of not getting this right is that it can have devastating consequences in retail sectors like food, beauty products, and e-commerce. Besides, delays in order fulfillment can lead to consumer attrition and loss of revenues.
Once considered a premium service, same-day delivery is now an essential requirement for retailers. According to Honeywell Intelligrated, 56% of consumers in the age group of 18-34 years expect same-day delivery. Without high throughput in the MFCs, retailers can no longer hope to deliver ordered products on the same day.
As more consumers demand faster deliveries, an MFC or distribution center in closer proximity to customers is no longer sufficient to guarantee a high speed. Here’s why it’s hard for retailers to accelerate throughput in their order fulfillment process:
- Unpredictable consumer demands
Retail brands are constantly challenged by changing customer expectations, with more pressure on timely deliveries. In the face of unpredictable demands, retailers are finding it difficult to differentiate their brand appeal from competitors. For instance, 75% of retail consumers expect a consistent brand experience across multiple channels and touchpoints.
Similarly, consumer demand for a particular product can increase substantially following a successful marketing campaign or an influencer-led promotion. Being human, consumers also tend to overstock products in the face of potential shortages (remember the toilet paper crisis).
This form of unpredictable demand can overwhelm the best of MFC and distribution centers, thus impacting high throughput.
- Frequent stock replenishment
Between 70% to 90% of stockouts are caused by insufficient replenishments.
Due to limited space, MFCs can stock items in lesser quantities, thus requiring frequent replenishments. For efficient replenishment, retailers require real-time inventory management that can prevent stockouts in MFCs and distribution centers. Food retailers are the worst hit as they look to fulfill orders from a single warehouse or location.
Frequent replenishments can also increase transportation and delivery costs, thus adding to the overall operational expenses for the retailer. Companies with distributed MFCs also need to balance the available stock across locations to meet customer demand.
- SKU varieties
On average, food retailers have anywhere between 20,000 to 60,000 SKUs (or store-keeping units). With its limited space, most MFCs and distribution centers find it challenging to stock all the possible SKU varieties. Depending on the available space, e-commerce retailers may not have sufficient space for keeping heavy or large-sized items. Without adequate cold storage facilities, food retailers cannot consider keeping seasonal or perishable foods.
On the other hand, limited SKUs can impact throughput efficiency and delay shipments to end consumers. Alternatively, retailers can improve throughput by limiting the number of items (per SKU) and increasing product varieties. However, this can increase the chances of a stockout.
- Ineffective micro-fulfilment technology
Retailers can no longer accelerate throughput using legacy or outdated technology in their MFCs and distribution facilities. These outdated MFC solutions cannot seamlessly integrate with third-party solutions like ERP and Point-of-Sales (PoS). As a result, retailers often lose time tracking new purchase orders or inventory levels.
Without these real-time updates, they often make mistakes leading to:
- Inaccurate product deliveries
- Understocking or overstocking of inventory items
- Delays in product shipments
Instead, retailers must opt for the latest MFC solutions that can seamlessly integrate with other existing applications and meet the most demanding fulfillment-related tasks.
- High order fulfillment costs
Order fulfillment costs account for roughly 10-20% of retail sales costs. Retailers face the dilemma of improving their delivery speeds profitably. What’s even more challenging is that most consumers are not willing to pay for faster deliveries.
Given these cost challenges, retailers need to make tough decisions regarding:
- Investing in technology solutions that can unlock business value and improve throughput efficiency.
- Partnering with retail solution providers to implement cost-effective order fulfillment.
- Automating operations at micro-fulfilment and distribution centers.
- Lack of operational visibility
After establishing a new MFC or distribution center, retailers continue to manually track the flow of inventory items in and out of the facility. MFC operators need to replace manual processes with automated systems, which can also provide real-time operational visibility. This can help in reducing wasted time and resources, thus accelerating the throughput.
Additionally, with real-time visibility into inventories, retailers can redirect order fulfillment and optimize stock reordering.
Conclusion
In the fast-moving world of e-commerce and food retail, companies find it challenging to accelerate throughput with the existing system. Low throughput in micro-fulfillment and distribution centers can damage customer satisfaction levels and expectations.
At Cartesian Kinetics, we work closely with global retail brands and address their common pain points in order fulfillment. Our flagship solution Carte+ is designed for:
- Faster installation in less than 6 weeks
- Higher order throughput with over 450 totes per hour
- Improved space utilization in 8-inch ceiling heights
- Faster ROI of less than 2 years
Experience the difference of our Carte+ solution. Reach out to us today!