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ecommerceIQ, together with Sasin SEC, created the Leadership Ecommerce Accelerator Program (LEAP) to provide the fundamental knowledge and skills needed to successfully run an ecommerce business in the world’s fastest growing market.

Originating from China, Singles’ Day online shopping festival has become Asia’s official Black Friday and Cyber Monday since 2009. Taking place on November 11th of every year, it was initially set up to celebrate the individualism of Chinese consumers but became an annual online shopping extravaganza that Black Friday and Cyber Monday sales combined cannot even touch.

Southeast Asia’s very own Singles’ Day, nicknamed the Online Revolution, happens on the same day.  For the last class in the Leadership Ecommerce Accelerator Program, students learned how knowledge was put to action through a practical look at ecommerce operations in a 21,000 sqm fulfillment center handling B2B and B2C orders for 11.11.

Project Management is the Backbone of Your Fulfillment Center

Lai Tze Siung (TS), Operations Director aCommerce Thailand

Lai Tze Siung (TS), Operations Director aCommerce Thailand

Whether you are preparing for 11.11 or beginning to set up a fulfillment center, frequently asked questions often revolve around the capacity and resources needed to run the warehouse efficiently.

So how do we answer such questions?

Proper project management.

At aCommerce, TS explains there are 5 stages: Initiate, Plan, Execute, Control/Monitoring and Closing. Some vital areas to watch out for is demand forecasting, which requires active communications with clients to plan for upcoming promotions and campaigns equating to high influx of orders.

For special sale periods such as 11.11, the warehouse floor is re-adjusted to increase efficiencies for the shortest process cycle time. Customer expectations during the holidays are much high than normal and must be managed.

Other tips? Ensure to call COD customers before arriving at their doorsteps to collect cash because many times they aren’t at home or don’t have the exact change.

Over the years, the entire ecommerce landscape has changed and shifted the way our warehouses are built. The packing tables, shelves and racks need to accommodate larger items as more consumers become comfortable with ordering items such as refrigerators and TVs online.”

After the presentation, TS and the operations team led the class through the fulfillment center to understand how customer service reps answer product questions.

More people are using social media to connect with their brands. We have seen the number of phone calls declining drastically over the years.”

The class was also showed how high-value items are stored in a secure location, which operations technology systems were running the backend and the entire picking and packing process.

The flow of our fulfillment center

A quick introduction of the safety measures and the fulfilment center operations.

The tour started at the inbound station, where goods are delivered to be stored according to brand. Items are also categorized according to its popularity. The fast-moving items are placed near outbound for quick pick-and-pack and delivery.

A walk through the large, bulk item section where 50” television, refrigerator, air conditioning units, etc. are stored.

aCommerce uses movable workstations to bring the labels and processing to the large items.

aCommerce staff explains the information each employee needed to complete the process. This includes the identification the location of the items or what are the items ordered in a basket.

At aCommerce’s pick-and-pack stations, where the items are being packed into boxes and the system will automatically choose suitable logistics supplier to complete the delivery.

As we come to the end of the first Leadership Ecommerce Accelerator Program, we look forward to celebrating the success of our senior executive class as they move forward in their companies with the new knowledge gained.

Thank you to all of our lecturers from leading industry players such as Lazada, Pomelo, eatigo, Kerry Express, honestbee and aCommerce. Thank you to Sasin Graduate Institute for the support and input. And congratulations LEAP graduating Class 2017 for the completion of Southeast Asia’s first ecommerce executive program!

For those interested in learning more about upcoming classes and workshops, please send us a message here.

If you haven’t had a chance to catch up on the past nine highlights from the 10-week program, here are the links to the past insights:

[LEAP Week 1] eIQ Insights: The New Ecommerce Opportunity in Thailand

[LEAP Week 2] eIQ Insights: Refinement of an Ecommerce Channel Strategy

[LEAP Week 3] eIQ Insights: Market-Product Fit First Before Anything

[LEAP Week4] eIQ Insights: Central Marketing Group’s Shares Phase II of Digital Strategy

[LEAP Week 5] eIQ Insights: Startups Need to Have an Independent Source of Income to Survive

[LEAP Week 6] eIQ Insights: In Mobile Commerce, App Install is Only the Starting Point

[LEAP Week 7] eIQ Insights: Logistics and Fulfillment, The Other Side of The Ecommerce Coin

[LEAP Week 8] eIQ Insights: Looking to Succeed in Fulfillment and Logistics? Start with Data and People

[LEAP Week 9] eIQ Insights: Thailand Must Do More With Less to Achieve a Digital Economy

Here’s what you should know today.

1. Facebook redesigns marketplace

The changes are more about making the marketplace easier to use, with a now-scrollable list of item categories that appear as candy-colored, rounded icons.

The idea here is to encourage better discovery, as most people come to the Marketplace with a goal in mind. They need a piece of furniture, or an appliance, or they want to browse for deals on second-hand items like clothing, purses, baby products or maybe a used smartphone.

You can filter any section by location and price to narrow the listings returned, either with or without an accompanying keyword search.

Facebook doesn’t share numbers related to how many users have tried Marketplace, number of listings or transactions to date. However, the company did say last fall that there are 450 million people already using “Buy & Sell” groups on Facebook every month,

Read the rest of the story here.

 

2. Twitter teams up with Bloomberg for streaming news

The social-media company is joining forces with the global financial news outlet to create a service that will stream news produced solely for Twitter 24 hours a day, seven days a week.

The channel, which has yet to be named and is expected to begin operating this fall, won’t simply rebroadcast footage from Bloomberg’s existing television operation.

It will be made up of live news reporting from the news outlet’s bureaus around the world, as well as a curated and verified mix of video posted on Twitter by the social-media platform’s users.

The effort comes at a turbulent time for Twitter, which this past week reported a decline in revenue for the first time since going public. It has struggled to find a successful formula for converting its sizeable user base into a fast-growing ad business.

Read the rest of the story here.

 

3. DHL eCommerce launches domestic delivery service with nationwide coverage in Malaysia

“Ecommerce has become a way of life for Malaysians, with 47% already using their smartphones to shop online,” said Malcolm Monteiro, CEO, Asia Pacific, DHL eCommerce.

The investment in Malaysia includes a 48,000 sq ft central distribution hub in Puchong as well as depots in Penang, Johor Bahru, Cheras and Puchong and a fleet of 2-wheel and 4-wheel vehicles.

The fleet of vehicles will provide next-day delivery to all urban areas in Klang Valley, Penang and Johor Bahru, and two to fourday delivery to all other locations across West Malaysia and East Malaysia.

Read the rest of the story here.

 

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Custom aCommerce fulfillment centers in Indonesia

It doesn’t matter if your business has recently entered the ecommerce market as a globally known brand, as a startup with a cool new product or as a distributor for various brands, scaling ecommerce logistics operations will always be a challenge. Operations in this case means everything between placement of the order all the way to its delivery to the end customer.

There are typically three phases:ecommerceIQ, logistics, operations

Phase One: Start Up

In the first phase, the business usually has just started its ecommerce business-to-consumer (B2C) operations, has low sales volumes and no prediction about growth. At this stage, the focus most likely is on marketing of the product and getting funding. There is no time to worry about how to store, fulfill and deliver the product. If monthly orders remain 1,000 and under, it’s best to keep it simple and cost efficient with these initiatives:

Use an established service provider

Share your outsourced operations by working with a service provider who already has other clients to leverage on existing space, systems and/or people. Don’t overinvest.

Skip the middleman

Ship directly from the supplier to the end customer to avoid inventory holding and improve cash flow.

Turn your store into a ‘warehouse’

Avoid double inventory holding by implementing instore fulfillment. In this model, the store becomes a ‘warehouse’ to carry your inventory, which can be managed by a warehouse management system connected to each store’s point-of-sale (POS) system.

Once a sales item is available at a certain store, it can be reserved in the POS system and picked up and delivered conveniently to the end customer.

Incubate your B2C business

If there exists business-to-business (B2B) operations already, only ample space is needed to set up a B2C incubator area. As long as the B2B and B2C operations don’t interfere with each other, this model saves many resources. 

ecommerceIQ, logistics, operations

The illustration shows B2B operations with a separate incubator for B2C.

Phase Two: Smart Up

After sales volumes pick up and exceed 1,000 orders per month, it’s time to smarten up. The first phase is about getting orders to customers without high costs. The second phase focuses on scaling and understanding the cost drivers of the entire fulfillment operation.

With increasing volumes, investments in space, people and systems are necessary:

Choose the most appropriate systems 

Many warehouse or order management systems out there – especially the ones developed in-house – don’t support scaling to thousands of orders per day, instant bottleneck. Not every system is equally flexible in supporting different value added services during fulfillment, for example, bundling of multiple products to sell together. It makes more economic sense to switch to an enterprise product such as Manhattan or SAP.

Determine the needed space

Space will surely become an issue with higher order volumes since the amount of SKUs is increasing and the inventory is doubling or tripling. Extra space is always handy as there are recurring spikes in demand thanks to marketing initiatives and public holidays. aCommerce has seen cases where these spikes can be as high as eight times the daily volume. 

Outsourcing to a service provider with fulfillment centers provides support for short notice peaks in volume but there are things to look out for. For example, it is crucial that there are options for future expansion. Every potential corner in the warehouse should be racked up or if needed, there should exist a short term storage space close by.

But by utilizing another warehouse, the pick and processes will be much more complex and time consuming, so use only as an interim solution.

Hire the right people

Running scalable and efficient operations require strong leadership with experienced logistics managers. In many cases, companies simply hire blue collar workers and someone to oversee the warehouse and distribution operations on the side.

Because logistics costs can contribute 15 to 25% of total product costs, it is reasonable to hire someone who understands the logistics business, drives down the cost per order and at the same time maintains quality customer experience.

To accommodate spikes, you may consider hiring contract workers, which is especially easy in many Southeast Asian markets, but rates can be 60% higher per month compared to permanent warehouse staff.

In many cases, contract workers do not have any system and/or process knowledge risking reduction in productivity and quality. There is no secret permanent to contract staff ratio but if the latter represents more than 50% of your workforce, you should ensure systems are easy to use and there are plenty of quality checks before an order makes its way to the end customer.  

Phase Three: Scale Up

Only a few companies actually scale as high as 100,000 orders per month – this means almost 5,000 orders per day for a five day operation. If the pick, pack and ship of one order takes 12 mins, this would entail a workforce of 140!

mitch-scale-up3

This doesn’t even include any overhead such as a supervisor, team leads, returns workers, quality control staff or managers.

If you are a Fitbit enthusiast, then reckon, if 60% of the total labor does picking only of 4,762 orders with an average of 1.5 units per order and 160 meters to and from the operations area, this would result in 13,000 meters per day or roughly 17,000 steps per day.

With an average of 240 workdays per year, this sums up to around 3,000 kilometers (2,000 miles) earning each picker the India Badge, which would thrill the American Heart Association.

mitch-scale-up4

It also gets interesting from a space perspective. Let’s assume there are 2.5 million units for storage and presume each SKU has the same measurements allowing the same amount of SKUs to fit into one storage box.

mitch-scale-up5

2.5 million units leads to a 9,000sqm warehouse without accounting for office space, canteen, packaging storage, returns, shipping and other operations. The third phase requires a sustainable warehousing and distribution model to accommodate the sheer size of manpower and space involved.

At such scale, even the smallest details can add up to impact the efficiency and costs significantly. Here’s what to watch out for:

Plan processes in the smallest details

It is absolutely essential to understand all processes in the warehouse to predict possible bottlenecks for future set ups. Imagine operators needed if a redundant step is repeated 4,762 times daily during processing.

Robots and other forms of pricey automation can be evaluated but requires justification in terms of efficiency and return on investment since salaries in most of Southeast Asian countries are still quite moderate.

Customize to maximize efficiency

Sometimes overlooked, the layout of the warehouse can add extra steps, time, and costs to order processing. For example, if the warehouse layout has mezzanine floors, order processing time can double due to longer walk ways.

In an ideal world, each country is full of 10,000sqm warehouses ready for move in, but unfortunately in Southeast Asia, warehouses are rarely fitted and planning of the space has to be done from scratch.

In Indonesia, aCommerce converted an old carpet manufacturing factory into a 7,000sqm world class warehouse fitted with four level mezzanine and semi automation for its client. Additionally, complete warehouse processes as well as running the operations were set up for the client in less than three months. You may want to consult professionals or outsource warehouse operations to ensure smooth scaling.

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Choose suitable last mile transportation

Build strategic partnerships with third party logistics (3PL) who offer guaranteed volumes or have a wide network in the country for quick delivery and Cash on Delivery (COD) options. The last mile delivery from the warehouse to the end customer should not be overlooked.

It can take up to four weeks to get the reconciled COD money back from the customer upon delivery in Indonesia as third party logistics providers tend to outsource part of their deliveries. If 100,000 orders per month at an average value of $20.00 are bought with COD as the delivery method by 60% of customers, somewhere floating around in the network is $1.2 million. Minimizing COD reconciliation time is crucial to any company’s cash flow and can be achieved by in-country hubs where daily COD money is deposited directly to the company’s bank account.

No matter whether you are in startup, smart up or scale up phase, your logistics staff should always keep the big picture in mind and decide what fits your purpose in each phase. If trying to ‘smart up’ or ‘scale up’, it’s best to seek a professional opinion as the operations process can make or break your business.

BY MITCH BITTERMANN, GROUP CLO aCommerce

When renovating spaces in Jakarta, always be aware of the flood season risks!

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:

  1. Exceed our competitors in terms of magnitude (400+ employees)
  2. Scalability (operational capacity triple initial capacity)
  3. Innovation (semi-automated conveyor system and technology)
  4.  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.

setting up an ecommerce warehouse in Indonesia

Interior of the factory.

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.

setting up an ecommerce warehouse in Indonesia

Before beginning, we developed layout design and work flow simulation.

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.

setting up an ecommerce warehouse in Indonesia

Warehouse setup deliverables

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.

setting up an ecommerce warehouse in Indonesia

Before and after the roof construction. This was one of the toughest parts due to weather.

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.

setting up an ecommerce warehouse in Indonesia - jakarta floods

When renovating spaces in Jakarta, always be aware of the flood season risks!

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.

setting up an ecommerce warehouse in Indonesia

Cawang fulfillment center 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.   

Setting up an ecommerce warehouse in Indonesia

Migration process of 1.4 million items to the completed center

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