E-COMMERCE 4.0: Mass Personalization of Shopping Experience Fuels Robotization and Hybrid Fulfillment

2022-09-26

E-COMMERCE 4.0 Mass Personalization of Shopping Experience Fuels Robotization and Hybrid Fulfillment

E-commerce and digital retail belong to the most customer-oriented industries. This is the reason why they are the fastest to innovate sales and marketing processes with the help of digital technologies and automation. Furthermore, e-commerce businesses also apply the same procedures to order fulfillment and logistics management processes, especially supply and warehouse management, and order picking. How are innovations in sales and marketing accelerating the transformation of e-shop logistics?

Online shopping and digital retail belong to the most customer-devoted industries. Businesses operating in this industry must deliver considerably higher standards of shopping experience to their customers in order to face the ever-growing competition. Thanks to digital technologies, the shopping experience is becoming progressively more focused on fulfilling the unique preferences of individual users.

Customer preferences are changing with emerging trends. E-commerce businesses are working to further scale the volume of their customer bases. Both factors, constantly changing expectations and growing clientele, must inevitably impact logistics management and order fulfillment.

As new events succeed in overshadowing 2020 and 2021, the pandemic is proving to be just another symptom of a turbulent period. And dramatic events are becoming the norm of present days when global supply chains are under the constant weight of predictable and hard-to-imagine circumstances.

State of permanent emergency

The type and the impact of disruptive events can no longer be predicted, and therefore businesses cannot adequately prepare for each occurrence. Especially when individual emergency events take place on a local and global level at the same time, and each one of them requires different measures.

The so-called chip crisis has led many businesses and consumers alike to adapt to its lingering effects. Companies already take this circumstance into account during short- and medium-term planning.

However, in addition to the global chip shortage, less predictable and more frequent consequences of

  • climate change (tornadoes, snowstorms, uncontrolled fires or floods),
  • temporary paralysis of key logistics hubs,
  • and not only as a result of a pandemic such as the blocking of the Suez Canal,

affect the worldwide economy and supply chains.

The chronic lack of skilled labor has already become evergreen.

Despite the unflattering current state of "permanent emergency," businesses continue to digitalize and implement digital solutions. The sector that responded without delay in the spirit of "every crisis is an opportunity" is e-commerce.

Retail e-commerce sales worldwide amounted to 4,9 trillion USD last year.

The opportunities brought on by the crisis were also seized by brick-and-mortar businesses that adopted e-commerce practices. Thanks to this approach, they managed to minimize the negative consequences stemming from the disruption of their conventional sales methods.

The speed and willingness with which the e-commerce industry not only deploys but also experiments with digital technologies are becoming the guide for how to face the merry-go-round of crises. It is also a glowing example of how continuous adaptation and innovation lead to further finetuning of operating models in the era of endless disruptions.

personalization shopping experience digital retail e-commerce

50 SHADES OF THE SHOPPING EXPERIENCE

The e-commerce industry is a customer-oriented and customer-driven business. That´s why is adapting the fastest to:

  • emerging and nascent trends,
  • consumer and customer preferences,
  • and market conditions and circumstances.

The swift adaptation to new trends occurs on different levels, including

  • business models,
  • sales,
  • marketing,

but new trends are reflected in operational processes, including

  • inventory management,
  • orders fulfillment,
  • and last mile logistics.

Being a customer-centric industry, the e-commerce industry and digital retail are constantly finetuning the synergy between marketing&sales and order fulfillment.

The main goal of both processes is to ensure

  • order processing smoothness,
  • order delivery quickness,
  • and customer comfort

in

  • the pre-purchase shopping stage
  • and post-purchase shopping phase.

Digital tools are second nature to e-shops and shopping portals, especially for marketing and sales purposes.

The same approach has also spilled into the logistics of order processing including

  • warehouse management,
  • item handling and transport,
  • and order fulfillment.

In contrast to the traditional (interpersonal) sale process, the e-commerce sales funnel is defined by the personalization of shopping behavior. That means in practice that there is not a single standardized way of

  • how,
  • where,
  • and when

the customer

  • browses and selects goods,
  • pays for it,
  • and how the customer has the order delivered.

mass personalization shopping experience digital retail marketing sales

agility of Online Shopping

Digital transformation enables e-shops to run several different simultaneous sales channels

  • starting with the essential sales portal,
  • their own sales applications,
  • selling through messaging applications,
  • or on the ever-growing number of social networks,
  • as well as on various third-party marketplace aggregators.

Thanks to the ever-expanding digital ecosystem, businesses can search for and target customers in a variety of segments and demographic groups. Digitalization and digital tools allow retailers to mass-personalize the shopping experience, as there is no single way to shop nowadays. There is a myriad of wholly unique ways to shop online which creates a hybrid selling environment.

In addition, digitalization also enables the integration of marketing and sales activities. This is the reason why the e-commerce business is a very dynamic industry that can respond to emerging trends without delay and in an agile fashion. For this, the industry utilizes a wide range of possibilities that disruptive technologies enable. Simultaneously, digital technologies can drive and automate logistics processes in e-commerce including

  • inventory management,
  • warehouse management,
  • and order fulfillment.

digitalization, data & decision-making

Digital transformation of warehouses and order fulfillment processes expand the business's approach to data in quantity and quality. The correctness and accuracy of business and inventory data ultimately affect

  • correctness,
  • accuracy,
  • and timeliness

of decision-making in managing the logistics of order picking including

  • inventory slotting,
  • inventory management,
  • and optimization of other warehouse processes such as
      • order repackaging and completion,
      • palletizing,
      • order reclaim among others.

However, decision-making is not only related to warehouse logistics management.

Information about stock levels, or order processing status is also needed for the effective management of processes such as

  • marketing,
  • goods purchasing,
  • and portfolio rotation.

warehouse and inventory transparency performance boost

transparency for performance boost

This is also why e-commerce is currently striving for the greatest possible visibility in its processes and inventory transfers, which can be achieved by

  • digital data collection,
  • their immediate analysis,
  • and result reporting.

The marketing department can boost campaign performance with laser-precise targeting thanks to the accumulated user data and their analysis extracting valuable insights about the current and future customer behavior.

Using the same principle, logistics management can proceed to improve efficiency and optimize warehouse processes based on access to logistics data and their analysis.

This is also one of the reasons why e-commerce logistics can no longer do without an immediate overview of

  • available stocks,
  • material flows monitoring,
  • and tracking the movement of items and orders in real-time.

Furthermore, this data is used for additional development, especially in the regard to qualified sales forecasting or expansion of provided customer services.

Well-adjusted data management is necessary for efficient logistics. This does not include only access to data in real-time, but also real-time data processing and reporting. The data displayed in real-time allows businesses to precisely monitor

  • stock levels,
  • orders in progress,
  • and queued orders waiting to be fulfilled,

what contribute to the overall improvement of decision-making activities in the business management of e-commerce.

virtual logistics managers digital twin technology

data-driven warehouse

Full transparency in the warehouse and e-commerce logistics as well as augmented traceability in the order picking processes are part of a wider initiative of e-commerce digital transformation.

This initiative is based on the transition to a data-driven warehouse.

It is a concept of warehouse management based on accurate and up-to-date data, which enables immediate and correct decision-making. And the high quality of decision-making relates to other procedures and processes unfolding in

  • different warehouse zones,
  • diverse tasks and jobs,
  • or other inventory handling or order picking processes.

Warehouse technology investment with the highest priority: Warehouse management system (WMS)

Process monitoring and relevant reporting based on logistics data serve not solely

  • marketing department,
  • sales department,
  • but logistics managers.

Due to the number of processes running simultaneously and their mutual influence and conditioning, logistics managers may encounter their cognitive limits in day-to-day and hour-to-hour decision-making. The cognitive strain worsens especially in cases when in addition to daily operation, they have to deal with

  • growing goods portfolios,
  • seasonal and holiday peaks,
  • or international market expansions.

virtual logistics managers digital twin

Virtual logistics managers

Middle management decision-making can be automated within the concept of logistics cyber-automation.

Advanced process-oriented and event-driven management systems such as advanced WMS systems or WES systems automate decision-making processes through

Digital twins create virtual copies of physical objects and other enterprise resources that are part of logistics processes. These virtual counterparts of company assets and objects have already a degree of

  • artificial intelligence
  • and autonomy.

The digital twins communicate with each other and coordinate in the performance of assigned tasks, such as picking incoming orders as quickly and error-free as possible.

In this way, it is possible, so to speak, to create a crew of virtual logistics managers who can make countless decisions in a matter of seconds based on the available data. They control and execute logistics processes in real-time, and therefore take into account all upcoming or crystallizing situations and changing circumstances with regard to current business priorities.

Thanks to data transparency, virtual logistics managers use predictive operations management and dynamic process parallelism when making decisions, which contribute to efficient resource management. This ultimately leads to greater operations performance with fewer enterprise resources, be it

  • employees,
  • material handling equipment,
  • transport technology.

Robotics and automation adoption in warehouse automation worldwide is at 36%

warehousing OMNISTRATEGY

The deployment of virtual logistics managers AKA digital twins means that the management of warehouse logistics unfolds:

  • in real-time,
  • based on ongoing conditions and circumstances,
  • and with respect to other operations in the job sequence.

Process-driven logistics management set up in this way means that order picking is not limited to a single standardized method.

Different procedures and strategies may be appropriate for order picking, depending on:

  • the current state of enterprise resources,
  • business priorities,
  • and queued jobs.

Digital twins are deciding at any given second

  • when and to who assign the next job,
  • evaluate the required enterprise resources for the job,
  • and the most optimal scenario for other jobs waiting in the queue.

This means that due to the constant volatility of circumstances, the decisions and operations that virtual agents select and assign are almost always unique.

They can change from day to day, from shift to shift, but also from hour to hour, due to ongoing jobs and external market-related or customer-related factors.

As the digital twins are tasked with finding always the optimal solution to incoming orders, order-picking strategies are being selected based on the prevailing circumstances. In the same warehouse, different operators, or pieces of equipment if robotization is applied, can fulfill orders by

  • batch picking,
  • sequential picking,
  • zone picking,
  • or cluster picking.

hybrid order picking strategies distribution omnichannel strategies

hybrid picking strategies

Picking strategies can be combined as for each configuration of orders

  • different picker,
  • jobs sequence,
  • and material handling procedure

may be more appropriate. The selection of all the elements also depends on

  • the quantity of items in the order,
  • order volumes to be processed during the shift,
  • and types and measurements of goods to be picked.

Therefore, just as personalization is the priority in marketing and the shopping user experience, mass personalization of logistics operations is the priority for warehouse and inventory management.

Digital twins and the decentralized architecture of the warehouse management system allow decision-making procedures to be automated in such a way and guarantee high-performing process management.

However, the combination of different strategies, or the hybridization of order picking procedures, is not only limited to order processing in the warehouse. It is the elasticity of management that digital technologies bring to warehousing, which makes it possible to bring other activities into the automation fold including

  • order assembly,
  • item sorting,
  • and order dispatching.

The agility of warehouse logistics is thus also extended to the expanding range of services that the business can offer to customers.

This is, for example, related to the current growing popularity of the O2O (online-to-offline) model. O2O model gave rise to the customer preference for the BOPIS option - Buy Online Pick-Up In-Store - ordering goods online with order pick up at the nearest available brick-and-mortar store.

Digitalization thus enables to segment services of last-mile logistics according to the individual preferences of each customer.

robotization of order fulfillment

ROBOTIZATION OF ORDER FULFILLMENT

The projected AGV and AMR share in the warehouse automation market in 2025 is at 14,7%

The current turbulent period favored the boom of the e-commerce industry, and many e-commerce businesses succeeded in expanding to foreign markets as well. On the other hand, an almost chronic shortage of skilled labor and spatial limitations of warehouses hindered the pace of fulfilled orders.

Since the semi-automation of warehouse operations can also encounter limitations, the possibilities for the robotization of order fulfillment are brimming with possibilities. More importantly, the robotization of fulfillment can bolster a more fundamental transformation of the inventory and order flow. Static handling and manipulation technologies such as conveyor belts are starting to be replaced by

  • automated guided vehicles (AGV),
  • and autonomous mobile robots (AMR).

Robotization is supported by yet another non-negligible factor. Pickers spend two-thirds of manual order picking walking around the racks, which has a significant impact on operating costs. Businesses basically pay their employees for walking around the warehouse.

A certain percentage of optimization can be achieved with the help of a WMS system, which navigates the pickers around the warehouse through the shortest and most effective possible routes.

But in the case of the peak season or rapidly increasing order volumes, businesses will always hit the top limits of performance. This means the moment when increasing the number of human labor no longer leads to an additional boost in performance.

In such a situation, warehouse management systems equipped with intelligent algorithms for scheduling the order picking jobs come into play. These systems can

  • coordinate the tasks and warehouse pickers with each other,
  • balance jobs and pickers evenly,
  • and thus eliminate bottlenecks and downtime.

This approach eliminates the largest part of purposeless walking.

goods-to-person picking 

This is also one of the leading reasons why businesses, especially with regard to expected

  • further development plans,
  • future business growth,
  • or planned expansions,

are increasingly considering the transition to robotization.

When deploying autonomous technology in a warehouse, the entire concept of the order picking process and inventory management change tremendously.

Instead of a picker passing through individual racking zones in the traditional P2G (person-to-goods) model, automation equipment enables to utilize the G2P (goods-to-person) order picking model. The automation technology ensures the delivery of

  • the right items,
  • at the right time,
  • to the right picker or picking workstation for order finalization.

An alternative exists in using the O2P (orders-to-person) model. Orders are gradually completed at sequentially arranged workstations with a dedicated assortment of items, while automation equipment ensures the transport of a carrier assigned to a specific customer order between workstations.

Both models require the implementation of advanced automation technology (such as AS/RS) and a fleet of mobile autonomous vehicles.

warehouse robotization automation

WAREHOUSE TRANSFORMeRS

Shuttle system-robot hybrids are considered as the emerging technology in the next three years in warehouse automation

The acceleration of robotization of warehousing and order fulfillment is driven also by growing requirements for flexibility and more efficient spatial use of warehouses. The robots can dynamically adapt to changes in the warehouse and the ever-changing needs of the operation.

And this can be achieved even in cases where the layout or organization of warehousing spaces changes more significantly, including

  • the expansion of the warehouse,
  • extension of stocked inventory,
  • or growing diversification of stocked inventory

Augmented mobility, in comparison to more conventional handling and transport technology, enables to improve significantly the process performance efficiency. Furthermore, the concept of autonomous mobile robots is associated with the increased deployment of cobots for

  • handling inventory,
  • picking items,
  • and packing orders.

robots for logistics

Robotization can thus simultaneously cope with all the pressing challenges of the e-commerce industry uncovered in the survey by Saddle Creek Logistics Services:

  • lack of skilled labor,
  • limitations of warehouse space,
  • and delivery expectations.

The digital retail industry has been a customer-oriented business since its inception. One global e-commerce giant has even built its reputation by being "customer-obsessed".

In practice, that means accommodating a large variety of customer preferences and requirements beyond UX designs and above-the-norm services. Unsurprisingly, this ethos was later adopted by other successful online merchants.

The functioning of businesses today is not only affected by disruptions in global supply chains and rotations of emergencies.

The most influential current circumstances include

  • rapid diversification,
  • and mass personalization of the shopping experience.

Under these conditions, e-commerce businesses must become, in addition to being customer-obsessed, also logistics-obsessed. 

That also means further larger integration of

  • business,
  • technology,
  • and logistics competencies.

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