DEEPER DIVES: The Future Of Retail & eCommerce Fulfillment

Good Morning,

First, as always, thank you for joining.

Happy Father’s Day to all the dad’s out there. It’s not always easy, but totally worth it.

I’m switching it up this week and getting right into it.

Grab your coffee and let’s go.

Here’s what this issue brings:

• How much longer can manual pick and pack warehouses survive? Customer expectations keep rising, real personalization and customization is coming to shop floors
  

• You’ve got a great idea, now it’s time for someone to make it. I’m sharing lessons learned from 13 years working in manufacturing
  

• Running a successful Daily Management System dramatically improves your performance - and it’s not just for operations

Is Your Fulfillment Strategy Future-Proof?

Retail and eCommerce are changing fast.

With new brands and products popping up every day, staying competitive is the only way to stay alive.

And to stay competitive, you have to do things differently.

It’s impossible to keep up with current trends by doing what’s always been done.

Customers want quick, easy and simple fulfillment.

They want to buy online and pick-up in store or have it delivered to their door in a couple of days (or sometimes even hours).

Buy Or Build

Some companies want to in-source to maintain control of their customer experience. Those companies often feel that handling the product themselves better aligns with their brand values. It gives them more flexibility to make changes. For some, it can have a noticeable impact on costs.

Other companies find outsourcing the best path. By partnering with a business who’s core function is fulfillment, they free up more time and energy to put towards product development, sales and customer experience.

Here’s my take.

There’s a huge infrastructure shift happening. Automation and robotics is popping up everywhere. For where the industry is today, it’s about to explode. It won’t just continue to evolve, it’s going to mutate.

If you aren’t:

1. Willing (and driven) to make operations and fulfillment a top priority

2. Spend a lot of money on your infrastructure

Then you should buy.

If you choose to build, you HAVE to do it right.

The Warehouse Automation Overview

Up until now, the most common warehouse system that you’ve probably heard of is a WMS (Warehouse Management System).

It uses slotting and waving (need definitions?) to optimize a distribution center’s operations.

These days however, the real talk is about Warehouse Control Systems (WCS) and Warehouse Execution Systems (WES) which offer even more granular control and real-time optimization of warehouse tasks.

A WCS focuses on the control of automated equipment (conveyors, sorting systems, the ASRS, and robots), while a WES acts as a middle layer, optimizing workflows and coordinating tasks between the WMS and WCS (orchestrating the people and the machines).

These systems are now being paired with AI driven models to increase efficiency, improve accuracy, reduce costs and provide more flexibility within the same four walls.

With increasing product complexity, an interesting distinction is being made.

It’s between tasks or activities that are considered “mobility” versus those that fall into “manipulation”.

See, robots excel in tasks that involve moving items around (mobility), while humans are better at tasks that require picking and handling items (manipulation).

This means less time for people picking items, and more time spent preparing packages for the end consumer.

With businesses like Amazon, Walmart, Target, Shein, and Temu all investing in massive amounts of automation, they will need to find more ways to create a unique customer experience at the door.

The focus is shifting for retails stores to become “customer experience centers”. Brands won’t be able to afford a day and night experience to their in-store versus online shopping experience.

This means higher expectations at the pack station. The demands of retailers will be unsustainable for warehouse operators that have made the decision to continue with all manual, people driven work.

How To Negotiate Prices Without Messing Up Quality

No one makes their stuff.

The vast majority of businesses that you see selling consumer goods aren’t actually the people doing the manufacturing.

The global contract manufacturing market is estimated to reach $604B by 2030.

Contract manufacturing is essentially outsourcing production.

Here’s how it works:

A company (let's call them the client company) hires another company (the contract manufacturer or CM) to make their product, or parts of their product. The client company provides the design and specifications, and the CM handles the entire manufacturing process, or a specific part of it, depending on the agreement.

One of my favourite videos to highlight the specific nature of the manufacturing world is this one - How Are Erasers Made

By understanding just how specific and precise manufacturing equipment is, you start to see how you can improve, or hurt, your position.

1. Understand your quantity requirements versus the capacity of the run. If you are under or over utilizing the manufacturing slot, you’re losing money. Most manufacturers aren’t setting the MOQ to the full capacity of the slot.
   

2. Use the manufacturer standard ingredients as much as possible. Depending who you contract with, they will be more used to working with certain ingredients versus others. Don’t ever add complexity if you don’t have to
   

3. Use standard shapes, sizes or formats. Customizations will require everything to be adjusted for your run (each time you have your product made)
   

4. Be careful to not over engineer product recipes or textile patterning until you are sure of your product-market fit
   

5. Validate how many adjustments need to be made for your specifications to start the production run. More changes or use of custom (or non-standard) components takes time. These hours flow directly into the billable manufacturing hours
   

6. Whenever possible create longer runs. One longer product run will be cheaper than two separate runs at different dates / times
   

7. Lock in schedules when you have them. The better visibility you provide to your CM, the better customer you are, the more they will want to keep your business
   

8. Be cautious about opting in for new processes, features or updates. Very often early production runs after making systemic changes have a higher defect rate
   

9. Manage your packaging relationship when you can. Changes to packaging (usually done to reduce costs), can have a negative impact on your product or customer experience
   

10. Mitigate your risk by carrying a decent inventory or working with more than one CM (your business can’t shut down if your relationship with the CM comes to an abrupt end)

Winning The Year Starts With Winning Each Day

One of the hardest things to do is any business is get people to appreciate how important the basics are.

Getting the basics right will save you countless hours of stress and firefighting (and a whole lot of money too).

There are different ways that you can create accountability for a team, but my favourite is having a solid Daily Management System.

“System” makes it sound heavy.

It’s not.

It’s basically your daily playbook that helps you understand if you are winning or losing.

With a DMS, you:

• Create targets

• Track performance

• See how you’re doing

• Take action to fix mistakes

• Check to make sure solutions are working

This is all done with 3 main areas of focus

1. Daily accountability

2. Standard work

3. Visual controls

The goal of the DMS is to create a culture of problem solvers. It moves your organization from one that relies on certain people to fix business issues, to one that has everyone fixing business issues.

Daily Accountability

This one is straightforward.

You team meets every day to talk about the current situation, anything that came up the day prior that didn’t execute properly, challenges for the current day and what they are focused on.

It’s information and data driven, not anecdotal.

Everyone should know their key metrics and be ready to talk about them.

These are short meetings. 10-15 minutes max.

The goal is to communicate and share relevant information. Problems are raised and assigned, but no deep or focused problem solving or “what if” discussions are allowed here.

These meetings are held every day at the same time. Not attending or not being prepared isn’t an option.

Standard Work

This is the one that most teams or businesses struggle with the most.

It’s incredibly hard to get people to acknowledge the routine in their days.

People have a tendency to focus on exceptions, and what’s different.

Forcing through that discomfort and getting a strong view of the daily standard work is extremely important.

By creating a structure and having a checklist of things that have to get done, you immediately introduce more consistency and reliability to your business.

It’s here that you set your standards and targets for the team.

Visual Controls (Management)

Humans are naturally visual learners.

Our brains quickly interpret and classify visual information very well.

Properly set up visual controls do something for us that no other means of communication can do as quickly.

Provide context.

You don’t need to know anything about the system that this gauge is measuring.

You don’t need to know the exact tolerances of the machine to know if everything is okay.

That’s why visual controls are powerful.

They give you the ability to understand how you are doing, where you are in your cycle, if you are doing well or need to make adjustments.

The best visual management systems should be able to communicate the state of your business by someone looking at it from 20 feet away.

Having a solid DMS as part of your business will make it easier for you to meet customer demand, secure new business and build out new capabilities. You’ll stand our against competitors that don’t have the discipline or rigor to keep perfecting the basics.

That’s it for this week. Thanks for being here.