Keep those orders rolling
Retailer Canadian Tire fills its Web site orders with a two-step process that relies on bar codes, warehouse software and a third-party logistics provider.
By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 4/1/2002
The challenge to creating an online retail business is that you have no idea up front just what demand will be.
That is especially true for established retailers like Toronto-based Canadian Tire, a $5 billion a year (Canadian) retailer that sells sporting goods, hardware, home products, and automotive accessories through more than 440 associate stores. "Our distribution systems systems were designed to replenish our stores with pallets and cases," says Bruce Johnson, vice president, distribution and express auto parts. "They weren't set up to ship individual items to consumers."
Canadian Tire's solution utilizes a two- step process. First, the company's distribution centers pick inventory needed for electronic orders the same as they pick inventory needed to replenish retail outlets.
That inventory is then shipped to a 3PL that fills Web orders and ships them by parcel carrier to customers (Kuehne & Nagel, 404-675-2800, www.kn-portal.com).
Two order fulfillment applications support this unusual approach. The first is a warehouse management system (EXE Technologies, 214-775-6000, www.exe.com) dedicated to managing online distribution activities. The second is a shipping application (Commport Communications International Inc., 905-727-6782, www.commport.com) used to customize the packaging and labeling for direct-to-consumer deliveries.
Bar codes link information about orders and inventory across the facilities (Symbol Technologies, 631-738-2400, www.symbol.com).
After one year of operation, the company has more than doubled the number of SKUs offered online from 5,500 to nearly 13,500 products, while reducing the amount of 3PL space dedicated to online order fulfillment from 78,000 square feet to 32,000 square feet.
Building a better mousetrap
Before going online, the retailer set some goals for itself.
To minimize start up costs and disruption to the existing business, Canadian Tire wanted to utilize existing processes and resources where possible. The retailer also wanted to fill orders from inventory already in existing replenishment centers to take advantage of a sophisticated demand planning system already in use for calculating the inventory requirements at stores. The missing ingredient was a system for piece picking and shipping.
"Since we didn't have a core competency on individual piece fulfillment, that's the area we decided to outsource," says Ewen McIlraith, director of distribution services.
Turning to a 3PL to ship parcels also afforded the flexibility to ramp up or downsize to meet demand once Canadian Tire had a handle on how customers responded to this new channel.
Managing online orders
Online orders are batched once every hour to a WMS dedicated to managing online orders at the 3PL facility. While most Web orders are filled from inventory stored in distribution centers serving Canadian Tire stores, three exceptions are stored at the 3PL: product that is unique to the Web, like luggage; seasonal and fast-moving merchandise; and, items that are ordered by the stores in bulk quantities.
These items are tracked at the 3PL just as they are at the distribution centers. When merchandise arrives from manufacturers at either location, pre-applied UPC labels are scanned and compared against an advance shipment notice already in the system.
Product is then sorted onto pallets in a staging area. Once a pallet is ready for putaway, the WMS creates a license plate bar code – or movable unit ID – to track the pallet. When a worker scans the movable unit ID, the system identifies a putaway location. There, product and location bar codes are scanned to confirm putaway and update the WMS.
That merchandise is now available to promise from either system.
When the WMS at the 3PL receives on-line orders, the software determines whether the required inventory is stored at a replenishment DC or the 3PL. If all items for an order are available at the 3PL, the order is scheduled for shipment that day.
If not, an order is sent to the corporate order management system. There, a pick list of items is generated and passed to the appropriate replenishment DC for batch picking onto pallets. An advanced manifest is sent electronically to the 3PL so its WMS can plan to receive shipments that night.
When trucks arrive at the 3PL, pickers using handheld radio frequency (RF) terminals scan UPC labels on palletized inventory. With that information, the WMS segregates the shipment into prioritized orders. It also sends picking instructions to orderpickers on the handheld devices.
The first priority is given to orders that will be filled from inventory in the 3PL facility. Order pickers are directed by the WMS to a storage location. There, the picker scans the location, the product, and enters the quantity of items picked.
Next up are orders that can be cross-docked from merchandise on the pallets just received. Those are further segregated into single item orders and multiple item orders. "To expedite the sortation process, we pick single item orders first," says McIlraith. "Since the packing area is very near the receiving area, they're simply cross docked across the DC and sent directly to the packing stations."
When the first two priorities are satisfied, the system tackles orders that are filled from a combination of storage and cross docked inventory.
Once all the items of an order have been picked, they are sent to the packing and shipping area. There, the items are scanned again for accuracy. Parcels are then weighed to select the most appropriate courier and calculate delivery cost.
Finally, orders are packaged. The parcel shipping system generates the shipping labels and packing slip. That triggers an e-mail to the customer, including a parcel identification number (PIN) used to track the status of their order online. At the end of the day, an electronic manifest is sent to the carriers and the parcels are loaded onto the courier's trucks on their regularly scheduled pickup.
More than a year into the operation, McIlraith says Canadian Tire is learning more about using its existing facilities to further its online business.
"We've struck a balance between integrating where it makes sense and leaving the e-business separate when it gets away from core business," says McIlraith. "This system is allowing us to reach that goal."
Click on this icon to read about National Retail Systems crossdock facility.
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