What is a Fulfillment Optimization System?

• A Fulfillment Optimization System (FOS) is an application designed to optimize resources in the distribution center (DC) by maximizing productivity, efficiency, capacity utilization and/or overall throughput.

• The purpose of an FOS is to obtain operational data, perform specialized analytics and run a set of algorithms to make recommendations regarding optimization opportunities.

• While multiple systems provide the functionality to manage warehouses, a fulfillment optimization system’s exclusive goal is to optimize operational resources to reduce sources of waste within an operation.

• Fulfillment optimization systems are commonly used in conjunction with warehouse management systems (WMS), warehouse control systems (WCS), and/or Warehouse Control Systems (WCS).

• The primary difference between an FOS, and the three common types of managements systems is fulfillment optimization systems are there to challenge the status quo – striving for continuous improvement.

• See how a fulfillment optimization system was used to achieved top-tier fulfillment for an 18,000 SKU greenfield facility.

What is a Fulfillment Optimization System?

A Fulfillment Optimization System (FOS) is an application designed to optimize resources in the distribution center (DC) by maximizing productivity, efficiency, capacity utilization and/or overall throughput.

A fulfillment optimization system integrates with other, more conventional, systems used to run an operation such as a warehouse management system (WMS), labor management system (LMS), enterprise resource planning system (ERP), etc. The purpose is to obtain operational data, perform specialized analytics and run a set of algorithms to make recommendations regarding optimization opportunities.

These recommendations are mainly in the areas of:

• Product Slotting (new items daily to full SKU variety re-slots)
• Facility Sizing (space, racks, dock doors & staffing required)
• Layout Design (areas, pick paths, rack profiles)
• Process Optimization (modeling picking practices, automated equipment)
• Capacity Management (Fronts and Capacity Utilization)

All based on operational data analytics and considering implications in productivity, cost savings, ergonomics, product damage and capacity utilization. You should expect functionality to perform a detailed implementation of the changes up to each item and slot number and you should expect to use it every day.

While warehouse management systems are designed to run daily operations in the distribution center, fulfillment optimization systems can help determine the changes to those settings – and potentially to the operation itself – by automatically uncovering and quantifying savings.

An end-to-end fulfillment optimization system provides both the ability to model fulfillment infrastructure requirements at a strategic level and the ability to develop tactical plans related to layout or material handling equipment. And this extends to daily dynamic optimization in item slotting and crewing optimization.

This means if you have questions regarding your daily operation such as:

• What is the best location for each new, incoming item?
• Are there items that should be re-slotted to new locations in the distribution center?
• What is the impact of reprofiling on available fronts and capacity utilization?
• Which mobile equipment is best suited for my operation?
• What is the best order selection methodology for my operation?
• What are the savings associated with these changes?
• How can we reduce fingerprinting and congestion on the dock?

Or questions regarding your infrastructure such as:

• How big should my facility be based on the current operation’s volume?
• How big should my facility be based on expected growth in volume and/or variety?
• Should I expand my facility? When? By how much?
• What are the best rack types for my operation, how many do I need, and where should each type be located in the distribution center?
• What is the impact of adding automation to certain functions?
• What is the estimated lifetime of my facility?

A fulfillment optimization system can help you find the answer to those and many more questions using your operational data.

How a Fulfillment Optimization System can improve your operation

While multiple systems provide the functionality to manage warehouses, a fulfillment optimization system’s exclusive goal is to optimize operational resources to reduce sources of waste within an operation. Besides saving money, additional byproducts of an optimized distribution environment include greater capacity utilization, reduced order turnaround times, increased safety, and reduced product damage.

As there are no silver bullets with optimization – especially in the supply chain – an effective fulfillment optimization system will rely on data modeling to help identify the source of the waste and understand how much it means in terms of real dollars.  The gap between current state and optimized state must be clear, quantified, and actionable to be effective. This is where a fulfillment optimization system shines, by providing feedback on potential fixes.

To bridge the gap between current state and fully optimized, fulfillment optimization systems automatically evaluate several alternatives (considering multiple trade-offs) before providing recommendations. 

The recommendations can include, but are not limited to identifying:

• Items that need reslotting (from the full SKU variety to a single item)
• Existing racks that should be reprofiled (or adding new configurations or technology)
• Zones that should be redrawn
• Pick paths that should be re-created
• Adjustment of inbound pallet configurations
• Changes in operating practices
• Use of different equipment – both fixed and mobile
• Use of automation solutions
• Expansion of a facility

These recommendations differ depending on whether the question being answered is strategic, tactical, or operational. Depending on the size of the gap, multiple recommendations will be made, showing the trade-offs and quantified improvement expectations for each.

The difference between an FOS and a WMS, WES or WCS

To offer a simple answer to a question you could spend hours discussing, a warehouse management system (WMS) is used to control and manage the day-to-day operation.  A warehouse control system (WCS) links a WMS to automation – or mechanization – where applicable.  A warehouse execution system (WES) organizes sequenced and directs resources in real time, acting as a hybrid system between a WMS and WCS. 

Using these management systems and how they work together or independently of one another depends on the operation and what functions are being performed.

There are many overlaps between the three management systems mentioned above in terms of purpose and overall value.  The one primary difference for comparing these management systems to a fulfillment optimization system (FOS), however, is all three management systems work in near real time and manage the status quo. In contrast, fulfillment optimization systems are there to challenge the status quo – striving for continuous improvement.

If you would like to know more about fulfillment optimization systems, SKUstream is the best place to look and if you would like to see it in action, give us a call.