Webvan

Webvan takes orders over the internet and allows customers to schedule delivery within a 30-minute time window. Orders must be placed at least by 8PM the day before delivery. The distribution center releases orders for picking at 10PM, orders are picked at night and shipped by 7AM the following day.

The distribution center carries about 30,000 sku's but these are growing by about 1,000/week until Christmas. They ship out around 3,000 orders each day.

Customer orders

Customer orders average about 25 lines each, with about 60 percent ambient (room temperature) and 40 percent chilled. The monthly seasonalities are much the same as for a traditional grocery store; but the daily seasonalities are much more concentrated, with a sharp peak of orders on Sunday for Monday delivery.

In general order submissions are much more volatile than requested delivery times. Furthermore, Webvan can smooth its work by controlling the times its website shows as available for delivery.

Warehouse

The warehouse is of moderate size, 360k square feet. Processes are controlled by a customized warehouse management system based on the commercial product from OPT. There are about 85 workers in the distribution center.

Most lines are for dry goods picked from carousels (twelve pods of three carousels each). Heavier products, such as bottled drinks, are picked from flow rack, with pickers guided by handheld RF devices.

All product is picked into totes. Each tote contains lines for a single order. Totes flow from three main areas: Yellow totes from dry goods, green from chilled, and blue from frozen.

Distribution

Webvan operates a hub-and-spoke distribution system. There is a central distribution center near Suwannee, GA (just north of Atlanta) where all the orders are picked. These are loaded into trucks that drive to nine small crossdocks, each of 10-15k square feet, where the orders are crossdocked onto vans for local delivery. There are currently about 20 delivery vans in the Atlanta area.

Currently, the utilization rate of drivers is only about 80 percent. Drivers average 17 deliveries in an eight hour shift, which is only slightly better than one every 30 minutes.

How is this is an e-commerce site?

In some ways this is not an e-commerce site at all: Customer orders are known twelve hours before being shipped, which gives plenty of time for Webvan to plan its work to be as efficient as possible.

The advantages Webvan derives include the following:

• Webvan can put items on sale if their sales rate drops too low or if there is little left.
• They can control scheduling of deliveries while still allowing customer choice.
• They can study and exploit buying patterns of their customers.

Conclusions

Webvan has invested very heavily in automation — carousels and conveyors— and the capital costs will be a constant drag on profits.

To become profitable, Webvan will have to achieve a higher density of deliveries. One obvious opportunity is to enlarge their suite of products beyond groceries; but it will be a challenge to identify products that will flow smoothly through a warehouse optimized for grocery distribution.

All these challenges are heightened because the grocery industry has traditionally had tiny margins, and so little room for underperformance.

Note: Webvan ceased operation shortly after these photographs were taken. Its business did not grow fast enough to justify the level of automation to which it had committed.

Storage Heavier ambient product is picked from flow rack.	Order-picking A grocery warehouse typically has 3 zones, determined by temperature: ambient, chilled, frozen. In this DC all ambient items are picked into yellow totes.	Order-picking Heavier, larger ambient items are picked from carton flow rack. Each tote has been reserved for a particular customer.
Order-picking A wrist-mounted display and finger-mounted scanner replaces a pick-list.	Order-picking An older RF "gun" leaves the order-picker with only one hand free.	Order-picking Scanning the label on the tote to confirm that the item just picked was put in the right place
Order-picking Completed totes are put onto a belt conveyor.	Order-picking Experimental design of a new order-picking cart designed to make all 8 totes easily accessible	Order-picking Smaller, lighter ambient items are picked from carousels.
Order-picking While the carousels rotate, the terminal tells the order-picker which locations to pull from and in which tote to place the picked items.	Order-picking Each order-picker pulls from multiple carousels so that one can rotate while the other halts for a pick or restock.	Receiving Arriving product, ready for putaway in the carousels
Putaway An arriving pallet is pushed along the rails to the back of carton flow rack; then product is inserted in the back of the flow rack. Note the roller conveyor that allows cartons to be moved left or right. This will be pulled when needed and restocked to the carousels.	Receiving Chilled produce arrives in wheeled shelving.	Order-picking in chilled zone Chilled product (fruit, vegetables) stored in shipping cartons in flow rack, which enforces FIFO
Storage Flow rack enforces FIFO on fresh produce.	Storage Some fresh produce is of unpredictable size and no determinate shape and so not suited for flow rack.	Order-picking Batch-pick of meat products. Items will be sorted later by customer.
Storage More fresh produce (flowers, in this case)	Order-picking Order-picking in the frozen foods section. Space is very expensive here because it must be kept below 32F (0C).	Orders arriving at chilled check/ship Chilled produce ships in green totes, frozen in blue, ambient in yellow, so warehouse zones are recognizable at a glance.
Order-picking Completed orders going to check/ship	Checking Customer orders arriving at ambient checking. After they are checked and closed, they are loaded on a cart (far left).	Checking Items are assigned to totes by a computer program that knows sizes of product, so arriving totes should close completely. When this failes, as in this photo, the program is revised.
Shipping Customer orders sorted by delivery truck, so the routing has already been done. Each cart can be rolled onto the appropriate truck.	Return to vendor Overships or past sell-by date	Maintenance The DC must maintain an inventory of totes to protect the integrity of its processes.
House-keeping Every tote is washed regularly by this machine	House-keeping Order-picking generates empty cartons that must be collected and disposed of. Here a compactor bales the trash.