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Capacity Planning in Order Fulfillment: Balancing Short-term Needs Against Long-term Goals

by Conveyco Marketing · Published July 8, 2019 · Updated May 31, 2024

Order fulfillment operations all measure success in different ways. Some pay special attention to their total order cycle time. Others focus on the number of orders picked per hour, or on order accuracy rates. The smartest focus on measuring a broad mix of the most important order fulfillment KPIs.

Regardless of which specific metric or metrics you are measuring and monitoring, your goal is the same as virtually every other order fulfillment operation: To grow your business by delivering more orders, and, in doing so, become more profitable.

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But growing your business successfully requires careful balance and planning. A sudden spike in demand might be exciting in the short term, but if that demand is not managed and properly planned for, it can cause a lot of headaches: Stock-outs, missed orders, and a poor customer experience that drives customers away.

Many of these potential headaches are caused by a single culprit: You’ve succeeded too much, too quickly, and in doing so have reached capacity.

Reaching Capacity

“Reaching capacity,” in this scenario, could actually refer to a number of related concerns.

You could have reached the physical capacity of your facility, limiting how much inventory you can store, the types of technology you can implement, or the number of workers/work stations you can support.

You could have reached the output capacity of your systems, limiting the number of orders that can be processed and fulfilled. (This is often also referred to as the peak total throughput of all systems in your operation.)

You could have reached the mechanical capacity of a specific major machine or technology (sorter, conveyors, AS/RS, etc.), or zone which can have a major impact on productivity by creating a bottleneck, even if other areas of the operation still have room to absorb growth.

You also could have reached labor capacity if your need for new hires outpaces your ability to fill positions (or retain hires).

Whatever the case, in order for you to be successful in growing your operation to meet this increased demand, it is critical that you are able to balance both your short-term and long-term capacity requirements.

How Order Fulfillment Operations Can Balance Both Needs

In capacity planning, it is not uncommon for an operation to fall into the trap of focusing efforts entirely on either short-term or long-term needs. But that’s a problem. If you are focused entirely on the long-term, you may find yourself unwilling to invest in short-term improvements, and in doing so miss out on sales and customer satisfaction. On the other hand, if you are always running from fire to fire in the short-term, it can be difficult to accurately forecast your future needs.

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The truth of the matter is that, in order to be truly effective, capacity planning should always be a balance between short-term and long-term needs.

Have you been struggling to meet both your short-term and long-term capacity needs? Below are four tips that can help you balance both needs and, in doing so, make your operation more efficient and productive.

1. Conduct an audit.

If you believe that your operation is at or nearing capacity, your first course of action should be to conduct a comprehensive capacity analysis of your entire operation. Though you may think you are at capacity, you may actually have plenty of additional floor space for growth. By auditing your current systems, technologies, and workflows, a capacity analysis will help you know for certain.

In addition to crystalizing your capacity needs and informing the steps that you should take to meet those needs, an analysis may also reveal ways that you can optimize your existing processes in order to become more efficient in the short term, buying you time to address long-term capacity goals.

A capacity analysis can, for example, help you pinpoint bottlenecks, slot inventory more efficiently, make better use of your existing space, and restructure your workflows in a way that allows workers to become more efficient.

2. Consider modular solutions.

If an audit reveals that your operation is truly at capacity in terms of throughput and the number of orders that it can process, your next course of action is to determine how you will meet the increased demand. In most cases, this will involve an investment in one or more different automation technologies.

Unfortunately, many of the most popular automation solutions that could help with this throughput issue—sorters, automatic storage and retrieval (AS/RS), goods-to-person—all require substantial time to implement. Some may take upwards of 6-18 months to go from concept to final, working system. While this lead-time may not be a concern for an operation that is purely looking to address long-term capacity needs, it can be detrimental for an operation that is facing critical short-term capacity constraints.

Scalable, modular solutions, like autonomous mobile robots (AMRs), for example, can be a great middle ground for operations who are trying to address both short-term and long-term capacity needs. Capable of being deployed in a few months, these solutions can provide immediate relief and help you meet increased demand. And because it is relatively simple to add additional units to a fleet once the fleet is active, it is possible to scale your investment as time goes on and your capacity requirements grow.

3. Put your personnel to better use.

Many order fulfillment operations have struggled in the past few years to attract qualified workers and fill open positions. Their facilities have plenty of space for inventory; their existing technologies have the capacity to process higher volumes. They simply don’t have the man-power required to meet these demands.

It’s for this reason that many operations have begun to seek ways of insulating themselves against an overheated labor market. Embracing automation is one effective way of achieving this goal. But transitioning to partial or full automation is a process that takes time. As you work towards that goal, it is essential that you find ways of making your existing personnel more effective and efficient at what they do.

If labor is a concern, you may be working towards a goal of full or nearly full automation years down the line to free yourself from the constraints of the labor market. As you work towards that goal, though, you need to find ways to put your existing workers to better use. Leverage automation where possible for repetitive/tedious tasks; optimize workflows to make workers more efficient.

Reducing the amount of time that your workers spend traveling within your facility, shifting resources to the areas in your facility that see the most activity, and throttling orders to underutilized areas are all potential solutions to this short-term need.

The Bottom Line

If you are struggling to balance your short-term capacity requirements against your long-term goals, a trusted systems integrator can help, by guiding you through a capacity analysis and audit and and crafting a custom solution that you need to be successful.