November 2012 | Commentary | Viewpoint

Sorting Out Savings Opportunities in Your E-Commerce Warehouse

Tags: Materials Handling, E-commerce

Jay Moris is Co-president, Invata Intralogistics,860-819-3200

The continuing growth of e-commerce has created challenges for distribution centers (DCs). Parcels are smaller, lighter, and harder to handle on the same conveyors and sorters. And shipping and logistics firms have amped up the pressure, adding dimensional charges as a penalty to those that ship lightweight goods.

But from the shipper's perspective, the less efficient the package utilization, and higher the void fill content, the greater the impact of additional, non-value-added costs such as increased labor, delayed shipments, chargebacks and assessorial charges, and additional space required in the DC—resulting in higher infrastructure costs and increased carbon footprint.

E-commerce customers typically want faster deliveries; environmentally conscious, appealing, and undamaged packaging; the occasional added-value or gift packaging; and free shipping. More than half of customers abandon shopping carts when faced with high shipping costs.

Taking control of your sortation, packaging, and shipping processes can help achieve the following goals:

  • Increase customer satisfaction. Right-size your packages. Reassessing and re-engineering your packaging process may allow you to select smaller cartons, standardize packaging, and leverage automated scanning to ensure customers receive the right package—on time, every time. Don't overlook the growing importance of using attractive, environmentally responsible packaging materials.
  • Reduce packaging costs. Use cartonization strategies and software to create smaller boxes and more sustainable packaging. Integrate the software with your packaging process and order and inventory management so you're able to take advantage of smaller cartons and cubes, and reduce parcel size.
  • Decrease labor and increase throughput. By optimizing its sortation system, one retailer cut per-package labor from 62 cents per package to three cents. And a food manufacturer was able to double throughput and reduce shrinkage in its warehouse while eliminating outbound shipping errors entirely.
  • Reduce freight, sortation, and shipping costs. Take advantage of reduced carton dimensional charges. A single sheet of paper can change the shipment's freight class. The actual weight registered by in-motion scales and validated by in-motion scanners eliminates chargebacks for incorrect weight, and can substantially reduce the direct and indirect costs of resolving excess weight charges.

Keep in mind that eliminating package surcharges and assessorial charges can yield a 30 percent or greater savings on annual shipping spend. One retailer combined these savings with an innovative new shipping alliance to reduce the cost of shipping each package by more than two dollars. Not bad when you consider the retailer was shipping up to 10,000 packages every hour.

Consider rate-shopping carriers with real-time transportation management system integration. Automate hard-to-handle products with new sortation technologies to reduce labor. And by changing package size (carton to parcel), evaluating carriers and shipping methods, and lowering weight, your products can qualify for drastically reduced rates. In a higher volume operation, the impact can amount to millions in expenses avoided and profits recaptured.