E-Fulfillment Race In Tight Labor Market Means Efficiency Trumps All

Powering e-commerce fulfillment in new and innovative ways has become the new arms race for retailers, but labor challenges can serve as hurdles to success. Thanks to the pandemic-fueled, e-commerce acceleration, consumers quickly grew accustomed to receiving or retrieving their orders without delay. And while shoppers may be ready to put the pandemic behind them, many of these digital buying habits will continue. U.S. e-commerce sales are expected to grow 17.9% in 2021 to $933.3 billion, and are anticipated to exceed 20% of total retail sales by 2024, according to eMarketer. For retailers, this puts tremendous pressure on their fulfillment operations at a time when their workforce pool has been unprecedently squeezed. Read on to learn how retailers can ensure they meet these new e-commerce demands while navigating today’s labor challenges. Having a successful fulfillment strategy has ramifications across the entire enterprise, with capabilities directly affecting customer satisfaction and engagement. As a result, many of today’s retailers are investing for success. One-fifth of respondents in RIS’ 31st Annual Retail Technology Study cited “accelerating flexible shipping and fulfillment capabilities” as a top technology-driven strategy for the next 18 months, and more than half have started or will start a major upgrade within the next two years. To be sure, there’s no shortage of tech innovation when it comes to e-commerce fulfillment. Walmart dedicated space in 42 of its regional distribution centers this past holiday season to add “pop-up” e-commerce distribution centers to meet the Q4 sales spike. Rather than investing in constructing new facilities, the move enabled it to more easily adapt to the increased online demand while readying for future unexpected demand spikes. Walmart Canada, meanwhile, is developing its first automated market fulfillment center inside one store, a 22,000-square-foot space with automated online grocery picking speeds said to be six times faster than manual store picking. There are also automated vending machine kiosks for online grocery orders where consumers can access orders in under two minutes by entering a code in a designated parking spot. Many retailers found success leveraging their stores as micro-fulfillment hubs during the health crisis and intend to do so moving forward; however, a widespread labor shortage is making staffing these stores difficult, with the U.S. Labor Department reporting that about 649,000 quit their retail jobs in April. And while warehouse automation is a booming sector that ResearchandMarkets expects to reach $30 billion by 2026 — fueled not only by e-commerce but also multichannel distribution channels, globalization of supply chain networks, the rise of autonomous mobile robots (AMRs) and heightened delivery expectations — staffing these warehouses has been just as trying. LinkedIn even named “professionals on the frontlines of e-commerce” as the No. 1 Job on the Rise. Apparel retailer Evo turned to robots to both fulfill a higher volume of e-commerce orders and alleviate pressure on its associate recruitment efforts. “Now, as we get ready for peak season, we won’t be as challenged to find the same number of workers we would typically need to meet the seasonal volume demands,” the company told The Wall Street Journal. The myriad ways to fulfill digital orders coupled with the accompanying labor shortages mean there’s no one-size-fits-all technology for every retail environment. As a result, today’s retailers require flexible yet scalable technologies that can be implemented and adopted quickly. In some environments, deploying AMRs are an opportunity for retailers to compensate for a lack of workers; however, additional investments toward upskilling their current associates may be necessary to truly maximize the technology. Christiana Shi, founder and principal of Lovejoy Advisors and the former president of Nike’s direct-to-consumer business, pointed to the number of retailers that shifted to new fulfillment strategies during the pandemic but failed to re-align their workforce to support them. “Long lines of disgruntled customers waiting for harried employees to fetch items from the stockroom is not a recipe for customer satisfaction,” she notes. To uncover how retailers can locate greater efficiencies while improving their e-fulfillment operations, RIS talked with Arthur R. Eldred, client executive, systems engineering at VARGO. RIS: With over a year of pandemic-era shopping under their belt, what do you see retailers asking for now that they’re being tasked with meeting consumers’ new standards for fulfillment? Arthur R. Eldred: Retailers are struggling to acquire labor to meet demands, and the new normal associated with fulfillment volumes has many retailers looking for ways to decrease costs. Most retailers have had a significant increase in e-commerce volume, which has stretched current processes and systems. There is an urgency to overhaul existing processes to increase throughput and efficiency — with an emphasis on labor mitigation and increasing volume. RIS: When it comes to technologies in the e-fulfillment business, what are some of the trends you've found, and how are you applying them? Eldred: Quick, flexible technologies are the immediate trend. Autonomous mobile robots (AMRs) are very popular right now due to their innovative pricing models, charging robots as a service (RAS), and speed to implementation. Higher volume operations are heavily investing in longer term automation technologies, such as automated storage and retrieval systems (ASRS) and goods-to-person picking technologies. VARGO has implemented RAS models to help mitigate the immediate labor deficiencies. We also designed and are working on several large-scale operations in new markets for several of our key clients. In addition, we have heavily invested in building out our COFE warehouse execution system (WES) to work with several goods-to-person picking systems. RIS: Can you share how an integrator differs in its approach to fulfillment vs. a technology supplier or manufacturer? Eldred: The role of an integrator is more important than ever when it comes to fulfillment and technologies. Integrators work with many different suppliers and become intimately familiar with their ability to deliver and adapt to changes. Over time, you build working relationships and eliminate common pitfalls, so it is a seamless process for the client. Most importantly, integrators are agnostic to suppliers and can search for the technology that provides the best form and fit to benefit the operation. While many suppliers do an excellent job, some can push to supply their own equipment and overlook the best choice for the client. RIS: What role does experience and leadership play when it comes to e-fulfillment, and why should this be important to retailers? Eldred: Great e-fulfillment operations are not chosen from a menu of different technologies. They are engineered to match your business needs. Leaders who take the time to visit, touch, and talk to similar operations prior to investing in a new or large modification to an existing operation can gain valuable insight into potential suitors’ abilities. Whether it is looking internally or to your partners, experience is a must when it comes to three critical areas: the technology stack; mechanical and controls; and operations and building flow. Working with an integrator like VARGO, who specializes in delivering dozens of e-fulfillment operations each year, can provide the expertise and experience required for success. An experienced integrator also can work with executives to build future strategies which is a great value to a business’s future.