Automation/Systems Integration: Ebay’s speed,  flexibility, and cost

eBay Enterprise’s Kentucky distribution location was chosen for its proximity to both coasts, but also for its proximity to parcel shipping hubs beyond Louisville and Memphis. The e-tailer’s campus puts a premium on flexible processes and absolute speed to the customer for e-commerce fulfillment.

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Most of us think of storage as one of the five processes common to every warehouse, along with receiving, picking and packing, replenishment, and shipping.

That’s not the case at eBay Enterprise’s Richwood Fulfillment Center located just over the Cincinnati border in Walton, Ky., according to Craig Hayes, the vice president of fulfillment. There, storage is really a replenishment function, because the vast majority of newly received merchandise is put away into bins and delivered directly to a forward pick location.

The reason is that Hayes isn’t running a warehouse: He’s running an e-commerce distribution center for retailers and e-tailers. “Forecasting is critical,” Hayes says. “Our goal is to work with our clients to accurately forecast so we only receive the products they plan to sell and ship within the next several months.”

In fact, the Richwood Fulfillment Center is really a fulfillment campus. It consists of two facilities with a combined 1,175,000 square feet. One is highly automated, featuring four levels of mezzanine and a high-speed induction and shipping tilt tray sortation system to handle high-volume, flat apparel. It’s complemented by put-to-light technology for products that are less automation friendly.

Those are picked to totes and conveyed to a light-directed put wall for sortation into orders. The other facility is a highly flexible fulfillment center that handles everything from pet and consumer electronics products to odd-shaped sporting goods such as kayaks and golf clubs. In its four-level mezzanine, orders are batch picked to carts and totes that are delivered manually or conveyed to put-to-light stations.

While the facilities may take different approaches to fulfillment, they were designed with a common philosophy that processes should be flexible, speedy and cost effective. For example, 85 percent of the orders from the campus ship the same day they are received and 90 percent are delivered to the customer in three days—the average is 2.37 days in transit.

“Our whole fulfillment concept is flexibility and speed, from the time an order drops until it reaches the customer’s doorstep,” Hayes says. He adds that the company also has a strong focus on cost efficiency and a lens toward sustainability.

From garage sales to omni-channel fulfillment
Say “eBay” and many may think of the e-commerce auction site once famous as a sort of online yard sale for the unused items taking up space in our basements, attics, and garages.

But today, the company has moved well beyond those roots. eBay remains an iconic Internet brand; meanwhile eBay Enterprise, which is headquartered in King of Prussia, Pa., and was acquired by eBay in June of 2011, provides a total e-commerce solution to e-tailers and brick-and-mortar retailers that don’t want to invest in their own each fulfillment.

Formerly known as GSI Commerce prior to the acquisition, eBay Enterprise provides not only pick, pack, and ship solutions, it can also develop a retailer’s Web store, execute e-mail marketing campaigns, manage credit and payment services, provide customer service, perform value-added services before the order goes out the door, and handle returns.

More importantly, the company operates in an omni-channel world. “If a customer in Denver orders a sports jersey for delivery the next day, our algorithm can determine the best ship-from location, including pick and ship from a store,” Hayes says. “The focus is absolute speed.”

Through its value-added services, the package shipped from eBay Enterprise will be branded just like a package shipped from the store. “We maintain our clients’ brand experiences. The end customer doesn’t know whether it came from the store or our center in Kentucky,” Hayes adds.

The Richwood campus is part of a larger global network that includes a total of nine campuses worldwide and comprises more than 7.5 million square feet of space allocated for order fulfillment solutions in the U.S., Canada, and Europe. In 2014, the network shipped 174 million units while Richwood ships as many as 350,000 units per day during the peak season.

Both buildings were greenfield facilities. At 543,000 square feet, the first building went up in 2007 and was dedicated from the start to handling apparel. Located two days by ground transportation to the East Coast and four days to the West Coast, geography also played a major role in the location.

The second, larger facility was completed in 2014. The primary catalyst was the need for more space. In addition, eBay Enterprise wanted a facility designed to handle a wider range of products. “We were at capacity in the original building,” says Hayes. “And, we wanted to stay here because we had a highly motivated local management team, a great workforce, and a very positive experience with the local community.” Today, the campus manages e-fulfillment for 10 different customers.

Speed and flexibility
When it came to the design of the facilities, eBay Enterprise faced the same question as any other third-party logistics (3PL) provider: When does automation make sense?

There are any number of automated goods-to-person picking solutions on the market, such as shuttles, mini-load automated storage and retrieval systems (AS/RS) and horizontal carousels. However, for a 3PL, the capital investment in those solutions can be substantial and limiting.

“We have clients who come to us with a three- to five-year horizon,” says Hayes. “After the contract ends, the next client may have a different product line and a different number of SKUs to manage. We believe that when you put in automation, you box yourself in on the SKU count.”

For that reason, the facilities were designed with flexibility and speed in mind. For instance, while the first facility features a large tilt tray sortation system, it was designed to meet the needs of two specific clients with flat tagged and bagged apparel products. “The tilt tray offered the best value to handle that product,” Hayes says.

The tilt tray system also offered a very speedy way to fill orders once they dropped into the facility’s warehouse management system (WMS). “About 85 percent of the orders in that facility ship the same business day, and we ship seven days a week,” Hayes says.

However, when it came time to expand the product lines to larger and bulkier apparel items, eBay Enterprise used tote picking and conveys those totes to a light-directed put wall area.

Similarly, the second building was designed with a four-level mezzanine and put wall solution from day one because of the variety of products handled in the building—everything from pet supplies to golf clubs. “We’re using RF-directed batch picking to a tote in the mezzanine that is then put on a conveyor to the put-to-light area,” Hayes says.

There, lights direct associates on one side of the wall to place items in a specific cubby. When all the items for that order are in a space, a light on the other side of the wall alerts a packer that the order is ready to process for shipping. “With a mezzanine and put wall, it’s fairly inexpensive to add more bin space or another cubby if the business changes,” Hayes says.

The two facilities are also managed for flexibility. With 10 different customers, and a variety of product lines, there are times when one building may be slow while the other is operating at maximum capacity to manage a special promotion. “It’s not uncommon for us to move skilled labor from one building so that we can scale up or down very quickly,” Hayes says.

While both facilities feature RF-driven picking today, Hayes says that eBay Enterprise plans to install voice-directed picking, which is already being used in other eBay Enterprise fulfillment facilities, to increase speed and accuracy.

Speed and cost
At the Richwood campus, fast and flexible fulfillment doesn’t stop at the dock door. Transportation management is also critical to the campus’ operation. The facility was chosen for its proximity to both coasts, but also for its proximity to parcel shipping hubs beyond Louisville and Memphis.

“We measure speed inside and outside the box,” Hayes says. “Inside the box, we measure how quickly we can fill an order and get it out the door. Outside the box, we measure how quickly we get it to the consumer’s doorstep.”

That’s because eBay Enterprise’s central location allows it to bypass Louisville, or even Memphis, and make a direct truckload line haul to another location, like a distribution hub serving Chicago, that will lower the overall transit time and control ever-rising e-commerce transportation costs.

And now that parcel carriers have instituted new pricing based on a package’s dimensions, eBay Enterprise is paying close attention to the size of the cartons going out the door. “We spend a lot of time weighing and cubing inbound inventory and optimizing the sizes of our boxes,” Hayes says. “When an order drops into our WMS, it cartonizes prior to the waving process, finding the ‘best fit’ carton for that order.”

Upon ship confirmation, the WMS picks the smallest box for that order. In addition, the company has installed an on-demand box making process for low-volume products. “One of our goals is to be an environmentally friendly company,” Hayes says. “When you ship 40 million packages a year, corrugate is an important part of that effort.” Any reductions in corrugated help meet sustainability goals as well.

As the e-commerce world evolves, Hayes believes that eBay Enterprise is positioned to meet the needs of its customer base. “It’s competitive out there,” he says. “But with this campus, we have the solution in a building that allows us to quickly flex up or down to meet the needs of our clients while providing a great consumer experience.”

About the Author

Bob Trebilcock
Bob Trebilcock, editorial director, has covered materials handling, technology, logistics and supply chain topics for nearly 30 years. In addition to Supply Chain Management Review, he is also Executive Editor of Modern Materials Handling. A graduate of Bowling Green State University, Trebilcock lives in Keene, NH. He can be reached at 603-357-0484.

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