Why is choosing an order picking strategy so important?

An integral process in warehouse management, the speed and accuracy of order picking is essential to achieving seamless workflow and higher level business objectives including productivity, customer satisfaction, and ultimately profitability. Uncertain labor and increasing warehouse operation costs prioritize effective resource management of people and processes. Inefficient order picking processes waste valuable time and resources, working against warehouse leaders’ strategies and making operational goals unattainable or expensive to achieve.

Order picking is widely reported to account for 50% to 55% of total warehouse operational costs. Consequently, identifying the right picking strategy can have a significant impact on the bottom line, with the potential to increase both warehouse productivity and profitability. Key performance indicators (KPIs) such as throughput, order accuracy, and order cycle time should be set and tracked, making adjustments as needed.

• Reduce cycle time
• Increased and sustained order accuracy
• Minimal inventory damage/loss
• Higher customer satisfaction
• Maximize human productivity safely
• Minimize non-value-added activities

Businesses can use a variety of order picking methods and types to create the best strategy to support an efficient, profitable operation. Certain methods may be more efficient than others depending on a number of warehouse operations factors:

• Size of facility
• Product type and quantity of SKUs
• Order to Ship Service Level Agreements (SLAs)
• Order Profile and Volume

Warehouse order picking strategies should be customized to fit your business’s unique fulfillment needs and goals with aims to increase throughput and reduce cycle time and costs. Evaluating the advantages and disadvantages of various picking methods and supporting technologies can help to determine the right method or combination of methods that provide the greatest benefit to your business.

Finding labor and budget to efficiently manage warehouse and distribution (DC) operations have fulfillment professionals looking for solutions that support cost-efficient and agile 2023 supply chain strategies.

So how is the fulfillment industry dealing with these concerns? We look at the top market trends that we see in fulfillment for 2023.

Labor Recruiting and Retention Will Continue to be a Major Challenge

Finding and retaining labor remains the primary concern across industries, but perhaps even more so among those in fulfillment. In the “Warehouse Operations & Trends Survey,” 48% of respondents cited finding and retaining workers as a top business challenge. But more than just a labor shortage, the labor challenges are also magnified by increasing labor costs.

“Finding and retaining labor is still the No. 1 driving concern for everyone that we are working with. Labor availability remains a critical concern, and a key driver for automation,” says Norm Saenz, Jr., managing director and a partner with St. Onge.

Those companies not able to add automation are finding that they need to be creative in finding labor, including an increasing use of “gig worker” platforms, temp agencies, and staffing agencies. In 2022, the average percentage of the workforce who were temps during peak volume reached 20%, up from 18.3% in 2021.

E-Commerce Will Continue to Grow Along With Customer Expectations

Even as consumers are returning to brick-and-mortar shopping to a certain extent, e-commerce sales are expected to soar from about 5 trillion US dollars to just over 8 trillion dollars by 2026. U.S. e-commerce sales have demonstrated this growth thus far in 2022, up 8.3% year-over-year from the first three quarters of 2021.

Along with the continuing growth of e-commerce, customer expectations continue to grow as well. Data shows that 60% of 3PLs fulfill orders less than 90 minutes after receipt, up from 53% last year, and nearly a third fulfill orders in less than 30 minutes, up from 22% last year. Flexible fulfillment remains a requirement even for brick-and-mortar retailers, as ship-to-store, ship-from-store, and buy-online-pickup-in-store (BOPIS) options are ruling the retail space.

The Costs of Fulfillment Will Continue to Rise

Labor costs, warehouse space and equipment, and parcel shipping typically make up the bulk of fulfillment costs – and these are only exacerbated by the growth of ecommerce and the increasingly high rate of inflation.

• Labor: Increased demand — and limited availability — are driving up labor costs, and ecommerce operations typically require three times more staff than traditional warehousing due to the high volume of individual orders. One of the most significant costs that a warehouse can incur, labor can take up somewhere between 40-60% of a business’s operating budget.Adding to the cost of labor for warehouses is the need to replace the constant tide of departing workers. As a result they are forced to pay wages that are significantly higher than those of other blue-collar jobs. In June, according to the Bureau of Labor Statistics, nonsupervisory warehouse workers earned an average of $21.55 an hour, compared with about $15 to $20 for those in fast food and retail jobs.

• Warehouse space: The demand for warehousing space is historically high across the country, while the supply (i.e., vacancy) is historically low. This scarcity has led to drastic rate increases as companies compete for the little space available. In October of this year, the cost for in-place rentals for industrial space averaged $6.95 per square foot across the U.S., up 6.2 percent year-over-year.
• Transportation and shipping: According to a study in 2020, the majority of a typical logistics budget goes towards transportation needs – about 50.3% on average. It’s a trend that isn’t likely to slow down anytime soon and, in fact, has already become more expensive in the years following the study. From rising fuel costs to a diminished labor force of truck drivers, transportation costs are driving up the cost of logistics.

More Businesses Will Integrate Innovative Technologies into Their Systems.

Meeting the demands of modern fulfillment with legacy technology and systems is a challenge made even more difficult in the current labor climate. To meet increased demand, highly fluctuating e-commerce volume, global staffing changes, and rising labor costs, the use of automation is crucial.

Supply chain leaders are also finding that investing in technologies and training helps to retain labor and increase worker satisfaction. Re-skilling and up-skilling supply chain workers allows them to adapt and evolve their skills for a more hybrid, flexible, and technologically-enabled workplace. In fact, the World Economic Forum estimates that, by 2025, 50% of all employees will need reskilling due to adopting new technology.

yd7610 is Lighting the Way in Fulfillment

Global supply chains face a future of continued economic uncertainty, labor shortages, and a skills gap, along with an on-demand world with growing consumer expectations. With labor and warehouse space at a premium, every second of order fulfillment counts. It is a risky, complex and constantly-changing environment that leaves businesses questioning how to boost capacity and do more with less.

At yd7610, we are lighting the way to fast, reliable, and connected operations–so businesses can not only be competitive, but grow. Be among the first to see how our new solution can amplify the potential of the human labor force while boosting employee satisfaction and productivity.

With yd7610, the future is bright.

The labor market as a whole is changing, but even more dramatically in the logistics industry. Qualified labor is getting harder to find, while a significant percentage of the existing workforce — baby boomers — will be leaving the workforce over the next 10 to 15 years. For the first time, there is actually an inversion in the marketplace, meaning that there are now more jobs available than people available to fill them across the entire economy and particularly in this industry. 

A variety of factors have converged to create this labor shortage, at the very time that there is a complementary explosion of e-commerce. All-time lows in unemployment, combined with a change in perception of manual jobs by younger, STEM-educated workers, has led to insufficient numbers of workers for these manual jobs. Businesses are being required to do more with less, and are turning to automation to address their labor needs. 

Nothing is impacting the logistics industry as much as the exponential growth of e-commerce. Consider that American consumers spend 40 billion hours shopping in stores— the equivalent of 20 million full time jobs. This significant job growth in logistics combined with a decline in the available workforce represents an unsustainable shift for businesses. Autonomous robots can fill the gap. 

Automation is a Reality

Robots are already in the supply chain and that is only going to increase with the growth of e-commerce fulfillment. It is expected that shipments of warehousing and logistics robots will grow from 194,000 units in 2018 to 938,000 annually by 2022. According to the 2018 MHI Annual Industry Report, the implementation of robotics and automation continues to expand as companies look for ways to remain competitive. Robots and automation can improve overall efficiency by performing traditionally manual tasks such as picking, sorting, inspecting, storing, handling, and classifying products. 

Once considered a futuristic trend, autonomous robots are quickly becoming the go-to technology for the logistics industry. According to Inbound Logistics, “the 3PL executives charged with making their company’s operations more efficient and cost-effective to the associates on the floor who pick the orders, all are singing the praises of the ‘bot revolution.’”

The fact is that manual picking in a warehouse requires a lot of people, and can be a dull and mundane job. A robotic workforce allows businesses to stay competitive by lowering capital costs, while moving more products with improved accuracy and efficiency.  Robots also provides flexibility to businesses to scale according to demand.

Automation is Changing the Way in Which People Work

While headlines may occasionally declare that the robots are taking all of the jobs, it turns out that actually the exact opposite is true. Automation does not mean the loss of jobs for the human workforce, but rather an improvement of job opportunities. 

Defining warehouse robotics as the “deployment of robotics in the warehouse to perform functions such as pick-place, packaging, transportation, and palletizing,” Allied Market Research says key market drivers include increased demand for automation due to the prevailing competition in e-commerce; SKU proliferation, and advancements in technology.

As the Association for Advancing Automation (A3) points out in Work in the Automation Age: Sustainable Careers Today and Into the Future, “While robots don’t cause net job losses, however, they do change the type of work and the skills required, driving new jobs and shifting existing jobs toward higher-value tasks. This distinction between jobs and tasks is critical.” 

Within any given job, but particularly in the warehouse setting, there are tasks that can be mundane for the worker, but essential to the success of the business. E-commerce trends tell us that customers are requiring more product options, placing smaller orders, and demanding nearly immediate delivery.  By allowing a robot to perform the piece-picking necessary to meet these demands, the human worker’s job becomes focused on higher-value tasks that may ultimately increase companies’ productivity and the workers’ satisfaction.

Automation Will Change the Types of Jobs Available

The nature of work has been changing hand-in-hand with labor automation for hundreds of years—this is not new with the dawning of autonomous robots. Before the industrial revolution, people were required to use their own energy to complete tasks. Industrialization marked a shift to powered, special-purpose machinery, factories and mass production.

Many people today work in jobs and fields that are a direct result of increased automation. And it is expected that up to 65% of kids in grade school today will work in jobs that currently do not exist. And while it is true that autonomous robots will supplement and ease the need for manual labor, it will never replace it. In fact, robotics will create 58 million net new jobs by 2022. But the jobs will in many ways be different, requiring different skill sets. And workers know this—87% of workers believe that it will be essential to get training and develop new skills to keep up with changes in the workforce. 

Automation Requires a Change of Culture

Using robots requires a cultural shift within an organization; and the impact is typically felt across all levels from the material handling labor force to IT, management, and human resources. While businesses want to be seen as being innovative and on the cutting edge of technology and trends in their industry, they need to be proactive in educating current employees and stakeholders about the benefits of the technology. 

Businesses need to understand the cultural impacts of adding automation, and realize that cultural change takes time. It is essential to train and educate the workforce, hire new employees with the right skill sets to work with the robots, and integrate new people into the culture of automation. 

As demand for more efficiency and productivity in the logistics industry continues, and as the labor market shortage persists, companies that want to stay competitive must factor robotics and automation into their growth. Furthermore, when automation is properly acclimated into an organization’s culture, businesses can grow while engaging their employees with higher-level tasks and quality of work life.