Sneak Peak: How Warehouses are Adapting to Rapidly Changing Demands

Prior research by ARC Advisory Group and DC Velocity on omni-channel fulfillment determined that companies expect an average of 40 percent growth in e-commerce sales over the next five years. That research project placed strong emphasis on the use of stores in today’s omni-channel environment. But it also showed that major changes are occurring at DCs as well. To learn more, ARC Advisory Group in partnership with DC Velocity developed and launched a subsequent survey of logistics practitioners to evaluate the future direction of today’s distribution facilities, technologies, and practices. We obtained feedback from practitioners and analyzed the results. DC Velocity will be running an article on the findings in May, and ARC will distribute a strategic report to clients soon as well. But for now, I would like to provide you with a sneak peak at a small subset of our findings.

• We listed four fulfillment capabilities of a warehouse – Accuracy, Responsiveness, Throughput, and Adaptability – and asked respondents to rank them by relative importance to their organization. Not surprisingly, Fulfillment Accuracy was by far the most frequently chosen as “most important”. However, when asked how they anticipate the relative importance of these capabilities to change over the next five years, the survey results painted an entirely different picture. Adaptability (defined as the ability to handle a wide range of order profiles) and Responsiveness (time from order receipt to delivery) moved to the top of the list.
• We listed four common fulfillment paths between nodes in today’s supply chains and asked respondents to indicate the degree to which they engage in these processes. Replenishment of downstream DCs and stores were the most prevalent responses. However, when asked about anticipated change, the responses once again painted a different picture – as direct-to-consumer and drop-ship were the paths expected by most practitioners to “increase extensively”.
• Digging deeper into warehouse operations, we asked respondents about how they anticipate the prevalence of picking unit types to change over the next three years. We chose “picking” because it is typically the most labor intensive process within a warehouse. Piece (eaches) is the unit type that most said would increase. In contrast, less than half of survey respondents anticipated an increase in pallet retrieval. This data supports the view that picking units will continue to move toward eaches as warehouses increasingly shift toward direct to consumer fulfillment
• Finally, we we asked respondents to select their top warehouse technology investment priorities over the next three years. Interestingly, but not surprisingly given the labor cost of direct to consumer fulfillment, warehouse labor management was the most prevalent choice. WMS was the second most frequently selected investment choice, also unsurprisingly, given its role as the backbone of warehouse operations.

That’s all for today’s sneak peak. ARC Advisory clients, look for the full strategic report in June. DC Velocity readers, an article will be published on dcvelocity.com in May. Others may contact mailto:chanf@arcweb.com for more information.