e-commerce fulfillment Archives

Amazon and Anticipatory Shipping: Revisiting This Highly Publicized 2013 Patent Ten Years Later

Artificial Intelligence | By Clint Reiser • 09/06/2023

Amazon’s patent for anticipatory shipping generated quite the media buzz a decade ago. My first impression at that time was the mental image it provoked – a delivery truck pulling up to my house and placing a package that I hadn’t ordered on my front door, but ultimately decided to keep. My second impression was “how can this be patentable?” And then I didn’t give it another thought. Fast forward to last week when I came across another reference to this patent in the book Prediction Machines – The Simple Economics of Artificial Intelligence. The authors mention Amazon’s use of AI to suggest items to shoppers they may be interested in purchasing, based on past activity. The authors then describe the progress necessary for something like anticipatory shipping to change business models. In short, the authors propose that Amazon’s prediction accuracy of customer “wants” would have to become extremely accurate – enough to increase revenue (or margins) more than it would increase the costs of supporting returns, etc.

I do not believe that Amazon has utilized anticipatory shipping in the way that I envisioned when I first learned of it. But the use of AI has progressed significantly over the last five years. Also, I felt a natural curiosity to learn more since I have a professional interest in the use of technology to improve logistics. So I decided to learn more about Amazon’s anticipatory shipping patent and share my learnings and perspective with Logistics Viewpoints readers.

Amazon’s Competitive Rationale

Amazon has historically been competitive in its ability to offer essentially any merchandise through its website. But a disadvantage compared to physical stores was the wait time between ordering and receipt of merchandise. Expedited shipping could reduce shipping wait times, but with a substantial cost increase. Of course, the progress of Amazon Prime over the last decade has leveled the playing field quite a bit. However, this was a real concern ten years ago and Amazon expressed this concern quite well in its patent:

“one substantial disadvantage to the to the virtual storefront model is that in many instances, customers cannot receive their merchandise immediately upon purchase, but must instead wait for product to be shipped to them…..expedited shipping… may mitigate the delay in shipping, but often at substantial additional cost….lowest-cost surface-based shipping options may take a week or longer from a customer’s order date. “

The Essence: Predictability Can Enable Cost-Efficiency and Responsiveness

Amazon’s anticipatory shipping patent describes both physical distribution network capabilities and information technology capabilities. Together, these capabilities support the proactive shipping of packages toward potential customer destinations in a manner designed to improve customer experience (timeliness) with low inventory handling and transportation costs. There are many iterations and details provided (patents include numerous “embodiments” of the broader concept). But this is the essence in my opinion.

The Physical Distribution Network

Inventory is proactively pushed into common carriers’ shipping networks to achieve the goals of anticipatory shipping. Packages with selected inventory are shipped to a geographical area without specifying a final delivery address. But specificity is sufficient to perform a majority of the routing to the likely final destination (for example, a portion of a postal code such as the three most significant digits). Once a final destination is determined, Amazon can either contract with the common carriers to complete the address, or it could be done electronically by assigning an address to a pre-attached RFID tag. Amazon refers to this process as late-select addressing. If the predicted order is subsequently placed by the customer, then it is a win – instant gratification for the customer delivered economically. It is also an instant gratification win if another customer in close proximity to the item places an order for it – just redirect the item to that destination within the geographical area. But what if a timely order is not received for the item “floating” within the common-carrier network? One embodiment of the patent includes the process of suggesting the item to customers within proximity and potentially offering them a discount to purchase. Doing so as a limited time offer could certainly incentivize a timely purchase.

The Information Technology Capabilities

The information technology capabilities would have to be extremely robust to enable anticipatory shipping to serve as a cost-effective means of providing instant gratification to Amazon’s customers. Customer demand prediction algorithms are outside of the patent’s scope. But the patent does explicitly state required IT capabilities such as those needed to determine and communicate the status of the package in transit, including the geographical area and potential final destinations. Additional business variables for informed decision-making include the status of previously shipped packages (assumedly for context), the cost of shipped items, and the ability to determine the risk of a shipped package incurring return or redirection costs. The redirection options included return package to the fulfillment center, redirect to an alternate geographical area, and offer an incentive to customer to purchase shipped package.

My Opinion: Great IT and Planning Framework – Insufficient Distribution Network

It appears that the anticipatory shipping concept was not put into action, at least not as proposed. Amazon has built up its own distribution and transportation network substantially over the last decade. In my option, the anticipatory shipping patent relied too heavily on common-carrier networks and predictability, and not enough on forward storage capacity local to urban areas. However, I believe many of the concepts are valuable, similar to other models in use elsewhere, and are likely to be put into use within Amazon in some manner. For example, the development of a predictive shipping model is similar to what Quintiq developed for a customer years ago where they utilized forecasting to set routes ahead of time, so when the orders were received they were assigned to existing routes requiring only fine tuning adjustments in the short-term. Furthermore, late select addressing has similarities to a postponement strategy in the semiconductor wafer fabrication process. But is it applicable to individual packages? Well, maybe for high-demand, seasonal items such as Halloween costumes, storm-specific items like shovels, or roof rakes. Finally, the integration of customer demand and order information, inventory visibility across locations, and transportation capabilities sounds a lot like what many of Logistics Viewpoints sponsors are currently doing with their technology suites that include distributed order management (DOM), WMS, in-store inventory, and TMS. Maybe it isn’t just coincidence that the Amazon patent references papers by RedPraire (acquired by Blue Yonder) and Manhattan Associates.

E-Commerce Sales are Soaring! But are E-Commerce Operations Profitable?

Warehousing | By Clint Reiser • 02/16/2022

Yes, if you take on risk.

We hear it everywhere and I have said it myself a number of times “e-commerce sales are soaring!” But more difficult to determine is the profitability of e-commerce operations. And even more difficult than profitability is the detailed cost-structure of e-commerce channels. According to Digital Commerce 360, Amazon accounts for 42 percent of e-commerce. And the competitive pressures from Amazon (the “Amazon effect”) are largely responsible for the level of service e-commerce consumers receive, and the difficulties other retailers are having in turning a profit from e-commerce.

Revenue, Growth, and….Profit?

Let’s start with Amazon. Unfortunately the behemoth of e-commerce doesn’t provide a financial breakdown of its e-commerce business, exclusive of its other revenue streams and costs. However, Amazon North America is primarily retail sales of consumer products, but includes subscription services as well. So I consider it a reasonable point of reference. Amazon NA achieved an operating income margin of 2.6% for 2021. If you allocate income tax provisions to Amazon NA in proportion to its percentage of corporate revenues, you arrive at a 1.6 percent profit margin. Not a magnificent maring. Of course, Amazon is investing heavily in its infrastructure and working toward market share gains, likely in detriment to earnings. But that is exactly my point. This focus by Amazon is exerting similar pressures on competitors. Nike’s 2020 earnings are another example of costly e-commerce operations’ impact on the bottom line. So what are the options available to competitors for achieving and maintaining e-commerce profitability?

The Old “Price plus shipping & handling”

E-Commerce costs are widely understood at a high-level. Inventory storage costs are lower than brick-and-mortar. Online order processing is also extremely cost-effective. The high costs of ecommerce relate to the fulfillment of orders – namely warehouse handling and transportation costs. However, the path to ecommerce profitability in more nuanced as today’s competitive pressures restrict cost containment options. Transportation costs account for a large percentage of costs. As does reverse logistics (returns). These costs can be charged to customers – at the risk of losing customers due to uncompetitive pricing. Or they can be absorbed by the seller – greatly diminishing profits. My colleagues Chris and Steve focus on last-mile transportation. I will leave that topic of discussion to them. Instead, let’s address the other big expense – warehousing and fulfillment costs.

Scalability and Capabilities

Warehouse automation investments provide increased throughput capabilities, operational stability, and the opportunity to reduce the variable costs of fulfillment. However, the higher fixed-costs come with risk. High volumes are necessary to pay down the fixed costs and achieve profitability. Even Amazon is subject to the two-sided effects of operational leverage. In fact, the following statement appeared in the Amazon Q4 2021 earnings transcript “Our results also include approximately $1 billion year-over-year negative impact from lower fixed cost leverage in our fulfillment network. Recall that we saw very high unit volumes for most of 2020 and the first half of 2021.” Large companies like Walmart, Amazon, and others have the financial resources to establish infrastructure and fixed assets to create scale and lower variable costs of fulfillment. Warehouse automation investment is certainly a long-term strategic decision that can establish competitive position and deliver profitability. However, if your organization doesn’t have the risk tolerance or capital, many of these above mentioned companies also offer fulfillment outsourcing services that provide smaller retailers the opportunity to utilize this existing capacity (at the same time assisting these larger vendors pay back their capital investments). Examples include the Shopify Fulfillment Network, Amazon Multi-Channel Fulfillment, and Zalando Fulfillment Solutions (Europe). 3PLs are also investing in automation, allowing customers to benefit from their scalability. GXO Logistics is taking its investment to the next level. Of course, a certain amount of upside potential is lost when one decides to utilize a third-party fulfillment provider. But that must be balanced with the risk of investment misalignment with long-term requirements. This is where flexible automation in the form of mobile robotics or other technologies offer increased value. The ability to address a wide range of throughput requirements reduces the risk of investment and increases the probability that the investment will align with changing needs.

Ultimately, it’s a matter of aligning fulfillment capabilities with the specific circumstances and requirements of the organization. There are many paths to success. But evaluating the proper technology for adoption is certainly a good place to start.

Inoculating 2021 E-Commerce with Fulfillment Best Practices

Omni-channel logistics | By Ken Fleming • 01/14/2021

All around, 2020 lessons learned are fueling improvements in this new year. Record-setting speed of medical innovation delivered multiple COVID-19 vaccines in less than a year. Schools that sat dormant for nine-months are better equipped to safely welcome students back for in-person learning. Fulfillment professionals also made great strides in 2020, driven by necessity, and many lessons can be applied in the year ahead to keep customers happy and operations on track.

Whether shipping COVID-19 vaccines, test kits or ventilators; office supplies; clothing; or groceries, some shippers rode thorough preparedness to a competitive advantage in 2020. Others adjusted throughout the year to improve or struggled mightily to the end.

Fundamental shifts of e-commerce and consumer behavior took shape in 2020 and presented new and unprecedented challenges. Parcel shipping volume skyrocketed. Retailers, manufacturers and others welcomed new e-commerce customers, sold new types of products, and fulfilled more direct and online orders. These shifts led more fulfillment teams to identify and embrace emerging best practices as part of their 2021 planning. The savviest even used Q2 2020 to fine-tune or overhaul processes ahead of a peak season unlike any other. They prioritized e-commerce customer service and satisfaction. They studied the value of getting inventory closer to customers. They diversified fulfillment procedures to deconsolidate risk. Those with competitive advantages embraced them more than ever.

Visible symptoms of a stressed supply chain

Symptoms of a stressed supply chain persist. Carrier rates are up and climbing, even at the USPS, and carrier capacity limitations crippled some of the largest merchants who did not prepare for them. Critical cargo to treat COVID-19 rightfully gets prioritized by carriers, with vaccines, treatments and equipment saturating carrier capacity in the United States and abroad. With e-commerce soaring, retailers are moving and processing what many project will be a record-breaking volume of returns.

Leveraging every competitive strength remains critical in 2021, when any one of these trends can wreak havoc on an unprepared shipper.

Fulfillment best practices treat the symptoms

Most shippers do not have the luxury of launching their own fulfillment fleet to offset the rising prices and shrinking available capacity of carriers as Amazon has done. Scaling existing fulfillment processes by investing in personnel and other resources generally proves to be costly and less effective than embracing new and smarter fulfillment processes to boost customer satisfaction, extract cost-saving insights from fulfillment data and improve partner relationships.

Keeping customers satisfied keeps them customers, and shippers who commit to a meaningful baseline of transparency greatly improve their odds of satisfying customers. Those not already doing so should provide their own tracking and tracing capabilities on every order to monitor and respond to the on-time delivery performance of every carrier service and reward the best partners with more business.

Shippers should also audit their own fulfillment data with business intelligence tools to discover how making changes to processes, physical operations or retail footprint can better serve customers. Could adding distribution centers or modifying a retail footprint reduce costs and delivery times? What can be gained by partnering with other 3PLs or local warehouses in priority markets? How can creative solutions like localized manufacturing (3D printing) and omnichannel fulfillment (BOPIS, curbside pickup, ship from store, etc.) make service departments more profitable and radically improve the way a shipper fulfills e-commerce orders? Business intelligence applied to a shipper’s own data can answer these questions and more.

At the very least, shippers relying on an exclusive carrier relationship must adopt a multi-carrier approach immediately. For many, multi-carrier rate shopping provides the single-most-effective way to safeguard against rising carrier rates and reduced capacity. As carriers’ average rates rise, shippers should pinpoint competitively priced services, keep using those and turn to alternative carrier services that offer the same service levels at reduced costs.

With explosive e-commerce growth underpinning all or most of these challenges, carriers scrambled to build out their fleets to better meet the rising demand for shipping capacity, close the gap and restore some normalcy, but proactive shippers sought solutions rather than waiting for carriers to solve their problems. They spent much of 2020 taking steps to address the parcel shipping capacity shortage and rising e-commerce volume, and other shippers should consider some of the recent developments and innovations their proactive brethren have successfully adopted.

Innovations target the root cause

Many shippers increased their use of LaserShip, OnTrac, Speedee Delivery, and other last-mile and regional carriers in 2020. In doing so, they not only addressed problems related to parcel shipping capacity and rising rates; they also drove growth in this sector. Demand for these last-mile and regional carriers spurs increased investment in the sector, and as these carriers respond to increased demand by growing their fleets, they become ever more viable options for shippers.

Localized or on-demand manufacturing via 3D printing, combined with multi-carrier parcel shipping, reduced dependence on carriers in 2020 and is sure to pay dividends for other shippers in this new year. While on-demand manufacturing also reduces waste, manufacturing costs and inventory management costs, the benefit of reduced dependence on carriers alone typically justifies the investment for the right type of shipper.

Business intelligence has long been able to help shippers answer questions like “how can we benefit from local, on-demand manufacturing?” and many others. In 2021, look for shippers to incorporate external data sources to get even more out of their business intelligence efforts. Data feeds focused on weather conditions or Twitter sentiments, for example, help innovative shippers make more careful carrier service selections and avoid unnecessary disruptions that may otherwise damage customer relationships.

Challenges persist, but so should optimism

We will undoubtedly see 2020’s fingerprints all over 2021, but shippers have options for controlling their own destinies throughout this new year. Catching up with accomplished competitors who have proven the value of best practices during this pandemic or pressing on even further to adopt the new innovations available to fulfillment teams offer many reasons to be optimistic about the year that lies ahead.

Ken Fleming is president of Logistyx Technologies, the leader in Transportation Management for parcel shipping. Since the mid-1990s, Ken has led successful launches of many new technologies and services, including supply chain management, e-commerce, SaaS, and enterprise software and systems integration solutions. Ken can be reached at ken.fleming@logistyx.com.

How Warehouse Automation is Enabling the E-Commerce Explosion

Logistics Trends | By Clint Reiser • 01/24/2018

It is a well-known fact that e-commerce is growing rapidly around the globe, and this is causing a significant shift in the retail landscape. It’s changing fulfillment paths and requiring retailers, distributors, logistics services providers, and manufacturers to expand and reconfigure their fulfillment operations. These changes are in turn driving growth in sales of warehouse automation systems. All of this I knew from general interest in business and prior research into the global warehouse automation market.

I am now in the process of updating ARC’s Warehouse Automation & Control market study. As part of this process, I reached out to a number of leading warehouse automation suppliers to learn about the changes that have occurred over last couple years. For example, how have the e-commerce demands placed on retailers changed over this timeframe? What are the primary concerns retailers are expressing to warehouse automation suppliers? What operational capabilities are they looking to develop? And what are the characteristics of automation that are in the highest demand, and why?

Today’s Fulfillment Demand

For starters, the shift to e-commerce is happening at a faster pace than many retailers and warehouse automation providers had imagined just a couple years ago. E-commerce retail sales are approximately $400 billion a year in the US, and have been growing at an annual rate of about 15 percent over the last couple years. This amounts to an annual increase of over $50 billion in e-commerce sales in the US alone. Annual US e-commerce sales have now doubled since 2012. The fast growth of e-commerce has brought about higher direct-to-consumer throughput requirements and many other changes to fulfillment operations.

Compressed Fulfillment Time Horizons

Retailer competition has compressed order fulfillment times considerably over the last few years. Expedited delivery, such as same-day or next day delivery, has become a common consumer expectation. These pressures have greatly impacted warehouse automation requirements. Kevin Reader of Knapp noted that customers will come to them with the goal to get orders out the door in an hour and a half with limited staffing in their warehouses. According to Erik de Jonge of Vanderlande, in Europe they have seen order lead times as short as 30 minutes. These quick order turn-around times are often a disqualifier for batch picking concepts. The batch picking and sortation systems used in the past are often not the right solution for today’s e-commerce fulfillment needs. Many of these customers are now opting for more agile goods-to-man solutions such as shuttle systems.

Accelerated Pace of Change and Increased Uncertainty

Retailers are dealing with an accelerated pace of change and this is causing increased uncertainty about future fulfillment requirements. They have a good feel for what they will need to handle over the next year, but three to five years out is extremely difficult to predict in this environment. So retailers are looking to configure their fulfillment centers to meet unknown changes in order profiles that will occur over the next five years. Adaptability is now a primary requirement for today’s e-commerce warehouse automation systems. Retailers need to be nimble and able to react to a range of scenarios that may occur in a fast changing marketplace. According to Tom Rentschler of Swisslog, three years ago you could predict the growth rate for an early stage e-commerce company such that the warehouse automation system would still be suitable five years later. Because of the explosive growth today, there is a real risk that a system could become obsolete almost immediately. Tom notes that many early stage e-commerce companies want a system that can scale easily and rapidly. These systems are often modular and include software intelligence that enables the operation to adapt to changing circumstances. Andreas Wimmer of SSI Schaefer confirms that adaptability and scalability are paramount in Europe as well. He notes that fulfillment adaptability is being achieved through proper multi-site planning, more sophisticated operational planning supported by software intelligence, and flexible warehouse automation that can adapt to volume and order structure changes. Andreas also noted that some online businesses are working with their customers to make demand patterns more predictable through repeat order programs. As an example, companies and households purchase consumables such as paper towels and cleaning supplies on a regular basis. An automated weekly delivery of these items can provide a discount for the customer and predicable, easy-to-fulfill demand for the online retailer.

Warehouse Automation Characteristics in High Demand

In the e-commerce world, order volumes are increasing rapidly, fulfillment turn-around times are being compressed, SKU numbers are proliferating, and order sizes are decreasing. But the specifics are occurring in a difficult to predict pattern. The high-growth, highly variable characteristics of today’s e-commerce industry are causing retailers and other distribution operations to seek out more adaptable and scalable solutions. Generally speaking, goods-to-person solutions are in high demand, as are other forms of automation that are flexible and scalable. Shuttle systems are often the choice solution for many e-commerce fulfillment operations that are willing to make the investment. Logistics service providers are investing in flexible solutions because they align well with their contract business model and allow them to easily adjust their facilities and operations to meet requirement changes that occur with short-term contractual agreements. Interestingly, Erik from Vanderlande informed me that he is seeing a trend where traditional parcel companies are offering more pick/pack operations and are purchasing solutions to support those processes. At the same time, traditional retail fulfillment operations are increasing their investment in parcel sorting capabilities. So the operational lines are being blurred in the e-commerce fulfillment chain. Finally, there are numerous start-up companies in China and other Asian countries that are offering their own goods-to-person robotics systems. Many of these solutions operate in a similar manner as Kiva systems. When I asked Erik if these appeared to simply be Kiva replica’s, he said that he did not necessarily think so. He stated that many of the solutions offer innovative software features such as slotting, route optimization, and fleet management capabilities. He believes that many of the providers that exhibited at the trade show in China had “evolved from imitation to innovation.”

Why Your Supply Chain Should Be Riding the Dynamic Waves Trend

Inventory Management | By Craig Moore • 06/22/2017

Online retail has rocked order processing to its core.

Large, pre-determined replenishment orders are the past. The amount of unique, one-off orders from consumers from anywhere at any time is constantly increasing. As a result, order sizes are consistently shrinking down to single unit fulfillment. Order cycle times are also waning. Twenty-four hour shipping is no longer the expectation. Customers expect same-day delivery.

What does this mean for the distribution center (DC)? All aspects of its operations – the facilities, personnel, automation, and supply chain systems – are challenged. Peak seasons, such as the holidays, intensify this. Distribution centers can quickly morph from needing to ship large, wholesale orders to handling a flood of direct-to-consumer orders. This can turn a distribution center upside down.

Supply chain professionals have the ability to not only keep DCs upright, but also capitalize on the variable nature of unified commerce.

This is possible with dynamic waves.

Dynamic Waves: A History

Traditional waving, also called wave processing or loading planning, came into play to increase productivity in distribution operations. Supervisors systematically grouped orders into waves. Orders traditionally came in a day or more in advance for the operations team to wave and plan resources accordingly. After this, replenishment was completed to ensure smooth processing of the wave, and picks were then executed. In automated DCs, the warehouse management system (WMS) or fulfillment system took care of waving and pick processing, and then handed the sort job off to the warehouse control system (WCS). This resulted in better visibility, enhanced replenishment planning, and increased labor planning. Ultimately, it ended in a more efficient operation where pick densities were increased and travel time reduced.

With the onset of ecommerce, the traditional waving model started to break down. With new orders coming in 24/7 and the market demanding same-day processing, operations could no longer depend on a firm cutoff the day before to plan orders.

Enter dynamic waves…

With dynamic waves, also called waveless processing or waveless order fulfillment, the system constantly releases and reprioritizes the order pool based on cutoff times, inventory levels, and resource availability. Waveless systems allow conditional business rules to dictate which orders should be available to the floor and when, along with their priority during certain time windows. Orders continue to flow into the system throughout the day, but the operation is no longer required to put them in a pre-defined wave.

The Benefits of Going Waveless

The advantages of dynamic waves span far and wide. Here is a quick snapshot:

Improved throughput: Waveless order management avoids the “lulls” that typically occur as waves are finishing or starting. This maximizes throughput at all times.
Better resource utilization and labor management: Because the system is constantly releasing work on pre-defined rules, employees are never underutilized during the valleys between waves.
Upped productivity: An operator’s tasks are assigned in real time as he or she proceeds through the pick path. Additional picks are completed without the need for a separate trip.
Exceeded customer expectations: As tasks are released and reprioritized in real time, the need to draw a line in the sand on which set of orders gets out that day is eliminated. Same-day delivery is achievable.
Beating the competition: The business can use the decreased order cycle times and increased customer satisfaction as a differentiator in the market.

Making Dynamic Waves in Your Supply Chain

To reap the benefits dynamic waves offer, supply chain professionals must tap into a WMS or fulfillment system with waveless order fulfillment embedded in it. Consider the following features:

A rules engine that controls the flow and priority of orders to the floor: This includes managing the number of orders in the active queue and their priority at any time based on configurable thresholds such as carrier and time window.
Continuous “re-evaluation” of picking queues: This includes real-time notifications to operators to adjust the number of units needed while en route as new orders arise. Additionally, this should pinpoint “hot items” located in multiple pick locations. This allows dynamic inventory replenishment or rerouting the pick to a new slot as needed to fit demand.
Real-time, actionable analytics: Due to the fluid nature of waveless fulfillment, real-time visibility of the workload throughout the operation is increasingly important. This includes a dashboard that illustrates where current labor allocation won’t meet needed service levels or cutoff times. It should be actionable, with the user being able to redirect operators to correct the situation as needed.

The present and future of unified commerce must consider the aftershocks that ecommerce has and will continue to make. Dynamic waves will provide the flexibility necessary for distribution centers to not only survive, but also thrive in today’s dynamic supply chain landscape.

Craig Moore is Vice President of Sales, NA at HighJump. He joined HighJump in 2011 and is responsible for the continued growth of HighJump’s Supply Chain Execution solutions within its customer base and by working with new prospects. Moore’s previous roles in sales and sales management have allowed him to work with retailers, manufacturers, distributors and many other points of influence and impact within global supply chains.

Quantifying the Changing Warehouse Order Profile

Logistics Trends | By Clint Reiser • 10/13/2016

My colleagues and I have written a number of articles about the widespread growth of e-commerce and its effect on distribution operations. Many companies are opening new facilities for e-commerce fulfillment and others are using traditional replenishment facilities to fulfill e-commerce orders as well. It’s well-known that e-commerce growth is affecting the requirements placed on many organizations. But to what degree is the movement of goods through the supply chain shifting? And to what degree are handling units changing? Clearly direct-to-consumer shipments are smaller in size and greater in volume than traditional fulfillment. But to what degree is this shift occurring? ARC’s survey research, conducted in partnership with DC Velocity, provides some cross-sectional insights into the magnitude of these shifts.

Warehouse Capabilities and Priorities
Accuracy, Responsiveness, Throughput, and Adaptability are all importance capabilities of a fulfillment operation. But is the prioritization of these capabilities changing? Well, our research (Figure 1) shows “adaptability” (defined as the ability to handle a wide range of order profiles) as the fulfillment capability expected by most to increase in importance over the next five years. One respondent, from a fashion accessories brand, stated that they are becoming nimbler and more adaptable, geared more towards direct-to-customer fulfillment than ever before. And “adaptability” is followed by “fulfillment responsiveness,” a high priority in today’s next-day delivery environment. A respondent from a workplace or office supply wholesale, said that they have been increasing e-commerce direct to consumer shipments. This change requires greater responsiveness due to customer expectations and parcel carrier shipment frequencies.

Changing Fulfillment Paths
We listed four common fulfillment paths between nodes in today’s supply chains and asked respondents to indicate the degree to which they’re operations engage in these processes. Replenishment of downstream DCs and stores were the most prevalent responses. However, when asked about anticipated change, the responses (Figure 2) provided insight into the changes taking place, as direct-to-consumer and drop-ship (shipping goods directly from the manufacturer) were the paths expected by most practitioners to “increase extensively”. I expected the increase in direct-to-consumer, but underestimated the degree to which drop-ship is expected to increase. This statistic on drop-ship shows the degree to which e-commerce is affecting the extended supply chain. One respondent, from a branded apparel company, specifically noted an increase in sales through Amazon.com that are fulfilled by the apparel company.

Picking Units
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. The response profile (Figure 3) supports the view that picking units are generally getting smaller as warehouses increasingly fulfill e-commerce orders. At the same time, upstream partners are expected to support those downstream with greater SKU variability and smaller volumes of the same SKU. This puts pressure on upstream partners to reduce their picking units from pallets to cases. For additional insight, I broke down responses to this question by respondent sector (Retail, Wholesale, and Manufacturing). Sixty-five percent of retailers expect piece picking to increase, with 30 percent expecting it to increase extensively. Although some retailers do expect case and pallet loads to increase, none of them expect either load type to increase extensively. Wholesalers expectations are best stated as “the smaller the unit type, the greater likelihood of an increase over the next three years.” Finally, the responses from manufacturers were dispersed across the picking types, with case picking as the most frequently noted picking unit expected to increase.

Final Word
To put our survey-based warehouse findings into a narrative… The ongoing transformation in the fulfillment environment, primarily driven by the explosive growth in e-commerce, has shifted order profiles and warehouse operations, placing a premium on adaptability and responsiveness. Direct-to-consumer fulfillment is expected to increase extensively, as is the practice of drop-shipments. Logically enough, the change in fulfillment paths and order profiles is expected to continue to influence picking processes. The smaller the unit, the greater the expectation of its increase over the next three years. As you move closer to the end-consumer, the greater the expectations for a shift in picking units within the facility.

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