Article by Fares Mami, SAP Supply Chain Consultant at Beelogix
US$1 trillion in Asia (mostly China!), US$600 billion in Europe, US$427 billion in USA, have a guess?….e-commerce retail impressive sales of 2016, and still growing fast with China’s offline to online (o2o) trends and mobile e-commerce expansion. But such capricious demand puts big pressure on the supply chain, and while Amazon’s Prime Air service for delivering a package in 30 minutes by drone seems to be magic, it is a tremendous challenge to have the formula right, and profitable!
For the retailers, reducing costs in the supply chain needs to be scrutinized in every detail, and this start with having the right package for the right product. This is even more crucial with the growth of cross-border e-commerce having parcels travel around the world before knocking at your door. Too big and you risk low density surcharge (commonly known as the dimensional weight), too small and you’ll have higher shipping cost. Optimization and guidance during packing is a key to deliver parcels quickly and at the lowest cost. For facing this challenge, SAP EWM continually evolves to provide retailers adapted IT solutions for managing their warehouses. For instance, Cartonization Planning is one of them. Its goal is to optimize packaging for each parcel and gives guidance to the packing clerk to pack as quickly as possible. It is not covered here but Cartonization Planning also allows early planning for the LTL shipping. Let’s have a quick look into it!
Consider the simple case of having four deliveries for customers living in the same zone and to be delivered on the same day. Here is what each one has ordered from an online retailer.
Of course, delivery items of different customers cannot be mixed in the same package and the packaging weight and volume limit need to be respected during packing. These constraints need to be considered to avoid packing mistakes which, apart from losing money, can badly impact customer satisfaction (wrong item, package damaged).
Using the functionality of Wave Management, picking warehouse orders group together items from different deliveries so that the picking can be executed as quickly as possible. SAP EWM Combined Picking functionality fits also well with this scenario. It reduces confirmation time by combining picking tasks with the same item and the same bin (one confirmation). These SAP EWM functionalities are a must in the online retail industry to pick items in the warehouse as quickly as possible, but will not be discussed here.
The following diagram shows when and how Cartonization Planning intervenes in the outbound process depending on parameters that can be set or determined.
Cartonization Planning can be performed based on deliveries, on waves, or when the picking tasks are created in the system. It can use preconfigured algorithm, or custom algorithms that fit with the retailer reality. Different algorithms can be maintained and determined based among others on customers, routes or items to be packed the same way. You can imagine an algorithm for delivery zones where dimensional factor applies and another where it doesn’t, or a different algorithm for each packaging type (regular, flat rate, non-conventional, etc.). The output of the Cartonization Planning is Planned Shipping Handling Units (PSHU), which represents a template of the real parcels (items, quantity and packaging) to be packed and shipped to the customer. This template is then used during packing to guide the packing clerk. Also, in the LTL shipping world, early information about the capacity needed on the truck can be valuable to avoid booking too much space and wasting too much money!
You can find below screens of what this scenario looks like in SAP. It uses the default algorithm that aims to minimize the number of packages:
Four deliveries have been created after the four customers ordered online (see above for case data).
At the time the deliveries are created in SAP EWM, the delivery items are automatically assigned to a wave grouping all items that need to be delivered at the same time. Also, a profile that controls the behavior of the Cartonization Planning is assigned to each delivery item. For example, you can control if a delivery item should be considered in the Cartonization Planning at early stage (for delivery items or for wave) or during picking tasks creation (for warehouse order creation). You can also control if the packing is done during the picking (pick and pack) or later at the packing station (pick then pack). You can see in the following screen that we are using here a pick then pack scenario with Cartonization Planning on waves.
The delivery items have been assigned to a wave.
After the cut-off time, Cartonization Planning can be executed by the warehouse manager. Cartonization Planning can also be scheduled with a preselection criteria. You can for example automate Cartonization Planning execution after the cut-off time of each wave.
Here are the result of the Cartonization Planning.
The $_### lines are PSHUs. It contains the items, the quantities and the packaging to be used later to pack the parcels. As we can see in the right side of the image, even with this simple case, packing without guidance can easily lead to sub-optimal parcels and therefore to higher shipping costs. Adding to this the variability in packer’s experience, larger choice of packaging, unorganized packing stations and pressure on packers when there are delays during the outbound process, sub-optimal parcels could result almost every time.
Sub-optimal parcels is not the only issue. Thinking too much about the optimal package means spending a lot of time analyzing product’s data, packaging data, and you need also to have an idea about package delivery companies’ cost calculation. By implementing Cartonization Planning, apart from having optimal results (or very close depending on complexity and algorithm logic), all this calculation is performed by the system which helps to reduce packing time and therefore improve the business profitability, especially in the online retail industry.
Once items have been picked, they are moved to the packing station in a pallet. In the next image you can see the packing screen (the packing can also be entirely executed on an RF screen). In the left side, the pallet 96 that have just been dropped and the items it contains are displayed. In the right side, information about the pallet/products are displayed and packing functionalities can be performed. To start, you can either enter manually the product you want to pack or scan the information using the RF.
Once the product that needs to be packed is entered and confirmed, the system proposes a quantity to pack and a packaging or an already existing parcel to complete based on the PSHUs created earlier. Another flexibility of the Cartonization Planning is that retailers are able customize, using their own algorithms, how the system executes the parcel packing based on PSHU. You can for example use an algorithm to prioritize already started parcels so that they are completed as soon as possible.
We disclosed a piece of the recipe for the e-commerce magic to work. By minimizing their packing and shipping costs, online retailers can turn what can easily be a nightmare to an e-dream! But it is not all, SAP EWM, as we saw it briefly in this case, has other functions to support your e-commerce business. We talked about Wave Management and Combined Picking, but there are also Pick by Voice, which enables a voice control when exchanging information with the system during picking, E-Commerce Returns with Fiori app which controls the behavior of the returned goods (inspection, put-away/scrapping, refund), and more.