It begins with a sea change in how companies think about warehouses. In the 20th century, warehouses were perceived as a "necessary evil," packed with processes that were largely manual and inventory that frequently had to be expedited at the last minute because the warehouse wasn’t integrated with marketing and planning. ERP (enterprise resource planning) systems came on the scene to address this, but still the warehouse lagged.
Twenty-first century warehouse system thinking is different. Suddenly, warehousing is in nearly every company’s strategic goals. It is being viewed as an area of competitive advantage. Some of the pressures for change are due to increased global competition for customer wallet share, but equally important is the continuing growth of e-commerce, which thus far in the 21st century is seeing an annual growth rate of 12% to 14%. From an IT standpoint, this requires an integration of multiple shipping channels in real time with the warehouse.
But perhaps the largest warehouse sea change is philosophical. Companies are systematically moving their warehouses to the "front lines" of the customer experience, recognizing that instantaneous order fulfillment (and customer gratification) are crucial (and difficult to achieve) in e-commerce, and are only attainable with 21st century warehouse technologies. "Investing in your warehouse is not just about cost reduction anymore," says Mitch Rosenberg, VP of marketing at Kiva Systems, a supplier of automated material handling order fulfillment systems. "Twenty-first century consumers are different than their 20th century predecessors, so the warehouse must also be able to contribute to a beneficial customer experience."
Delivering the right goods on time to an expectant e-commerce customer often means that the warehouse distribution center becomes the "store," and the end customer experience becomes the experience that is happening within the warehouse. This transformation won’t happen overnight, as industry experts forecast that by the mid-21st century, brick-and-mortar retail transactions will still comprise 70% of all sales.
However, companies planning for the future are already funding and incorporating new warehouse technologies that improve efficiencies and responsiveness to market demand. "It’s all about customer gratification," says Rosenberg. "In the 20th century, companies worked on this by optimizing their stores so that customers could walk out of these stores with the items they had purchased. Now, people want this same kind of instant gratification by immediately obtaining their goods through e-commerce, but this is hard to get online. For e-commerce to compete with traditional brick and mortar retail in an area like instant customer order fulfillment, warehouse distribution centers must be optimized to deliver on that promise."
So what are the technologies and automation that can bring all of this to pass?
Batch-and-wait operations With this type of operation, orders are system-batched up during picking to improve process speed and then automatically separated into customer orders before leaving the warehouse for the customer. This reduces the latency factor that now exists when orders are separately picked for each customer, and it improves the overall performance of the distribution center in website-to-doorstep order fulfillment.