Systems Technology Inc.
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The E-Commerce Tipping Point: Graduating to High Volume, Automated Packaging

Feb. 17, 2020
A range of automated packaging equipment options enables cost-effective, speedy fulfillment even during peak periods.

With the rapid growth in e-commerce, online retailers that are already fulfilling a significant volume of orders annually may reach a tipping point where they must eliminate manual aspects of the packing and fulfillment process and transition to a higher speed, automated packaging operation.

Although the tipping point for any online retailer varies, companies processing several hundred thousand orders a year often find themselves in this position.  Symptoms of the growing pains include orders that sit in bins for days before leaving the warehouse, high manual labor costs, and even high packing material costs.

In addition, staffing up to meet peak holiday season demands can be even more of a challenge—particularly when 50 to 80% of annual sales are made between Black Friday and Christmas. During this time, most e-retailers run extra shifts and hire large quantities of people that must be trained for the 30 to 60 days they will work.  But even this approach can lead to slow order fulfillment—a detriment when competing with the Amazons of the world that promise one day—and even same-day— delivery.

Whatever the reason, when this tipping point is reached, e-commerce retailers are forced to evaluate options for more automated equipment and additional packaging and fulfillment lanes.

Fortunately, there is packaging equipment that provides the functionality and options to cost-effectively scale up from manual to semi-automated to full automation as growth continues. In many cases, this is the same type of equipment used in the largest fulfillment centers by major online retailers.

FragranceNet.com, a fast-growing online retailer of discounted brand name fragrances, skincare, makeup, haircare, aromatherapy, and candles hit the tipping point in regards to automating packaging several years ago. The company, which has doubled its sales annually for years, has shipped over 30 million packages and sold more than $1 billion in beauty products since 1997.

“I come from a corporate background [at a Fortune 50 company] where if we had a 2% sales increase, we flew to South Beach for a party,” says Hector Dilan, FragranceNet’s Director of Warehouse Operations for the past six years. “But our e-commerce sales have doubled here every year since the day I was hired.”

Unfortunately, with such growth comes growing pains. Too often the partially-automated fulfillment process left too many bins of picked items waiting to be processed. The problem was exacerbated each year from Black Friday through Christmas when FragranceNet generated more than half of its annual income.

“Peak season shopping can result in up to ten times the normal sales volume for many days in a row, which strains fulfillment capabilities,” explains Dilan. “In just five weeks during the holidays, the company’s fulfillment operations recently had to work 16-hour days, seven days a week to meet the demand.”

The company had been employing a conventional packaging system that included manual labor. This involved having a checker manually place the product in a box, adhere a shipping label, and put it on a conveyor. Another team would add void fill to protect the product and the box would be sealed with tape.

“With the conventional packaging system, we were paying people to make boxes, fill them, tape them up, and put on labels,” says Dilan. “We needed a system that was faster and more automated.”

Graduating to High-Volume Automated Packaging Equipment

Given the rapid growth of e-commerce and dramatic spikes in order volume during the holidays, in 2015 FragranceNet felt driven to invest in new automated packaging lines. The conventional packaging lane would still be used for larger items and gift sets that are often sold in higher volumes during the holidays.

For its solution, FragranceNet.com turned to a compact, automated parcel packaging machine, called ParcelPack by Systems Technology Inc. (STI), a manufacturer of automated packaging systems which have equipment installed at other fast-growing online retailers including Amazon, Shutterfly and District Photo. The equipment can be used to package up to 20 orders per minute and can reduce labor up to 50% or more with ROI typically in 10 to 24 months.

In conjunction with the automated packaging system, the online retailer also uses a patented STI product called SecurePack, which protectively holds the contents of the shipment in place on an economical corrugate base pad using shrink or stretch film, without the use of void fill. With this design, the “tabs” on the base pad interlock into the die-cut slots of an economical shipping carton to securely hold the base pad in place. Contents may be totally random in size and shape and may be any combination of products.

“There is no need to manually put items in a box because the box gets formed around the pad, and there is no need for void fill because we shrink wrap the items to the pad. So, the process helps us process our high-volume orders very quickly,” says Barbara Porter, FragranceNet.com’s Chief Technology Officer.

FragranceNet chose to implement STI’s automated packaging systems using two carton sizes. During most of the year, leading up to the holidays, the majority of sales are single items or several smaller items in a single package.  So, FragranceNet decided to use a small packaging size as well as a larger one. If needed, however, each line can be changed to adjust packaging size in as little as 10 minutes.

The picking system recognizes which lane should be used, small or large, based on the item(s) in the order, and takes into account whether the item might be sensitive to the heat in the shrink wrap process.

At each automated lane, up to 8 checkers can scan and place items for the order on the corrugated pad. The pad is then conveyed through the shrink wrap heat tunnel and the box is formed around it using the ParcelPack equipment. The shipping label is printed and applied automatically and adhered to the top of the box and the order and the shipping label are verified they match.

“Speed was certainly what attracted us to STI’s automated process,” says Porter.  “We had to figure out how to solve the holiday backlog, which usually peaks for us on Cyber Monday every year.”

She notes that the packaging automation helps to streamline the fulfillment process not only during the holidays but also throughout the year.

“Today, with Amazon shipping items out the same day, waiting two days to see order tracking is unacceptable,” says Porter. “So, our packaging line automation was needed to streamline the process to get shipments out faster.”

With the packaging automation supplementing its traditional packaging lines, Porter says that the product is getting fulfilled and shipped much faster so that FragranceNet.com is well-positioned for continued growth and volume, even during the upcoming 2020 holiday season.

For more info: call 1.909.799.9950 ext.222; Fax 1.909.796.8297; visit www.systems-technology-inc.com; or write to Systems Technology Inc., 1350 E. Riverview Dr., San Bernardino, CA 92408, USA.