Brian Shepherd

8/6/2019 Brian Shepherd

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Accelerating Order Fulfillment and Profits

through Material Handling

Brian ShepherdMajor Systems Sales Manager


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Online Order Fulfillment RequiresSupply Chain Responsiveness

Key Online Order Performance Parameters

Inventory management

Order management


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Supply Chain Responsiveness

Inventory Management Performance Metrics

Cost-efficient fulfillment of orders from in-stockinventories

No bulk storage everything goes to a pickablelocation directly from receiving

Order Management Performance Metrics

Cost-efficient transport of product to/from DCinventory locations

Reduced wait times


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Zappos.comA Study inResponsiveness

Founded in 1999 byentrepreneur, NickSwinmurn

Dissatisfied with

traditional retail outlets

Opportunity: $40 billionfootwear market$2billion via mail order

Key differentiator:selection and servicethat Wows customers


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Zappos.com Vision

One day, 30% of all retail transactions inthe US will be online

People will buy from the company with the

best service and the best selection

Zappos will be that company

A service company that happens to sell

shoes (and eventually, any category)


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The Zappos.com Business Model

Direct-to-consumeronline retailer

Competing with the storeexperience

Zappos shoppersexperience the Wowfactor

The best shoe selectionanywhereover 2 millionpairs in stock

Free next-day shipping

365-day return policy

110% price protection


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Responsiveness Leads to RapidGrowth

Zappos gross merchandise sales

1999: Almost nothing

2000: $1.6M

2001: $ 8.6M

2002: $ 32M

2003: $ 70M

2004: $184M

2005: $370M

New DC project launch


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A New Fulfillment System toAccommodate Rapid Growth

A New Fulfillment System toAccommodate Rapid Growth


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2005 Reality Check: Old DCInadequate

Conveyor-fed, primarily manual orderfulfillment

SKUs picked from paper lists

No growth potential to handle futurevolume forecasts


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Objective: A Fulfillment System toAccommodate Rapid Growth

Move fulfillment operations into a461,000-square-foot section of an800,000-square-foot DC

New material handling andfulfillment system to automate

processes Decrease order cycle time to handle

the volumes required for thecompanys rapid growth

Support the wow factor thatZappos promises to all of itscustomers, e.g., extensive liveinventory, next-day delivery


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Challenge

Design and build order fulfillment systemfrom scratch

Overcome learning curve for personnel who

have never worked in a high-volume,automated environment

All new styles must be photographed foronline store

Ability to process an order in one hour orless


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Solution

End-to-end, integratedsystem for fast,optimized orderfulfillment

Automated receiving,presort, put-away,picking, packing andshipping

Overlapping receivingand shipping systems

Dedicated returnssystem


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Solution

Design by globalconsulting firm, Arup

Integration andinstallation by FKILogistex

Static-racking systemstores each SKU inpickable location

Built-in photo studio toshoot new products upon

receipt Extensive in-house

customer service andwarehouse training forevery new hire


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Result: Wow

5-hour average cycle time from orderreceipt to loading onto truck

Ability to process an order in under an hour

All orders received by 8 p.m. are on thetruck for next-day shipping

Orders processed, packaged, shipped, and

delivered in less than a day


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The What Behind the Wow

Zappos.com Distribution Center

Shepherdsville, KY System Review


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Design Consideration

Design Based on Goals and Criteria Provided

Expandability / Flexibility

System Availability / Reliability

Simplicity of Design & Technology

Order Accuracy / Speed of Delivery

Ease of Implementation

Ergonomics

Noise Abatement

Minimize Labor Requirements

Reduce Distribution Cost

Shipping Efficiency / Flexibility


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Zappos DC System Layout


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System Components

High-speed induction andmerging

Four high-speed FKI LogistexUniSort XV sliding shoesorters

Seven UniSort IV pop-upwheel sorters

9,000 feet FKI LogistexAccuglide live-rolleraccumulation conveyor

8,000 feet FKI Logistex belt

conveyor 1,300 feet FKI Logistex

Accuzone 24-volt motorizedroller conveyor


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System Components

Truck unloaders

Truck loaders

Racking System

Warehouse Optimizersoftware

Answer SystemHuman-MachineInterface Software

(HMI)


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System Operation Overview Receiving

At receiving docks, cartons are unloaded usingautomated truck unloaders

Cartons then placed on conveyor and routed toreceiving unpack stations or returns unpack

stations


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System Operation Overview Storage

From Receiving Stations,SKUs are routed to shrinkwrapping lanes by a high-speed FKI LogistexUniSort XV sortation

system

Packages then redirectedto another UniSort XV forput-away to storagelocations

New merchandise routedto full-service photo lab


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System Operation Overview Order Picking & Packing

Orders picked from storage locations

Routed via high-speed FKI Logistex UniSort XVsliding shoe sortation system to packing areas

SKUS distributed to single- or multi-pack area


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System Operation Overview Shipping

Completed packages routed to Print-and-ApplyModules for labeling

Ready-to-ship packages sorted by UniSort XV at+100 cpm to shipping lane, conveyed to truck via

truck loaders


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System Operation Overview Software & Controls

FKI Logistex Warehouse Optimizer softwaredrives system

Integrated with existing, home-grownwarehouse management system (WMS)

FKI Logistex Answer System monitors alarmsor jams; provides productivity information


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Results?

Record daily shipments 2006/2007 holiday season

42,000 peak daily shipments (twice previous peak)

Reduced distribution and labor costs

Record-low order cycle times 1-5 hours

Keeping ahead of astronomical growth

Repeat customers account for approx. 50% ofdaily sales

20% of daily new customers via referrals


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Return on Investment?

1999: Almost nothing

2000: $1.6M

2001: $8.6M

2002: $32M

2003: $70M

2004: $184M

2005: $370M 2006: $597M

2007: $800M(projected)

Zappos.com gross merchandise sales growth

Zappos.com gross merchandise sales

0

100

200

300

400

500

600

700

800

900

1 99 9 2 00 0 2 00 1 2 00 2 2 00 3 2 00 4 2 00 5 2 00 6 2 00 7

Year

Sales(inmillionsofdollars)


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Built to Handle Future Growth

Utilizing 416,000 square feet of 800,000square feet building

Many pre-built divert points for future

expansion

Receiving platform only 2/3 built

Singles pack area scalable to 2009 future

demand


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Zappos.com and FKI Logistex APerfect Fit

Automated material handling solutions wowZappos.com

Zappos.com service wowing more customers

The wow factor is very important to us and tothe success of our business. Offering the bestservice and selection while getting our goods tothe consumer as quickly as possible is the onlyway to compete with the store experience.

- Vice President of FulfillmentOperations, Zappos.com


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For More Information

www.fkilogistex.com

Tel +1 877 935 4564

FKI Logistex de Mexico, S.A. de C.V.Avenida Homero 1343, Piso 3Colonia Los Morales, Seccion Palmas

MexicoD.F. 11540Mexicophone: +52 55 5281 5376fax: +52 55 5281 8109

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