Despite the onset of banality of the term ‘world class’ (which, in Southeast Asia, seems to signify that something functions adequately without posing gross health and financial risks) my team and I sought to reinvigorate the term when setting up an ecommerce warehouse in Indonesia. What ‘world class’ meant for us was to design an ecommerce warehouse that could sustainably handle a 200% uptake in order growth. Our hot startup ecommerce client has been enjoying an intense surge of ecommerce success and needed long-term scalability, fast and not rely on sloppy patch-work processes typical of fast-growing startups everywhere.
When setting up an ecommerce warehouse in Indonesia, the targets were the following:
- Exceed our competitors in terms of magnitude (400+ employees)
- Scalability (operational capacity triple initial capacity)
- Innovation (semi-automated conveyor system and technology)
- Customer experience (detailed project updates and account management).
With my seven years of solution design and project management experience with notable German global logistics providers, my obsession with efficiency and quality (not only a German stereotype) and a scrappy and clever team, I didn’t think it was out of our reach. But by no means would it be easy.
Our learnings for industrial engineers & logistics PMs in emerging market ecommerce
My advice to young solution designers, industrial engineers or logistics project managers in the ecommerce market, the devil is in the details –critical information gathering is what differentiates one solution designer from the other. A successful implementation depends primarily on the level of details the solution entails.
Here is a recap of our trials and tribulations to setting up said world class fulfillment center in Indonesia. While not totally comprehensive, you will learn about the key considerations and parameters in crafting or implementing your next ecommerce fulfillment solution or project.
So what was in store for us? First we had to build a complete new warehouse, redesign all existing processes and hire manpower, all within a six months’ timeframe. The challenge was not just in pure size of the project but the tight deadline we were working within.
1.Sizing up the problem – order volume projections
The first thing we did was get our Solutions Design Team assembled to start analyzing historical data against projected volumes. Using detailed solution templates and tools, we submitted a proposal simulating the required warehouse space, storage solution, resource requirement and process maps for the operation.
The expected growth calls for a warehouse design that meets both storage-picking optimization and long term scalability requirements. The projected sharp increase in handling volumes also meant that we had to reassess the current technology and operational processes that could no longer support the projected growth in transactional volume.
2. Choosing the right warehouse & location
There weren’t many options from a real estate perspective as we needed to find a ready space of approximately 7,000 sqm in the heart of Jakarta within two weeks. Fortunately for us, there was an old carpet manufacturing factory in Cawang (East Jakarta) that was winding up and looking to rent out the space immediately.
It was the perfect site based on its location, size, availability and price; it even had a mezzanine floor which could be transformed into offices for our client.
3. Redesigning the space to be ecommerce optimized
However, it being a factory, the specifications of the building structure were not meeting our initial warehouse design. Some key areas that we needed to fix asap included the low height of the factory, damaged flooring, excessive interior configurations, poor network and electrical systems etc. The factory was also positioned on a lower ground right next to a river bend making it highly vulnerable for floods.
Often mistaken, the key criteria in designing an optimized storage solution lies in the pick profile of the operation instead of its inventory profile.
The solutions team started plotting the space requirements based on the blueprint of the factory. The proposed design included a 2500sqm 4 level mezzanine storage structure equipped with 2 cargo lifts, a semi-automated conveyor system, an office space to accommodate up to 150 office staff as well as a state-of-the-art studio room for photoshoot.
The proposal also highlighted the required renovation to the original state of the factory such as roof elevation and demolition of existing columns and rooms.
The main focus for the warehouse setup was the roof elevation since nothing can be done until the roof is up. Unfortunately, a considerable amount of waiting time was invested to governmental approval and regulatory certification. The actual roof reconstruction works were then impeded by rain- each time it rained the project paused and when the rain stopped, had to wait for drainage drills to kick in before continuing the construction.
4. Selecting the contractors & sticking to timelines
With the approval from the customer, we proceeded to seek quotations from warehouse vendors. The vendor management process included our assessment and recommendation based on the solution designed as well as the customer’s budget. After almost a month of negotiations, three vendors were selected to participate in 8 key areas of this mega build out.
With the sign off on the overall solution, proposal and investment budget, the project implementation timeline started. All in all, we had 3 months to transform the old factory into a “world class” facility. As most activities were interdependent; for example, activities within the factory needed to hold up until the roof elevation was completed, the mezzanine buildout could only start after the required floor repair and site demolition were completed – timeline management was particularly challenging.
Once the project timeline was set, weekly meetings were held with all vendors as well as key project stakeholders to make sure the timelines were met and that all potential risks raised were mitigated.
Fortunately, it didn’t rain much during the construction phase and the skeleton of the warehouse was completed on schedule.
5. Building the inside
The setup proceeded with parallel work on mezzanine installation, workstation setup, office buildout, roadworks and electrical setup. It was a good learning experience for the team as we participated in electrical distribution layout design, network cabling blueprints as well as water reservation and supply including the number of toilets required.
Just when we thought the rain could no longer serve as a threat to the project, a heavy downpour in the middle of the night coupled with a broken dam leading to the river resulted in a flood in the warehouse through the overflowing reservoir at the back of the warehouse.
6. How we dealt with the Jakarta floods
This led to an additional project milestone on enhancing flood preventive measures. Corrective action plans were immediately put in place. A response team was formed to drain the water out of the warehouse – sandbags and temporary floodgates were installed in preparation for the next heavy down pour while deliverable items such as enlarging reservoirs, renovating the walls as well as installing additional drainage facilities were carried out in phases.
Fortunately, no assets were damaged during the process but the overall timeline definitely took a hit; since then, a rain-phobia was developed throughout the project.
Other challenges such as the overall safety of the mezzanine as well as the levelness of the conveyor led to several assessments and trial and error to achieve the most optimal setup for the operations. By mid May, the warehouse was completed.
7. Operating the warehouse – hiring the manpower
Using productivity numbers collected from existing process cycle timings and calculated assumptions made on new operation processes, we simulated how many people we would need to handle the projected volumes.
The resource modelling tool allowed us to define clearly the number of manpower required by positions, functional roles as well as shifts – making it easy for hiring. The challenge however was to have all 408 headcounts qualified, interviewed and hired on time for training, migration as well as Go live.
We overcame this by engaging with local established headhunting firms and manpower agencies and successfully hired 80% of the required manpower with the outstanding positions filled out by the existing team to add experience and stability to the run operation. Unfortunately, the hiring process was not all straightforward, replacement or rehiring processes was an ongoing procedure due to natural attrition and absentees.
It is important to note that an influential warehouse manager is the key to staff retention. An effective warehouse manager creates strong family-like bonds within the team, develops a team of trusted leaders and is respected by all.
Two key responsibilities of a warehouse manager are 1) Ensuring the team’s commitment towards go live and 2) Sustain operation excellence after Go live.
8. Training & knowledge transfer to local management
There will come a stage in the project where the project manager will start transferring ownership and controls to the warehouse manager. The warehouse manager will take over on training deliverables, shift planning and overall discipline of the team.
The team sat down to plan out the rotational training schedules and deliverables targeting to get all 408 employees ready for the launch- Go live. The topics covered product knowledge, system processes as well as hands on operations in the existing and new warehouse. Each employee was assessed on what the topics covered at the end of each day to ensure that we have everyone in sync before we moved forward.
Workstations readiness and network connectivity were stress tested during the User Acceptance Test (UAT) exercise to ensure all potential risk were managed prior to go live. To curb with the intensive operational requirement, we had installed a backup line for network as well as power distribution.
The last week of training was held in the new warehouse where dummy orders were created to simulate end to end operational process in the new warehouse. There, situational tests were created to assess the employees’ response and rectification initiative.
9. Migration challenges & Jakarta’s travel ban
The lead-time given for migration from old to new location was five days. Using the same solution templates and tools, we were able to define the targeted letdown and the number of trips required per day. These targets were translated to the team to ensure we stay on track for each day.
The main challenge during migration was the travel ban that only allows vehicle movements after 9pm. As such, coordination between the operations and transport team were crucial to ensure we optimize the letdown and loading process effectively before the travel ban is lifted.
Other considerations such as inventory accuracy, quality assurance and system management were key to the successful migration. All in all, approximately 1.4 million units over 90 trips were transferred.
While there is no perfect project where all factors can be foreseen when setting up an ecommerce warehouse in Indonesia; experience and dedication are what minimizes that inadequacy and in order to get there, it takes no less than pure focus, passion, structure, top management commitment and hard work and maybe some luck with mother nature.
By Mitch Bittermann, Group CLO and Kenneth Thean, Regional Director of Solution Design at aCommerce