Last October, Amazon.com offered free shipping on all orders over $25 through the holidays and possibly beyond. What's more, the online retailer revealed that it had lowered prices 5 times in the past 15 months.

This wasn't, however, some new economy plan to lose money but make it up in volume. Amazon was actually improving margins while lowering prices and giving away shipping.

The secret to the company's success was decidedly old economy: paying attention to order fulfillment costs in the company's network of distribution centers.

Amazon defined order fulfillment as everything associated with getting the items for an order off the shelf, into a shipping container, and on a truck for delivery to a customer's doorstep—the kinds of challenges that warehouse managers face at the start of every shift.

To learn more about the best practices impacting order fulfillment today, we turned to Jim Apple, a director and co-founder of The Progress Group (770-804-9920), a logistics consulting group, and a regular columnist for Modern Materials Handling.

MMH Recently, Amazon.com described order fulfillment as everything it takes to get an order out the door. What does order fulfillment mean to you?

JA Well, order fulfillment is about getting things out the door. But you can't design good order fulfillment systems without also thinking about your receiving operations, reserve storage and replenishment. You might also start thinking about when is it appropriate to ask my supplier to ship to my customer? That's certainly fulfilling the order and it's doing it without touching the product myself. Third-party logistics (3PLs) providers are also part of the equation. Order fulfillment has many aspects to it today.

MMH Are there more consumer direct and 3PL shipments today?

JA Yes, and that's because of the Internet. There's always been some consumer direct distribution. The change is that it's now a mainstream supply chain activity because of the Internet.

MMH One of the terms we hear, especially from 3PLs, is flexibility. How important is it?

JA In terms of efficiency, the most efficient solution is a rigid solution. Flexibility adds cost. The catch is that you need flexibility because the problem doesn't stand still. Your business is changing and you have to respond.

MMH How do we make that trade off between being efficient and responsive?

JA Well, I'm a fan of smart manual processes. I'm working with a 3PL with a pick-to-belt sortation system. But that's not always the best way to process their orders. For instance, some orders call for 180 cases from a pallet with 220 cases. Imagine how much work it would be to label and sort 180 cases. We came up with a manual system to remove 40 cases and ship out the pallet. That's being nimble enough to create parallel manual processes when they're warranted.

MMH Sounds like planning is important.

JA Absolutely. I see too many facilities where managers try to respond to today's orders today. That can't ever be the most efficient way to fill orders.

MMH Well, how do you plan for tomorrow's orders today?

JA The first thing to do is find out what part of tomorrow's workload you do know. Some people think they don't know what's going to happen tomorrow because they don't know everything that's going to happen. But if they explore the issue, they'll find that they can plan for 50% or 70% of the day.

MMH You plan for what you know?

JA Sure. I buy from a large catalog company. When you call, they don't commit to ship your order today unless you'll pay for over-night service. Instead, they promise to ship in four to six days. That buys them the time to plan tomorrow's work today.

MMH Are there other steps a manager can take to improve fulfillment?

JA I'm a strong believer in workplace design. That goes all the way down to asking what the picking instructions look like and whether the rack labeling makes sense to the picker and not just to the IT guy. Too many systems have been designed by IT people that make perfect sense when you talk about them, but are cumbersome for the people on the floor.

MMH Like what?

JA Take scanning. Say you want to scan the location and scan each item to confirm the pick. Pickers get tired of doing it. So, they look for ways to short circuit it, which means the probability of an error goes up. I think it's valid to ask whether we're scanning too much.

MMH How important is receiving on order fulfillment?

JA There's tremendous opportunity there. As we be-come more effective supply chain managers and get smaller and more frequent receipts, you have to pay attention to receiving. That's the process of receiving efficiently; dock to stock time becomes more critical because the less of the stuff I have the more likely it is that what's coming in the door is needed. I can't afford to have five trailers sitting out in the yard that I haven't gotten to yet. I have to be able to unload as this stuff arrives because there's going to be at least one part in each trailer that I need. The receiving process is now a major area of opportunity.

MMH Does crossdocking play a role there?

JA Absolutely. I've seen some amazing things done very simply and very efficiently. I visited a little auto parts distributor in Ohio. They had a big warehouse in Columbus, a medium- sized warehouse in Akron, and a small warehouse in East Liverpool. They ran a shuttle truck twice a day between the facilities. Now, if someone in Youngstown took an order for an out-of-stock part, the order automatically got routed to Columbus. In Columbus everybody knew that if the order said Youngstown, the part had to go on the truck to Akron. When it arrived in Akron, they looked at the order sheet, and automatically put it in an accumulation area for the guy making a run to Youngstown. Low and behold, it got delivered by the middle of the afternoon, and it all happened with just a little bit of information. It was so simple I was pretty overwhelmed. I think the lesson is that you don't need a big, complicated order fulfillment process to be effective and efficient.