eCommerce has become a pillar of modern life. In fact, the eCommerce market is expected to double to over $6.5billion by 2023. Consumers have swiftly become accustomed to the convenience of next day or even same-day delivery orders from their favorite eCommerce retailer. Whether it’s running shoes, groceries, or a new book, customers often give very little thought to how a product gets to their front door. The answer lies with a complex supply chain that is vital to ensuring orders arrive at their intended destination on time. Distribution centres (DCs) are a core element of this, as they hold, sort and send the products.
As eCommerce grows, there is more and more demand for workers to fill these positions. Distribution centres must also meet Service Level Agreement targets – meaning getting customer orders to them on time, whilst also running the center in a cost-effective way. This can be a struggle. Here are some of the main challenges distribution centres face today:
- Service expectations and pressure – Service expectations have increased significantly. People order multiple items from separate sources, all to be delivered in an incredibly short period of time. With that becoming the new normal, it puts time pressure on distribution centres.
- Demographics – There are shortages in the workforce due to changing demographics. By 2024, 25% of the US workforce will be composed of workers over the age of 55. In Europe, the number of employed over-55-year-olds increased from 38.4% to 58.7% between 2002 and 2018. An EU 2020 goal is to further increase this employment rate. However, this makes it’s difficult to find enough qualified people to work within the distribution centres, as the work often involves manual labor. Additionally, warehouse work has become more expensive as employment laws have come into effect around the globe.
- Automation – In order to make more efficient and smooth-running process, more and more automation equipments are being implemented. In a recent survey, 42% of warehouse respondents said that they had either fully or partially automated conveyance, whilst 38% had automated labeling. However, it can also become a bottleneck in the process if the wrong machine is purchased or not being used properly.
- Industry 4.0 – This new development creates a disruption and requires companies to rethink the way they design the supply chain. The potential for “smart-factories” which are totally automated has arisen. Industry 4.0 “emphasises the global networks of machines in a smart factory setting capable of autonomously exchanging information and controlling each other.” – Procedia Manufacturing
- Eco-friendly Operations – Distribution centres are under pressure to reduce carbon emissions and comply with traffic regulations for socioeconomic reasons.
In order to cope with the changed requirements, supply chains and distribution centres need to become much faster, more granular, and precise.
The Difficulty with Scheduling
To build the granular and precise DC of the future, centres must have intelligent staffing and strategy. The distribution center planning manager is in charge of this. They ensure that the right resources are staffed whilst also running a cost-effective and competitive business. However, staffing and SLA strategy must be adjusted based on demand, costs, and availability.
Currently, many planning managers rely on offline calculation of manning in order to create schedules. They have to forecast order volumes, order mix, VAS, and KPIs before planning accordingly. A complex knowledge matrix is then required to check if an employee is qualified and trained to do the tasks required on the shifts. Planning managers must also take union agreements and business law into account. Balancing this with unexpected sick leave, holiday time, and last-minute schedule changes can make for a very complex scheduling procedure. It gets even more complex when you realise that this process is required simply in order to achieve the first schedule for staff.
On the day of operation, distribution centres have to respond to demand disruptions such as higher or lower forecasted orders. The planning manager will decide what to do in order to meet SLAs, whilst keeping staffing costs within budget. For example, they could choose to rely on part-time agency staff to meet the unexpectedly high demand. However, this is costly and could result in the DC running over-budget. If there is unexpectedly low demand, the planning manager may want to send some workers home. However, this often doesn’t work with planned shifts and schedules. A last-minute canceled shift doesn’t comply with labor laws and results in penalties. It’s a complex balance to maintain.
The role of technology
Distribution centres are perfect candidates to benefit from using data and algorithms for employee scheduling. Automated employee scheduling works by accurately forecasting supply and demand and optimally (re)allocating resources. It can also plan for different scenarios and outcomes in case of disruptions. For example, if a DC knows that Monday mornings often see an unplanned 20% reduction in staff, automated scheduling can run that scenario and recommend the ideal employee schedules to manage that drop within budget.
The allocation of resources can also be calculated in response to a DC’s specific goals. If the priority as a business is to meet long-term service level agreements, scheduling is organised in order to achieve those SLAs, despite higher costs. If the priority is to reduce staffing costs, then automated scheduling will also function within those parameters, perhaps sacrificing hitting SLAs.
At Quinyx, our automated scheduling technology can successfully help you handle the volatile and quickly changing activity at distribution centres. This helps DCs to achieve more and stay ahead of the game in the rapidly developing world of eCommerce. Want to learn more about how we reduce planning complexity, maximize utilisation and handle disruptions? Visit our solution page for Distribution Centres.