The global emergence of shopping holidays like Black Friday, Cyber Monday, and Singles’ Day, is challenging capacity planning at parcel distribution centres. While a major business opportunity for CEP providers, without proper planning, peak seasons put operations at risk. Here’s how to prepare for fluctuating demand with automated sortation, without wasting money on overcapacity.
Consumers are increasingly taking care of all holiday shopping online. In the United States alone, holiday e-commerce spending in 2019 will rise 13.2% to $135.35 billion. That’s more than three times the rate of total retail spending growth. Traditionally, the holiday season is roughly one month, defined in the US as the period between Thanksgiving (the fourth Thursday in November) and Christmas.
However, peak season is no longer only about delivering Christmas gifts on time. With about 40 percent of e-commerce sales being returned, peak season has extended well into January. Combined with the globalisation of regional holidays, distributors might be looking at an annual wheel of multiple peak seasons.
The massive eruption of shipments during relatively short time periods is a challenge for distributors, for several reasons: 1) Systems and equipment are overstretched, increasing the risk of breakdown at peak time. 2) The need for additional manning is often accommodated for with temporary staff, who don’t have the same level of training and experience to handle critical situations.
Choosing the capacity level of your sortation system is a relatively permanent decision; scaling sortation systems up or down is not done overnight. As such, fluctuating activity levels in distribution throughout the year makes it difficult to decide on the scope of a sortation system. Should you design a sortation system based on regular activity levels with the risk of working well above capacity during peak season - or go for a system with higher capacity to easily accommodate for busy times with the risk of paying for overcapacity?
To find the right balance, we recommend you consider the tips below in combination with designing your sortation system based on parcel mix projections.
Proper peak time preparation is critical for handling seasonal disruptions while performing at the service level your customers expect. The following tips are based on “Handling the Holidays with a Peak Season Plan” by Mark Sibley, Vice President of Customer Support, BEUMER Corporation.
Begin three to five months in advance to identify, document, and analyse areas of potential risk. Ample lead time is also necessary to implement, test, and evaluate new processes. Your peak season plan should cover key systems, personnel, maintenance, and operational processes.
A plan for the future always benefits from a look at the past. Examining and evaluating your maintenance and operational records will help you identify systemic issues or previous areas of concern. Knowing where bottlenecks occurred in the past will help you develop an effective action plan.
Documenting and tracking everyday events now will help you identify areas of vulnerability during peak season planning. You should capture data about equipment failures, unscheduled shutdowns in conveyors or sortation equipment, interruptions in order flow, as well as reductions in service levels and throughput. With regular documentation and just a half-hour review of these diagnostics might save you from four hours of downtime during peak season.
With regular documentation and just a half-hour review of these diagnostics might save you from four hours of downtime during peak season.
Stress testing equipment is an effective way to simulate high-demand conditions. A best practice is to conduct the test four to six weeks prior to the season's start. One way to test includes holding back up to half of a normal day's throughput, then sending it all during a compressed three- to four-hour period to replicate peak volume and operating conditions.
Any kind of system testing requires observing and documenting results in preparation for process improvement and training. As such, observers should be instructed in what to observe and how to capture information. For example, if you experience an increased rate of “no reads” at sortation induction, you can assess if operators are positioning the product improperly, or if the quality of labels has been compromised.
High-tech, high-performing systems operate best with preventative maintenance programs that follow the manufacturer's recommendations.
Preventive maintenance can be compared to an annual physical check-up. Technicians perform these maintenance tasks when everything is still running smoothly in order to prevent future breakdowns or emergency maintenance issues (Source). For sortation systems maintenance, recommendations are usually based on the number of operating hours.
As part of your regular data capture about equipment condition, as well as in relation to stress testing, you should inspect components that are particular vulnerable to wear and tear during peak season, including cabling, photo eyes and sensors, and motors and belt alignments.
Consult with your systems and spare parts suppliers in relation to increased maintenance intervals. They can also provide refresher training for maintenance personnel on troubleshooting and prompt repair.
With a preventative maintenance plan in place, it’s also important to review your plan for emergency maintenance to ensure you have the expertise, partners, and parts necessary to handle the increased operating hours and multiple-shift conditions of peak season. As part of the emergency response plan, identify the key equipment that could bring operations to a halt should it go offline.
CEP operations today are IT-driven, and as such, 24/7 IT support is critical. You should have an IT response process in place, including how, when, and whom to contact in case of systems failure.
Make certain that your on-site IT staff has the proper training and level of expertise to troubleshoot and manage potential IT issues. And make sure that they have access to tech support from your equipment partners for remote assistance, if needed.
Your peak season maintenance and response plan will help you identify which spare parts you and your equipment partners should have readily available for fast repairs. Always double-check your spare parts inventory prior to peak season.
No peak season plan is complete without a workforce component. The plan should call for sufficient staffing levels for all shifts, including production associates, supervisory personnel, maintenance teams, IT resources, and managerial level team members who may be needed to help coordinate and resolve complex issues or set priorities. Additionally, the plan should include refresher training for supervisory personnel and sufficient training for temporary operators.
Low season is also the time for a consultancy to see if the system and operations can benefit from an upgrade, refurbishment, or other kinds of renewal of components or interfacing equipment. A system or equipment modernisation is worth considering to support future operations and, in doing so, propel your business into the future. Such replacements often require a high degree of risk-planning, and all stakeholders should carefully plan the project to avoid unnecessary disruption to daily operations.
Get the full overview: Read our guide to e-commerce logistics for parcel distributors.
Just as you wouldn’t wait until the last minute to prepare a holiday get-together for the entire family, you shouldn’t postpone readying your CEP distribution centre for peak season.
Timely planning, which involve both operational and maintenance professionals, might include: Consulting data of past holiday seasons, running simulations, running preventive maintenance programs, crafting an emergency response plan, ensuring adequate staffing and training, and more.
Emerging trends in global e-commerce make it increasingly difficult to know which is the right solution for automated parcel sortation.
Mark has nearly 40 years of experience working in the material handling industry in a variety of roles including engineering, operations, project management, and sales. He currently leads BEUMER Group's Customer Support group in North America.