COMMENTARY
By Peter Bradley
OMNICHANNEL DISTRIBUTION
CREATES MULTIPLE CHALLENGES

The growing importance of omnichannel distribution—and the problem of how to meet the challenges it creates—has attracted significant attention from retailers and their suppliers.

And no wonder. E-commerce is one of the fastest-growing parts of the economy. Forrester Research projects online retail sales will reach $262 billion this year, up

13 percent over last year. And the company expects e-commerce to grow at a 9-percent compound annual rate through at least 2017.

It’s business that retailers are actively courting. A separate Forrester study, done in conjunction with the National Retail Federation’s Shop.org, found that retailers are shifting marketing dollars to pursue mobile traffic, a response to the rapid adoption of smartphones and tablets by consumers as a way to shop.

What does all that mean back at the distri-
bution center? A great deal. “It means we need
to redefine the warehouse,” says Mike Khodl,
vice president of solutions development for
Dematic. “It can be the retail store, your sup-
plier, a dealer’s warehouse, a dedicated retail
store distribution center, a dedicated e-fulfill-
ment operation, as well as a multichannel dis-
tribution center.”
Khodl says businesses looking at how to
design DCs to support omnichannel distribu-
tion have two particular challenges: forecast-
ing future demand to ensure the facility is
the right size, and choosing a material han-
dling solution that can handle wide swings in
demand, particularly in the e-commerce por-
tion of the business. “It’s also about balanc-
ing and accommodating changing SKU
velocity, SKU growth, daily order volume,
modate seasonal, promotional, and weekend
pooled order surges.”
Dematic, a major provider of material han-
dling and logistics systems for customers
across a number of verticals, sees omnichan-
nel distribution as a significant development
for its retail customers. It has made
omnichannel distribution a major focus of its
annual Material Handling and Logistics
Conference, which takes place in Park City,
Utah, from Sept. 8–11. The conference
includes several presentations specifically
aimed at issues in omnichannel distribution,
including “360 Degree View of Omni Channel
Distribution” and “Committing to a DC Design
When the Future Is Fuzzy.”

order quantity, warehouse space, [and] seasonal and promotional peaks,” he says. “Most designs incorporate a storage buffer strategy that shares inventory across multiple distribution channels. Furthermore, these solutions have peak capacity flexibility built in to accom-