CNBC reports that due to the ecommerce boom the U.S. may need another 1 billion square feet of warehouse space by 2025. ProLogis, a real estate firm that is Amazon’s largest landlord, estimates that e-commerce companies require 1.2 million square feet of distribution space for each 1 billion in sales. Clearly, the US and the worldwide supply chain have gone through dramatic changes due to Covid-19. E-Com has boomed, resulting in increased parcel shipments in both B2B and B2C distribution centers. This is especially true in the growth of essential goods shipments that have shifted from retail stores to E-Com fulfillment. This trend, while accelerated by Covid-19, is most likely to be a permanent shift in behavior in consumer and business purchasing habits for the future.
What does this mean for Distribution?
If you own or are responsible for the profitability of a warehouse operation, you need to operate a lean, lower cost per touch order fulfillment center that can ship a single case or single re-packed line item at a cost comparable to the fulfillment costs of Amazon or Walmart. This operating performance is not possible without adapting leaner, more efficient pick, pack, and ship processes managed and enforced with the right blend of automation software and technologies. It’s either adapt, automate, or die off like the dinosaurs over the next few years!
The role of Automation Integrators
A skilled Integrator is a true subject matter expert, bringing application expertise, knowledge, and experience in process improvements. They will evaluate the multitude of automation technologies suited to increasing warehouse efficiency and productivity and chose the technologies best suited to that individual customer’s needs. The right integration partner operates in a consultative role and provides strong engineering, mathematical and analytical skills to understand operational requirements, order profile and business needs. Clients are best served by a partner with in-house engineering skills who will evaluate, analyze data and recommend the right process improvements and blend of technologies that are best suited to improving the DC operation while generating the fastest ROI.
Design Services act as the Roadmap
The design study starts with the automation integrator and the customer’s team focusing on a business-first approach to align labor, technology and distribution operation’s practices with business strategy and corporate vision. Workforce, Workplace and the Work to perform are three factors that need to be evaluated and aligned so that the final solution matches the businesses order fulfillment requirements.
The design study is data driven using a year or more of past order data and has the ability to project a future 3 to 5-year period for growth to understand order profiles, SKU movement velocity, peak periods and how future growth will impact the facility’s capacity. Fox example, many E-Com businesses see a spike in orders over the weekend resulting in 40% or higher order volumes on Mondays. The data must account for daily and time window order volume fluctuations. Once the entire design team is aligned, the data becomes essentially a single version of the truth. Processes and technologies can be evaluated, contrasted and selected for improving an existing operation or designing the new DC.
If you have questions about developing a DC roadmap, how to choose the right technologies, and how to benchmark metrics for improvement, we’re here to help.