The Automated Local Fulfillment Imperative
By Jeff Ashcroft
Vice President, Business Development, MonarchFx
Numerous times recently I’ve found myself saying (and tweeting) that…
‘Going forward Fulfillment automation is no longer just an option.’
Having been a contributor to many SWOT (Strengths, Weaknesses, Opportunities & Threats) analyses for e-commerce service providers, retailers and even CPG manufacturers, I’ve lost count of how many times I’ve warned all who would listen that fulfillment automation (or the lack thereof) will be a significant threat to their online business in the future.
Today I’m going even further to state that this threat has now evolved into what I’m coining as simply ‘The Automated Local Fulfillment Imperative.’
So just how do we define “imperative” in this context?
Definition: imperative(n) [im-per-uh-tiv] noun: a command, rule, duty, etc., that is very important or necessary. Serious edict issued with or from position of authority or advanced knowledge.
The imperative in this case is that in the not too distant future not only will your fulfillment operations need to be automated, but also that this automation will need to be applied at the local level of your supply chain.
Automation in logistics operations has been around for many years beginning with the use of simple conveyors and evolving into advanced sortation, automatic storage and retrieval systems (ASRS); and now the latest in Automated Picking Systems for e-commerce fulfillment.
As sexy and cool as many of these materials handling technologies seem to appear, getting the design and implementation right can be a very challenging (and costly) task and one of the scariest factors of these implementations is the lack of flexibility to change with your business.
It’s also important to note that these major automated picking and fulfillment operations are built out on volume projections which are typically 3 to 5 years out. What this means is that you’re paying for equipment and capacity you won’t need for another 3 or 4 years from start up, that is assuming there’s no changes to the overall network and consumer demand for those areas turns out as planned.
Additionally, because of the high capital cost of major automated picking and fulfillment systems, huge volumes are required to cost justify them almost always resulting in single, or perhaps at most dual national fulfillment operations in the United States.
So what forces are driving ‘The Automated Local Fulfillment Imperative’?
The Need for Speed
Consumer demands for rapid delivery just continue to grow. People used to be satisfied with delivery in 3 to 5 days which meant that one national fulfillment center would do the trick.
This expectation then evolved into 2 day delivery which many consumers now consider to be an acceptable standard. From a fulfillment perspective this means additional fulfillment center locations or 3PL partner providers are now required to meet this need.
But of course the consumer’s need for speed hasn’t ended there and online shoppers will most likely soon see Next Day delivery as their expected standard for delivery.
And depending on what percentage of the population an online retailer wishes to guarantee this service level to will determine how many local fulfillment centers are needed to support effectively.
And although many are still resisting the move to Same Day delivery, the inexorable growth in consumer delivery demands is unlikely to stop until this ultimately becomes the new normal for consumer service reality.
The need for speed in these cases results in the addition of more locations, but to meet these timings it also has an impact on fulfillment, especially at high order volume levels. This drives the need to have automated fulfillment locally in order to rapidly fulfill orders and get them out on delivery PDQ (Pretty Darn Quick) and meet those ever growing consumer delivery demands.
Obviously the addition of all these locations requiring ultra rapid fulfillment to meet delivery timelines comes at a higher cost relative to both inventory and operational requirements. These higher costs can at least be partially offset through the implementation of local to local deliveries to reduce Last Mile delivery costs. Exacerbating this need to reduce cost is the fact that consumers want to pay less (if anything at all) for fulfillment and delivery services.
And unfortunately the traditional automated fulfillment picking systems which can deliver lower piece picking costs require massive volumes in order to justify and deliver a satisfactory return on investment.
This is a problem screaming for a solution and one that is now offered through the robotic automated local fulfillment services available from MonarchFx.
Fit and Flexibility
If you’ve been following along with this train of thought, we now have a local solution that delivers the needed speed and low variable costs, closer to the customer to meet the increase in consumer delivery demands.
However, two other important features are also required, the first of which is ‘Fit’.
As mentioned, typically when automated fulfillment solutions are implemented, they’re heavy on capital investment and built to support a 3 to 5 year growth requirement. Effectively this means you’re paying now for capacity which won’t be needed until some future date assuming there’s no change in expected volumes.
By selecting the MonarchFx automated local fulfillment solution ‘Fit’ is customized to meet your business and only your current consumer delivery needs and locations from Day One.
And even better still, on an annual commitment basis you’re able to make any changes needed in fulfillment volumes and locations, because we all know the speed at which the e-commerce business is changing.
The second factor is ‘Flexibility’, (which justifies it’s own blogpost coming soon), but suffice it to say that the modular automated robotic solutions being described here are dramatically more flexible and even potentially portable should unforeseen changes to your business arise. Check out the below video to see this flexible fulfillment technology in action.
So the bad news is that for all of the above reasons ‘The Automated Local Fulfillment Imperative’ is real.
But the great news is that new, innovative and flexible local automated fulfillment solution options are now rapidly emerging to solve these challenges.
Vice President, Business Development, MonarchFx