Speed is Today’s Game Changer:
How to Fine Tune your DC for Faster Fulfillment
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Accelerating fulfillment is the goal for many distribution executives. While speeding up
fulfillment in some areas of your distribution center is easy and straightforward. Other areas require
a delicate balance between the value of the faster fulfillment and the cost of making that happen.
This article will cover the seven areas of your DC where fine-tuning for speed is relatively straightforward, and the four areas where a delicate balance is needed.
Speed is today’s game changer
In order to meet increasing customer demands and expectations for shorter order-to-delivery times,
accelerating fulfillment has become a key business strategy. Companies are re-examining their
fulfillment operations to determine how to speed up operational processes and reduce cycle time to
move the needle on overall fulfillment speed.
The goal? To get merchandise into consumers’ hands as quickly as possible—without losing accuracy.
Or perhaps enable delivery of any SKU to any store any day to support just-in-time ordering which may
help reduce store inventory and safety stock. As next-day delivery and just-in-time replenishment
becomes the new normal, distribution must respond with faster order fulfillment. There are no prizes
for second place.
Faster fulfillment can also help companies enable growth and gain competitive advantage through
increased margins, decreased inventory costs, and in some cases, lower shipping and DC processing
expenses. (For more on the benefits and impacts of accelerating fulfillment, read this article.)
Balancing Cost and Service Levels is Key
But same-day fulfillment carries with it many complexities. The impacts go beyond just receiving and
replenishment strategies—same-day fulfillment also impacts a company’s systems, transportation
strategies, culture, marketing and inventory philosophy. And implementing same-day fulfillment is not
a one-size-fits-all exercise—the process will be unique for every business.
Ultimately, the key is defining a strategy that balances service improvements with the cost of delivering
that level of service. It’s a delicate balance where an important pivot point is your order acceptance cutoff time.
A DC with a 24-hour window for processing same-day fulfillment orders, for example,
functions very differently from one with a two-hour window.
Even choosing between a 2 pm cut-off time (i.e., any orders received by 2 pm will be processed that
day) and a 4 pm cut-off time can have implications.
An additional two hours provides more
opportunity for batching. Ultimately, it’s about balancing a less than optimal process for the DC in order
to meet shorter fulfillment times for the customer which can also have margin impacts.
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So what do companies need to change in the DC to fulfill orders faster? The instinct to simply speed up
all fulfillment processes in order to accomplish faster order-to-delivery times is understandable—but
not holistic enough to avoid sub-optimizing the entire fulfillment process. Companies wrestle with
contradictions such as:

To increase speed you might place fast-moving SKUs in a high-velocity pick area. But if every
order has a fast-mover in it, you may not want those SKUs in a single area where your pickers
will bump into each other and cause a traffic jam.

To increase speed you might want to release an order the moment it is cleared through WMS.
But by holding it an hour, you might create a much more efficient picking wave.
It’s really about finding a balance between cost and service level. Focusing on how fast you receive and
pick, but not on how you pack and ship, for example, will only jam things up downstream. You want to
improve cycle time in the operation, but balance that against the cost and benefits of faster fulfillment.
Seven Areas for Easy Speed Improvements
So just what do companies need to do to get to same-day fulfillment? Here are some specific ideas for
optimizing your DC for speed and efficiency in seven key areas:
1.
Receiving

Voice or RF can be used to enable faster putaway so inventory is available sooner (dock-tostock).

System visibility to inventory at the dock for picking or for replenishment of forward pick areas
can help eliminate the need for an extra touch.

Cross-dock where possible.

As companies shift from receiving pallets to cases and parcels, they may delay ownership of
inventory, but must consider the impact of that on the operation. Many facilities will create a
new receiving process around parcel receipts in conjunction with ASN/EDI vendor compliance
so that Receiving can get goods put away faster and increase picking visibility.

2.
Consolidation (picks into orders)

Use automated sortation to increase speed and accuracy.

Consider different slotting strategies to minimize travel.

In zone-routed systems, conveyor design should have “early outs” for completed orders to
improve throughput.

3.
Use home-run lines or dedicated pack stations for full case picks.
Packing
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
Use automated packing technologies to complete tasks like void fill, literature insertion and
taping so packers can be redirected to fill a QA role.

Use fewer base carton sizes (simplify to improve speed).

Use cartons that are appropriately sized to reduce amount of void fill.

Centralize packing and labeling: If processes can be centralized, then the area can be laid out in
an ergonomic way that minimizes walking and reaching and maximizes the workflows to the
packer even without automation.
4.
Labeling

Use print and apply to weigh and auto-apply shipping labels, content labels and packing lists.

Implement an integrated packaging solution. (Read below about MSC Industrial’s integrated
packaging solution.)

Make sure your WMS is fully integrated to your carriers (Fedex/UPS, etc.) so you don’t have to
touch an order after it is packed; have blocks of pro numbers in your system so you only have
to label an order once.
5.
Validation

Implement automated quality control for all order types.

Use print and apply to create QA labels and divert for faster checks.
6.
Handling Exceptions. When issues arise (e.g., an unexpected out-of-stock item), what
companies do to fix those exceptions is a critical component of fulfillment time.
Exception handling should be given ample consideration in the DC design.

Centralize or automate exception handling so orders can be quickly reprocessed
and sent out the door.

7.
Dedicate processes and people to exception handling.
Shipping

For direct-to-consumer orders, pick directly to shipping container to save time.

Flow into truck rather than palletizing and re-handling; keep pools of trucks on the yard so you
have access to trailers rather than having to touch product again when carrier shows up.

Arrange predetermined pick-up times with carriers to match product flow and picking.
Four Areas that Require Delicate Balance
Optimizing cycle time in the operation is tricky. Companies must balance the easy speed improvements
with those where the trade-off might mean sub-optimizing certain functions of the DC, all the while
keeping an eye on the ultimate goal:
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Accelerating fulfillment for shorter order-to-delivery cycles
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customers demand. Here are some strategies for dialing-in a balanced solution in four critical areas of
your operations where increasing speed is most challenging:
1. Order Planning. Traditionally, the most efficient way to perform picking was to receive
orders a day in advance, batch all single lines together, and group multi-lines that go to
multiple zones with high-affinity SKUs to get an efficient picking process. But with faster
fulfillment, the window of time shrinks considerably. You give up the ability to tweak a
batch.
Again, determining how to plan for orders within a same-day fulfillment
environment means you have to accept a less than optimal process in order to achieve
shorter fulfillment times and service.

Can you release all single line or single unit orders differently than multi-line orders?

Can you effectively plan labor to where the work content transitions by functional area?
2. Replenishment. The trade-off or balance may be in a less-efficient replenishment operation that
allows for more responsiveness to spikes in demand. Replenishment could potentially be improved
in the following ways:

Replenish from reserve quickly so pick locations stay full.

Consider replenishment on min/max triggers as opposed to replenishment from demand for
high velocity SKUs. This can provide flexibility in meeting spikes in demand and service levels.

Increase the variety of storage media types based on velocity of SKUs to improve productivity
and reduce replenishment tasks.

Replenishment of forward pick faces is very challenging in a high volume or high SKU DC, so
system visibility by business channel is critical.
3. Picking. The trade-off or balance in this area might be in adding “good touches” to your process
or making a capital investment for a more efficient picking process overall. Picking could potentially
be improved in the following ways:

More parallel processing (pick and consolidate) that adds good touches to reduce the overall
cycle time.

Improve number of available pick faces per linear foot of travel for picking associates.

Designate separate replenishment aisles and picking aisles in pick modules.

Pick orders to shipping carton to simplify or bypass pack-out process.

Manage SKUs by velocity and create a high-velocity pick area to increase throughput and limit
the number of zones an order is required to visit.

Potential use of a case pick module with sortation—improves productivity by batch picking of
cases for high-velocity SKUs.

Investigate goods to person technologies.
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Accelerating Fulfillment Case Study: MSC Industrial Supply
Before its operation overhaul, it used to take MSC Industrial Supply
Company (“MSC”) approximately four hours hour to process an order
from receipt to the floor. Now it takes just 30 minutes. As a result, MSC
today can offer a competition-crushing service promise to its customers:
Any qualifying order placed before 8:00 pm is delivered the next day.
How did they accomplish this? MSC began by analyzing line and SKU
velocity history to find correlations that would lead to a smarter way to
organize the DC and lower the company’s costs.
MSC made several key changes to picking, including a new paperless RF
picking process that sends each order electronically to merchandise
selectors in waves. Now associates pick the items in their areas and place
them in totes that are consolidated (multi-line orders) or sent straight to
packing.
MSC also switched to on-demand packaging, which means it combines
information about the items being picked from the WMS with
dimensional and weight information to select the right size cartons. And,
the company rationalized carton sizes—MSC found that most orders can
be filled using just six different sizes, instead of the 30 different sizes it
had been using.
The impressive results include:
Decreased order cycle time (print to ship) from over three hours to less than 30
minutes.
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 The project was the single biggest cost-cutting
 The more efficient DC has allowed MSC to take on more business while
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4. Transportation. Transportation is a critical component of fulfillment time, but there’s no sense in
speeding up processing in the DC only to have packages sit on a dock for hours waiting for carrier
pick-up. Transportation could potentially be improved in the following ways:

Negotiate later pull times with carriers or align your pull times with your fulfillment strategy.

Consider ways to shift modes or skip zones to enable later order cut-off-times.

Can you justify an investment in automated technologies by the ability to ship at a lower cost
mode?
The Levers that Need to be Adjusted for Delicate Balance
This is the hard part. Because areas such as order planning/management, picking and replenishment
require a delicate balance, you’ll need to adjust certain levers in order to feed the speed without
starving the bottleneck. What are the levers to look at?

Volume. The growth of Ecommerce has caused order volumes to fundamentally shift upwards.
And volume is changing the game for all companies. It’s much harder to execute on same-day
fulfillment when you ship 10,000 orders per day than when you ship 2,000 orders per day.

SKU count and SKU velocity. SKU counts are rising as customers demand more variety and
want “one stop shopping”. Do all SKUs require the same level of speed in fulfillment? And do
service expectations differ during season peaks and promotions?

Throughput requirements. What are the true requirements? Do they vary by order type or
channel? Can you accelerate eCommerce and retail orders while running a different process for
wholesale operations?

Labor. Sometimes throwing people at the problem only increases cost-to-serve when you
consider the cost of training and retention. And what about labor availability?

Inventory. Inventory levels, slotting, allocation and visibility are critical to speed.

Facility size. Unless you are designing a new DC, this is one lever that may not be adjustable;
but consider what can be done to maximize the building cube.

Sizing of material handling equipment. Balance material handling equipment with design
volumes. Build in flexibility to handle anticipated order volumes, but keep your design simple
so that you can adjust as the business changes. Don’t over-engineer key functional areas.

Transportation and inventory strategies. Are these aligned around the same KPIs and
support the goal of speed? Do you have visibility to all of the inventory across channels and
business units?

Infrastructure investment. What is the available capital for investment in systems and
technologies that enable speed?
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Assumptions about growth are highly subject
to change, so we suggest that you both
confirm
your
assumptions
with
key
stakeholders and consider doing a tipping
point
analysis
as
you
move
“Cheat Sheet” for Getting to Same-Day Fulfillment

Review each process in the DC and determine
ways to optimize (see “Seven Areas for Easy
Speed Improvements” for specific strategies).

Reduce to as few non-value-added touches as
possible. The basic principles of lean are, less
travel + fewer touches = less cost. But to
speed up fulfillment, you may actually have to
add “good touches” to your processes. An
example of a good touch might be parallel
processing (e.g., a zone pick or pick and
consolidate) to reduce overall cycle time. This
reduces the time it takes orders to travel
across zones and can cut much of the cycle
time.

Implement automation where it makes sense.

Work across functional silos to align the
organization around the objective of speed.
Merchandising, transportation, inventory
strategy all have to support this goal.

Look for opportunities to increase throughput
and take dead time out of the process, but
keep the flow. Some examples:
forward.
Generally speaking, the longer the time
horizon, the higher the variability will be in
your projections. Identifying sensitivities and
their around projections will help you to
understand how your profiles might change,
impacting your supply chain in an uncertain
future. An example of tipping point analysis
assumptions around base growth projects is
illustrated below.
Adjusted
historical
data
should
include
detailed receipt transactions, inventory onhand data (month-end snapshots), shipment
transactions and order history data. As you
are studying what, in most cases, can be large
data sets you want to look at the data
characteristics.
− Increase utilization of equipment so
there is minimal or no equipment
downtime. For example, companies
can keep utilization high on a unit
sorter by making sure all chutes are
being utilized.
By looking at single line
orders and profile characteristics of certain
product families you start to see how changes
in where and how these items are stored and
picked can have impact.
1.
− Don’t have orders queuing and sitting
in WIP to be processed; no static WIP
pallets or cartons.
Identify receipt characteristics. Review
the data collected by graphing a trend
− Review SKU velocity and cube to
line, noting total units, lines, SKUs and
ensure storage and media are
inbound orders. Begin your analysis by
designed to enable faster
understanding the mean (average) and
replenishment and picking processes.
standard deviations (+1, +2, +3 above the
mean) for units, lines, orders and trailers.
Standard deviations help you evaluate design requirements. Designing to peak may be too much
and designing to the average is almost never adequate. Step back and ask some questions:

Do you see expected seasonality trends? How often are you receiving seasonal SKUs, is it all at
once or a continuous flow over the course of the season?

Do you see expected peaks and valleys, or were there abnormal events during your baseline
period?
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
What about your supplier base or buyer behavior is driving this profile? Is it something
recurring that you can plan for?

Is there an opportunity to use this data to educate the organization and potentially adjust a
requirement? Should you segment the peak seasons?

Are the spikes long or frequent enough that they should be your design threshold?

By sharing this information with the rest of your organization, is there an opportunity to
engage in collaborative planning across sales and procurement?
2.
Identify shipment characteristics. Outbound shipment characteristics tell us more about
customer demand patterns. Again, if you are operating in a constrained environment the historical
data should be based on scheduled ship dates to understand the true demand and capacity
requirements. So create a graph like the one below and notice how many times you exceed your
design standard. In both receipt and shipment analysis, be sure to track dates so as to identify the
number of occurrences by date and double check to make sure there are no other anomalies in the
data, such as a one-time promotion. Pause to review, asking similar questions as in the receipt
profile
analysis.
In this example of an outbound order lines profile, there was an average
3.
of 31 million orders per day with a maximum of 66 million. The largest
Identify
inventory
characteristics
Depending on
spike exceeds 3 standard deviations and there are several drops in line
volumes. Along with this high variability, there are service requirements
that must be addressed. As the saying goes, “you don’t build the church
your company’s
business
rules,
this data may not
for Easter Sunday,” balancing between service requirements and
variability in this example you would likely want a design based on +1.5
standard deviations.
be available in as
much
detail.
However, for financial purposes, inventory data is typically available as a month-end snapshot of
inventory-on-hand. Capture this data for 12 months in as much detail as is available. Determine
your days on hand values and average inventory turns. Review inventory profiles by product
groupings such as by category or other grouping where inventory characteristics are similar and
perform a comparison to your SKU velocity profiles. Inventories may move differently throughout
the year depending on what they are. For example, snow tires may sit in inventory through the
summer but have several turns within 2-4 months of the year during winter. Consider a few
questions in this analysis such as:

Do the velocities of some product groupings suggest large or small storage media positions?

Do the cubic velocities of some product groupings suggest higher productivity pick media?

Should the seasonality drive larger pick locations for 2-4 months of the year? (snow tires)

How do these findings compare to your operations today?
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
As you’re going through all of these profiles and your company operates in a multi-channel
environment, separate data by channel (i.e., retail vs. wholesale vs. eCommerce). Even if working
within a multi-channel DC, ask yourself whether the profiles behave similarly at the same time
periods.

If so, does this amplify your spikes and valleys? If not, do the complimentary profiles create an
opportunity to converge channels into a multi-channel operation
How can we help?
Fortna helps companies optimize their distribution operations for speed. We engage stakeholders from
across an organization to understand the current operations and service requirements in order to build
a business case for change that delivers competitive advantage. We use robust data-analysis tools to
support decisions and provide insights that lead to the right balance of cost and service. And finally, we
help implement a solution and provide on-going support to ensure the operations are optimized – now
and into the future. To learn more, ask to speak with one of our Associates.
[email protected]
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Don’t miss these other articles on our website:



Video: Accelerating Fulfillment for Competitive Advantage
Accelerating Fulfillment Requires Balance: The Benefits and Impacts of Same-Day Fulfillment
Building a Business Case for Material Handling System Investment
ABOUT FORTNA
For over 60 years, Fortna has partnered with the world’s top brands—companies like ASICS,
O’Reilly Auto Parts and MSC—helping them improve their distribution operations and transform
their businesses. Companies with complex distribution operations trust Fortna to help them
meet customer promises and competitive challenges profitably. We are a professional services
firm built on a promise—we develop a solid business case for change and hold ourselves
accountable to those results. Our expertise spans supply chain strategy, distribution center
operations, material handling, supply chain systems, organizational excellence and warehouse
control software.
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