FULFILLMENT SOLUTION FOR E-TAILER
For e-retailers, what happens on Black Friday colors the entire year. This day has become one of the largest online spending days of the year; however, it can be quickly eclipsed by Cyber Monday sales, which have set records as the largest online spending day in history.
ThinkGeek, a former home-based operation, has transformed into a rapidly growing e-tailer fulfilling a few thousand orders a day during steady state. In the peak season, it is known to receive several times that volume while filling even more orders on Cyber Monday.
- Develop a supply chain solution to meet growth plans
- Meet peak volume demands efficiently and cost-effectively
- Deliver exceptional service to ThinkGeek customers
- Warehousing and fulfillment operations featuring three-level vertical pick tower located in shared-use facility offering room for growth
- Automated, volume-driven warehouse management system (WMS) with inventory and order accuracy technology
- Labour management standards to drive productivity
- Reduced retuns by 5 percent
- Improved inventory accuracy to 99 percent from 92 percent
- Achieved year-on-year productivity improvement of 18 percent
Previously, the company had one distribution center in New Jersey operated by a small third party logistics provider (3PL) that could not keep pace with the increasing fourth quarter volumes or manage for future growth. In order to position the company for growth, ThinkGeek decided to partner with DHL Supply Chain. However, there was a short time frame for designing and building the operation, relocating 2 million units from the previous distribution center and achieving startup in time for fourth quarter peak season. In addition to the increased volumes and growth demands, ThinkGeek’s customers had very high expectations for on-time, accurate deliveries. Altogether, these pressures drove the e-tailer to seek a more customized, automated and data-driven supply chain solution to achieve supply chain flexibility, control costs and improve service.
DHL Supply Chain Solution
DHL Supply Chain located the ThinkGeek operation to an existing shared-use distribution center, which offered the needed scale, capability and more favorable location. The company now occupies 30 percent less square footage than the previous site. Besides conserving space, the facility’s automated three-level pick tower is designed to reduce congestion by storing product up instead of out, which ensures efficiency during peak holiday seasons. A conveyor system can also be adapted when needed to keep packages moving at high volumes.
DHL provides receiving, picking, packing and shipping services at the distribution center, all integrated by a state-of-the-art warehouse management system (WMS) that ensures inventory and order accuracy. Inbound product and customer orders are scanned and tracked electronically. The WMS tracks productivity for each area based on the facility’s labor standards, which saves costs for ThinkGeek by maintaining the right staffing levels.
DHL’s core competency in labor management also enabled a scheduling plan to be created and staffed by a mix of permanent, seasonal and temporary labor that gradually flexed up through fourth quarter holiday peak to ensure ThinkGeek labor costs were in line with business demand.
The operation was up and running in time to meet peak season demand, which included relocating inventory and hiring and training the workforce. Performance measures were instituted so that any order received by 2 p.m. EST during non-peak goes out the same day; during peak, 95 percent go out within 24 hours.
Sales volumes for the first peak season of the ThinkGeek- DHL Supply Chain partnership exceeded forecast by close to 35 percent, stretching the new operation to the limit. DHL Supply Chain engineers came in to redesign the operation for larger volumes. The following peak season was a resounding success, with volumes up 28 percent. The facility was able to satisfy customer demands and maintain service levels well above targets.
For the last peak season from Black Friday through the week after Christmas, the operation achieved:
- A significant percentage of annual volume fulfilled in only six weeks
- 99 percent completion rate for priority orders required to ship within 24 hours
- Post peak season inventory results of 99.8 percent accuracy
In addition, since start up:
- Returns have been reduced 5 percent through improved order accuracy
- Inventory accuracy has improved from 92 percent to 99 percent
- Year-on-year productivity improvement of 18 percent has been established