The warehouse of the future

What was once the traditional warehouse is now the multichannel distribution centre. Noelle Paskewitz explains

What was once the traditional warehouse is now the multichannel distribution centre. Noelle Paskewitz explains

As the supply chain explodes in the face of multichannel retailing, the traditional warehouse and the logistics that support it are under threat. And the new distribution channels that have sprung up as a result of the Internet - cable, satellite and mobile networks - mean that the role of the warehouse is becoming uncertai...

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Online shopping is creating a massive channel. According to Jupiter Research, 6.3 million US residents will spend more than 50% of their holiday budget online this year. This is an increase of 294% on 1999. Another Jupiter report shows that online retailing in Europe is growing, despite a number of high-profile dotcom failures. A survey of Internet users in Europe's seven most mature Internet markets shows that more consumers are buying online and that existing e-shoppers are spending more of their income online. Yet despite this growth, Jupiter's findings show that the traditional retail channel still achieves the most sales.

Jupiter analysts estimate there are over 37 million websites. The Web is over-crowded and dotcoms are being threatened as online shoppers gravitate towards trusted brands. So large retailers with both a physical and online presence are likely to win market control.

For the multichannel warehouse of the future, real-time interaction between the Web and warehouse is critical as it enables retailers to provide shoppers with current information on product availability.

With consumer expectations running high, a retailer is likely to lose business if it quotes an item as 'out of stock' after an order is placed online. Offering alternatives for out-of-stock items is key to online customer satisfaction.

Warehouses must also be geared up to pack and ship in singles. They must have an efficient returns process, as research indicates that returned merchandise is a $63bn (£42bn) problem for traditional retailers and a $1bn (£67m) problem for online retailers. They must also offer value-added services, such as gift wrapping, for example.

Finally, the warehouse of the future must be linked properly with a retailer's suppliers on the receiving end and its carriers on the shipping end. Customers should be able to select from a range of delivery options and the retailer must be integrated with a variety of carriers offering a range of services.

Today, some retailers opt to manage their warehouse operations in-house. They may manage all channels from one location or they may designate individual locations to manage each unique channel.

Some retailers realise that they are not distribution experts and turn part or all of their logistical operations over to experienced third-party logistics providers and/or to the newly emerging logistics experts that focus on delivering the goods that people buy online.

Virgin cosmetics

In 1999, cosmetics and personal care retailer, Virgin Cosmetics redesigned its order management system to enable one-time data entry and individual customer order picking. The retailer distributes its range of products via four channels: retail shops, direct to customer, corporate wholesale and mail order. Virgin Cosmetics uses a flexible warehouse management system, which enables it to fulfil bulk, case and single orders from one location.

Sainsbury's Supermarket

Sainsbury's, Britain's longest standing food retailer, operates a growing online service. Sainsbury's supply chain process requires the effective management of 2,000 suppliers at one end and 12 million-plus stocking points at the other. To manage this vast network, the company operates 34 distribution centres, many of which handle specific goods and services ranging from cold storage items to a specialised e-fulfilment operation.

Wedgwood/Ryder

Maker of fine china, Wedgwood, consolidated 12 warehouses last year into a single global processing centre (GPC) managed by third-party logistics provider, Ryder Logistics. With the company's growth in telephone, mail order and online sales, the GPC must handle an increasing number of bulk and single orders.

Boots/Metapack

An expansive network of fulfilment services has been assembled for the health and beauty business from Boots and Granada Media. MetaPack will reconfigure a Boots warehouse to handle online fulfilment. MetaPack will use an order management system developed in-house and parcel carriers, including Parcelforce, Royal Mail and Securicor Omega Express, to manage UK and overseas deliveries.

Noelle Paskewitz is the marketing manager at warehouse management company Manhattan Associates

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