As more and more retailers seek to expand their e-commerce offerings, many in supply chains are looking to supplement their back-of-store fulfillment operations with more centralized, regional distribution center (DC) fulfillment. Goods-to-person (GTP) automated solutions located in the DC offer a more efficient means to fill additional orders with fewer people, alleviating the demands on store employees. Yet, before making such an investment, it’s important that supply chain leaders have a holistic understanding of the company’s overall sales and marketing strategies. In this post, one of a series of “yes, that really happened” cautionary tales from the members of MHI’s Solutions Community, learn why it’s critical to solicit input from throughout an organization’s value chain in order to right-size a solution that best aligns with service level agreements and customer expectations.

In this situation, a national retailer seeking to expand its e-commerce fulfillment services and provide next-day delivery looked to add a new GTP automated system to an existing DC as a means to replace store-based e-commerce fulfillment. A consultant was engaged to determine the optimal automation solution, which DC to place it in, and the overall impact on the retailer’s fulfillment network. Further, an intralogistics solutions provider was engaged to design the automation to fit the available space. The two service providers used e-commerce fulfillment data sourced from the stores to size the system and determine the number of GTP presentation stations, where bins of product are delivered automatically to the picker.

What the supply chain team and its suppliers did not realize was that the retailer’s sales and marketing team offered certain products only in specific markets. Data about those region-specific picks was included when calculating the GTP automated system design; this artificially inflated the number of units picked per stock keeping unit (SKU), prompting the solutions providers to specify a reduced number of presentation stations. Further, they were unaware that new brand line introductions were planned for release at the same time as the GTP automation was scheduled to go-live.

The result? Upon commissioning, it became apparent that there were not as many units per SKU ordered as anticipated, meaning there weren’t enough GTP presentation stations — or pickers per shift — to keep up with the total number of open orders. Although stations were expanded and more workers added, the existing space was already tight. Additionally, sales and marketing did not want to lose the local-market feel customers experienced by stocking regional-specific SKUs in individual markets. There was not enough space in the new, automated GTP fulfillment system to accommodate these local market SKUs. In order to balance these stocking demands with customers’ next-day fulfillment expectations, the company moved to separating orders into two delivery packages: 90% common SKUs (filled at the DC) and 10% local SKUs (filled at the store backroom).

The lesson to be learned here is that it’s critical to solicit input from the entire value chain (particularly sales and marketing) when discussing an investment in automated fulfillment. By including representatives from throughout the company, the potential impact of such an investment can be examined from multiple angles and different fulfillment scenarios evaluated in order to best balance the system’s design with customers’ service level expectations. For this company, the original installation has since been expanded three times, and two additional regional DCs have been likewise upgraded with GTP automation — all informed by the input of multiple company stakeholders and annual design calculations performed by the intralogistics provider.

Have more questions about best practices in specifying an e-commerce, goods-to-person automated fulfillment solution? Connect with the members of MHI’s Solutions Community for purchasing guidelines and recommendations across a broad range of technologies and applications.