The Future of Distribution and Fulfillment – What We Know, and What We Will Find Out

ARC Advisory Group, in partnership with DC Velocity magazine, has just launched an online survey of logistics practitioners to evaluate the future direction of today’s distribution facilities, technologies, and practices. The survey is designed to obtain a multi-faceted overview of the changing demands placed on fulfillment operations and how practitioners are responding by adjusting processes, investing in technology, reconfiguring DC layouts, and expanding networks.

We encourage qualified practitioners to take the survey, and we will provide those participants with a summary of our findings as a sign of our appreciation (please find survey link at end of this article). The results will provide a robust analysis of the current state and future direction of today’s distribution networks. It will also allow us to evaluate our current assumptions about where things are headed. Here is our current perspective on the operating environment, at the outset of this project.

What We Know
Rapid growth in e-commerce, and the resulting demands placed on fulfillment networks, are stimulating widespread changes in distribution center configurations, fulfillment processes, and technology investments. At ARC, we have developed intimate awareness of this evolution from our primary research on the WMS and warehouse automation markets. Our research shows that warehouse processes are changing to support the high volumes of multi line-item e-commerce orders. Put walls are being used more frequently, packing has become more labor intensive, and wave management needs to be more flexible to handle compressed lead times driven by competitive delivery expectations. At the same time, practitioners have invested heavily in goods-to-person automation to cost-effectively and more efficiently meet the requirements of e-commerce fulfillment.

At the same time, Secondary research on industrial property markets shows widespread investment in new distribution facilities and network reconfigurations, as well.  For example, CBRE notes that growing demand for warehouse space in US secondary markets is being driven by e-commerce competition to deliver orders same day or next day. Likewise, publicly traded companies provide insight into the company specific changes underway. For example, Walmart just reported 10% growth in ecommerce sales, compared to a slight reduction in sales for the company as a whole. And the company is opening 4 new US ecommerce fulfillment centers in 2016, at an average size of 1.2 million square feet – noting that its new, highly automated ecommerce fulfillment centers increase throughput and reduce costs.

But these sources of information are slices of a larger picture. At ARC, we like to build a comprehensive mosaic. Although much of the information confirms our forecast for the future, some of the information is contradictory.

Mixed Signals

• Although e-commerce sales are clearly rising across the board, there is some reason to believe the pace of expansion is slowing. For example, Walmart’s e-commerce sales growth slowed from a rate of 22 percent to 10 percent. This may be company specific or an indicator of a larger trend. If growth slows, investment levels may follow.
• Research shows that demand for warehouse facility space is growing in primary as well as secondary markets. At the same time, companies are shifting focus to smaller facilities in close proximity to urban centers. However, Walmart is opening 4 new US ecommerce fulfillment centers in 2016, at an average size of 1.2 million sq. feet – large by most standards. At the same time, World Logistics Center — with its 40.6 million square feet of warehouses and 14,000 daily truck visits — is planned for construction east of Moreno Valley, California.
• Finally, there is widespread enthusiasm about autonomous mobile robotics in the warehouse. But most of these products still remain in their infancy and it remains to be seen if they will displace installed conveyor systems and how well they will compete with WMS supporting manual operations, or even the modern shuttle systems.

What We Will Find Out
The ARC Advisory Group/DC Velocity survey of logistics and distribution executives will evaluate future demand for warehouse types including bulk, regional, cross-dock and refrigerated; the factors driving changes in demand; and any facility shift in urban proximity. We will obtain a profile of the market pressures that practitioners are facing, and how these factors are changing. Fulfillment profiles and changes in the breakdown in picking units will be evaluated. And finally, the material flow and planning processes of greatest importance to practitioners, and likely investments to modify and improve upon these processes, will be discussed.

If you are a qualified practitioner, and you would like to take this survey, please click on the link below:

Survey: How Networks Are Evolving to Meet Changing Requirements

If you have any questions, feel free to contact me at creiser@arcweb.com.