India has seen a tremendous rise in the numbers of online shoppers in the last 1,000 days. A buyer simply clicks on the buy button and the product gets delivered in a matter of days at their doorstep. Online shopping is almost becoming a habit in the lives of millions of people. However, most people are totally unaware of the series of activities that get triggered inside the warehouses of E-commerce companies just after their one simple click to ensure that their product gets delivered as promised in the most efficient manner possible. Through a series of small articles, we try to bridge this knowledge gap and also endeavour to bring the best global practices for professionals who are directly working in this yet small but growing eco system.
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The current E-commerce retail laws in India are skewed towards marketplace models compared to inventory-led model. This law environment prohibits a lot of e-commerce companies from holding their own inventories and has forced them to strengthen their marketplace models.
One of the most popular models involves the inventory of marketplace vendors to be held in warehouses of E-commerce companies for multiple reasons such as quicker order fulfilment and better quality controls. In this model, the vendors stock their inventory with E-commerce companies and pay them rentals for offering this service. While this model may sound pretty straightforward, it entails one major challenge.
How do both parties, vendor and E-commerce company, estimate the accurate rent for the inventory stocked?
A “value of item” based rental scheme would not be the best solution, as the cost for an E-commerce company is the rent of the warehouse that they ultimately pay to the land lord. The “Value of Item” will lead to higher rent for a Rs 20,000 mobile phone and a lower rent for a Rs 5,000 air cooler.
Therefore, the best way to arrive at this cost is the space occupied by the vendor’s inventory in the warehouse of an E-commerce company. This solution brings with it another operational challenge.
How do we measure the volume occupied by a product in the warehouse?
Traditional method of dimension measurement includes manual measurement of one SKU using measurement tapes and then inputting this data into a WMS System that can then generate a vendor wise rental cost based on some pre-decided formula. This process is bound to fail at multiple points listed below:
- The sheer number of measurements required per day would require a huge team doing this job.
- Manual measurement is subjective and can involve human errors both while taking the measurements as well as while inputting this data into the WMS system.
To counter these challenges, the E-commerce companies have started resorting to automating this process using the advancements in sensor and scanner space that not only make this process much faster but also more reliable and accurate.
Automated dimension and weight scanning machines have started gaining a lot of traction these days. It can capture all three dimensions and weight of a product in an instant and then relay back this data automatically to the WMS systems using the latest “System to System communication” protocols.
These machines can greatly reduce the manpower requirement for this tedious process, while giving E-commerce companies and their vendors a confidence of 100 percent accurate data and thus reliable billing.
Several reports estimate that E-commerce packaging constitutes one of the three major costs in the E-commerce ecosystem after logistics and rentals. Even a small efficiency gain in packaging costs can greatly affect the financial performance of companies that are striving to succeed in a wafer thin margins business.
Usually, E-commerce companies have a pre-decided range of box sizes that are used to pack the customer orders. When the product arrives at a packaging table, the packer visually observes the product and selects the best fit box for it. This human decision can be wrong due to multiple reasons such as lack of knowledge with a specific packer or a wrong visual estimate.
This error would lead to selection of either an undersized box or an oversized box. Both these cases are a cash burn for the E-commerce company. An undersized selection would mean that the packer would need to re-pack that order leading to loss in his productivity, whereas an oversized selection would lead to overspent packaging. These packers over a period of time align themselves towards selecting an oversized box, to be on a safer side, to avoid their re-packing exercise as their productivity is measured with number of orders they pack per hour.
This peculiar problem can be easily mitigated using the correct dimensions data captured during the product inwards. Simple mathematical algorithms can be built into WMS systems that can recommend a packer the best fit box size using the dimensional data with them that was captured using automated dimensioning and weighing machine at the inbound process.
Data from E-commerce companies that have already adopted this simple yet intelligent system show that a cost saving of up to 25 percent in packaging can be generated using this box recommendation engine.
Correct freight costs
Once the products are packed and are ready to be shipped, they are handed over to courier partners or last-mile delivery partners. There has been a significant increase in the number of companies that are trying to capture a share of this market in last couple of years.
When an E-commerce company hands over a packet to a courier company for delivery, the basis of billing between the two parties is the volumetric weight.
Since a courier company would be required to carry the product in its fleet (air/road), the available space in its vehicles and aircrafts would be limited. Courier companies try to maximise their profits from this limited fleet space by charging on the basis of volume a particular product occupies in its fleet.
To be 100 percent sure that the amount of money charged by a courier partner is correct, E-commerce companies require dimension and weight measurement process just before handing over the packed order to the courier company. This volumetric data helps in reconciliation of invoices between the E-commerce company and the courier company at the end of each billing cycle.
Thus, having an accurate and fast DWS solution at the outbound area in an E-commerce warehouse is becoming a necessity for organisations to curb any avoidable revenue leakages that might be eating into their margins in absence of accurate and reliable volumetric weight data.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory)