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Formulating the distribution centre of the future


Over the past 10 years, ecommerce has become increasingly prominent, with major online players such as Amazon being the driving force behind the growth. As ecommerce purchases and revenue have grown, the innovation and competition in the industry have increased. Writing in the latest eDelivery Magazine, Craig Sears-Black, managing director of Manhattan Associates, considers the distribution centre of the future.

Craig Sears-Black, Manhattan Associates

Craig Sears-Black, Manhattan Associates

Today, companies are working hard to offer more to their online shoppers, with additional choices, increased flexibility and further promises bringing greater complexity to the operations. Considering all of the factors in place, e-fulfilment has therefore become increasingly complex, with the continued double-digit yearly growth in ecommerce dramatically changing how distribution centres operate.

Long gone are the days of shipping in five to seven business days; delivery expectations have changed, and distribution centres are feeling the pressure. They’re now expected to take action on an order within minutes of when it’s received and processing should be complete within a couple of hours.

While this does not necessarily result in same-day delivery, the customer expects that it should result in same-day shipping. Consumer demands have changed and are now at a point where all standard shipping orders are expected to arrive in two or three days, or even sooner, regardless of where the distribution centre is located.

So, in this latest retail shake-up, how can traditional retailers keep the edge? The simple answer is to work the whole network harder. It means moving fulfilment responsibility away from just the distribution centre, and bringing it to the high street as well, where stores can be empowered to pick and pack orders, process returns and see where everything is in the supply chain – so that customers can buy and return goods and ask for support through any channel.

Seems Easy?

In general, ecommerce orders are small, and companies are doing a lot to account for and take advantage of this. Fulfilling ‘single’ orders is as easy as finding the correct item, boxing it up and shipping it. Many ecommerce operations are set up to specifically handle such simple orders with a high level of efficiency.

However, if a company is not prepared operationally, even the simplest orders can be challenging when you take scale into consideration. Offering hundreds of thousands of unique stock keeping units (SKUs), processing tens and even hundreds of thousands of orders per day, and handling spikes resulting from promotions and/or social media exposure can be very disruptive to your simple order fulfilment strategy.

Now keep those taxing conditions in mind and reimagine how you might re-craft a more optimal fulfilment process: one that also takes into consideration more complex ecommerce orders, conveyable and non-conveyable items, and shipping hardlines and softlines products — all from the same distribution centre and one that fulfils store orders also. Now you can see why distribution operations are being rapidly reformulated.

In addition to this, if retailers start to lean on the stores to help ease the load on the distribution centres it will help to deliver a faster and more efficient fulfilment of online orders. Online conversion also increases by fulfilling from store inventory when a central distribution centre is out of stock or when fulfilling from the store means the customer can get hold of their goods the same day and without which they might choose to shop elsewhere. Fulfilling orders from network-wide stock gives retailers more flexibility and means distribution centres become the hub of the strategy not the sole fulfilment source.

Managing fulfilment in this way means that retailers can make their stores work harder, bring shoppers and products together in a more simple way and also create a distribution model for the future. Future-proofing the supply chain with this approach also means shaping the retail business to deliver omnichannel success today, with the built-in ability to adapt to changing industry demands.

We all know that ecommerce will only continue to grow, and as such larger, more complex orders will become more prevalent. To effectively manage them, companies must leverage the whole network, not just the distribution centre, and embrace modern, sophisticated order management software that can orchestrate complex order fulfilment and drive efficiency improvements across channels.

The key is creating a single stock pool for the entire business, providing flexibility and taking the pressure off the distribution centres. By treating stores as mini-distribution centres, a retailer can deliver true cross-channel shopping to the customer, letting them click, collect, and return on their terms, no matter where their order originated. It also means retailers can fulfil orders across the business by providing store, ecommerce and supply chain teams with instant visibility and real-time availability of network-wide stock, regardless of where it’s held. The result is a wider variety of fulfilment options, faster deliveries and returns, greater distribution efficiency, stronger customer loyalty, higher revenue and more profitable selling.

Maximum Profit

An enterprise solution such as this, that fits the overall business strategy, will allow distribution centres to hand some of the fulfilment back to the stores and maximises operating margins by allowing orders to be fulfilled from the location that maximises profitability for the business whilst still delivering on the consumer’s service expectations.

Today’s forward-thinking retailer needs to not just overcome the challenges within the supply chain; they need to create a foundation to build on success for the future. With consumers calling the shots and demanding instant gratification via a seamless shopping experience across channels, the old ‘it’ll get there when it gets there’ mentality won’t cut it. Mastering efficiency is a must, and distribution networks that are not utilising the technology available must start doing so before they fall behind the competition.

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