DC Velocity - June 2016

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saler noted that it had seen an increase in its e-commerce direct-to-consumer shipments. Such a transition requires greater responsiveness due to the change in order profiles and customer expectations. Similarly, a respondent from a fashion accessories brand mentioned that it is becoming more nimble and adaptable to gear its operations more toward direct-to-customer fulfillment than it had in the past.

FULFILLMENT PATHS AND PICKING UNITS: FROM HERE TO WHERE?

There are a number of fulfillment paths that warehouses can support: traditional store replenishment, DC replenishment, drop shipping, and direct-to-consumer shipping. We asked respondents about the degree to which their organizations supported these various fulfillment processes. Replenishment of downstream DCs and replenishment of retail stores are currently the most prevalent fulfillment paths. However, once again, our inquiry into anticipated change painted a picture that differs from the status quo.

When asked how they expect various fulfillment processes to change over the next three years, respondents identified direct-to-consumer shipping and drop shipping (shipping goods directly from the manufacturer) as the practices that would see the biggest growth. The anticipated growth in drop shipping suggests that respondents expect to see further decoupling of customer-facing and fulfillment processes. I consider this to be one of the most interesting reconfigu-rations of value-chain partnerships. For one thing, it indicates that e-commerce and the omnichannel paradigm are not only affecting retailers, but also their manufacturing and wholesale partners.

As retailers are pressed on margins, many are refocusing on the customer experience and unloading the inventory carrying costs and fulfillment processes onto their upstream partners.

PICK, PACK, REPEAT

Order size and scale generally decrease as
products move through the supply chain
toward the final consumer. Therefore,
the balance among material handling
units (pallet, case, piece) handled within
a warehouse is likely to change along with
the adjustments in fulfillment channels.

We asked respondents how they foresee picking unit types changing over the next three years. (We chose “picking” because it is typically the most labor-intensive activity in a warehouse.)

Piece (eaches) is the unit type that most said would increase and also the type that most said would increase extensively. Over half the respondents also said they expected to see an increase in case picking. In contrast, less than half of the survey respondents predicted an increase in pallet retrieval.

The responses about picking unit expectations support the view that picking units will continue to move toward eaches as warehouses fulfill more and more e-commerce orders and upstream partners support downstream partners with greater SKU variability along with smaller volumes of the same SKU.

PAIN POINTS AND TECHNOLOGY INVESTMENT

The shift toward processing higher volumes of small multiline-item orders is raising fulfillment costs within the warehouse. At the same time, greater levels of order variability are injecting inef-ficiencies into the fulfillment process.

Typically, when faced with the need to improve processes and boost efficiency, logistics practitioners turn to technology.

We asked respondents about the likelihood of deploying technology in the next three years to improve various operational processes (process pain points).

Shipping, goods retrieval/order picking, and put-away are the processes most frequently cited as targets for technology investment over the next three years.

In their supporting comments, respondents also expressed a desire to pick single and multi-unit orders by zone within the same wave, as well as a need for flexible picking solutions that can be deployed at scale.