Reducing Order Fulfillment Costs with Cartonization
Can Cartonization of Orders Help Reduce your Order Fulfillment Costs?
The short answer is yes, but there are several processes that make up a fulfillment/distribution operation. One of the critical KPIs that all distribution operations must consider is Cost Per Order Shipped. There are three basic processes that make up order fulfillment and factor into the Cost Per Order Shipped; Picking, Packing, and Shipping. These processes are interdependent when considering efficiency and costs. Increasing the efficiency of one could drive down the efficiency in another and not improve the overall process. All of the areas need to be considered holistically in order to reduce the overall cost of the entire fulfillment operation.
Cartonization software integrated into a Warehouse Execution Software (WES) system is the tool that can help all three areas of the fulfillment processes work together to help reduce the Cost Per Order Shipped.
Free Guide: Top Order Fulfillment KPI Indicators
Let’s start by defining Cartonization. It is the process by which the proper type and size shipping container are selected for each order shipped. Many people equate cartonization to cubing. Although it is a very important part of Cartonization, cubing is only one of several factors used to determine the right container selected for an order.
The three basic steps in the order fulfillment processes:
Picking: The first process in order fulfillment. There are several picking strategies that Cartonization can help improve.
- Discrete Order Picking: An order picked by one person from start to finish
- Cluster Picking: Multiple orders picked by a single person
- Batch Picking: Picking all the SKU’s for many orders at one time with one or many pickers, then using a secondary consolidation process to sort (manually or automatically) product into discrete orders.
Packing: The second process used in order fulfillment and the one that is changing most rapidly due to the increase in freight costs. Cartonization can be used to help determine what packing method is best used based upon labor and packaging costs and product attributes such as cube, fragility, temperature, etc. Some different packing methods/technologies include:
- Traditional Regular Slotted Carton (RSC): Used for medium and large cube orders. Handles relatively fragile products with the right type of unit packaging and void fill materials. Can be hand taped or run through a carton sealing machine for increased throughput.
- Polybags: Used for small to medium cube orders with a very durable product. Can be manually or automatically packed and labeled. Requires no void fill and can be ignored for dimensional weight surcharges because it contains little or no empty space (air).
- Corrugate Wrapping Machines: Machines that wrap sheet corrugate around the order requiring no void fill. A very efficient and low-cost packaging, but can be used for a small range of cubic sizes and product types.
Shipping: The last process in order fulfillment. Shipping or freight costs, especially from parcel carriers, are increasing far beyond other supply chain costs. Carriers are now adding surcharges to orders that have a large cube relative to their weight (dimensional weight).
One of the biggest focuses of supply chain managers today is how to get the most product on a truck when leaving the dock. The goal is to reduce or prevent shipping and paying for air. Cartonization is the best method to help prevent this. If the size and weights of all of the SKUs handled are maintained in the item master, the maximum amount of product into one shipping container or on one pallet, minimizing any wasted space. Order containers are selected to minimize the empty space thus reducing packaging costs in addition to freight savings.
How cartonization is applied to the order fulfillment operation
Cartonization chooses the type and size container to ship the order. If discrete or cluster picking is used, cartonization can be done prior to orders being picked. Pickers can be directed to the select the right container to start and orders can be picked into the shipping container. The packing process can be reduced to inserting a pack list, adding dunnage, and sealing the container. This will add little to the picking time and can reduce packing time 30-50%.
If there are enough order and unit volume to justify batch picking there will probably be 2-3 different types of containers (cartons, polybags, non-conveyables) that require different types of packing. Cartonization can select the type of shipping container based on the cost of the container and the associated labor costs of each type. For example, polybags can cost $0.12-$0.25 per order and bagging machines can package 10-15 orders per minute with a single operator. If the order cube is too large or the product is fragile, a polybag cannot be used and a corrugated carton may be a better container choice. Cartonization can then be used to set up the batches so that orders are batched together by their packing type, eliminating additional travel and handling sorting product to different packing areas.
The bottom line, no matter what your operation looks like today, there are ways that Cartonization can be used increase efficiencies and reduce the Cost Per Order Shipped. It may require time to define and modify the processes, but you won’t get any improvements without starting the conversation. You will definitely find improvements to your order quality, reduction in your fulfillment costs, and increased customer satisfaction.