In an economy where consumer shopping habits are shifting more towards e-commerce, the state of warehousing is changing. Distribution companies have to adapt to the trends, and it is having an interesting effect on several components of the industry.
How is the warehouse industry changing to accommodate e-commerce?
1. Geographical changes
Interestingly, the surge in online shopping has affected what makes an area a prime location for logistical hubs, especially across the East Coast. In the past, distributors would simply build their warehouses where zoning regulations were the most forgiving for their needs.
But over the past five years, we’ve seen a rise in two-day and same-day delivery of packages purchased on e-commerce sites. That means that the proximity to larger cities has become much more important for warehouse facilities, because the focus is on getting deliveries to the largest amount of people in the shortest amount of time. The Lehigh Valley, for example, is close to New York City and has recently seen a surge in warehouse development, including the new largest distribution center in the US, an 800,000 square foot facility built by Fed-Ex in Allen Township, PA.
2. Shifts from shipping pallets to individual items
A typical business-to-business model involves picking products and shipping them in flats, but when shipping directly to consumers instead of retail stores, the process requires picking single products. These products can be bundled, but their shipping patterns are more unpredictable than when shipping in bulk to a retailer. For that reason, warehouses need to take another look at the way they handle storage and inventory as well as the processes, materials and technology that go into picking and shipping.
The past 15 years have seen a significant decrease in the picking of pallets and cases at distribution centers, in favor of individual items, and since many companies are projecting a 40 percent increase in e-commerce by 2021, that trend is likely to continue.
3. Less predictable changes in volume
As mentioned above, the B2B model follows predictable patterns of sales, perhaps increasing slightly to accommodate holiday shopping, but in general remaining more or less stable over the course of a given year. And any fluctuations that do occur are the same from year to year, making it easy for warehouses to adapt in advance. But when products are being shipped directly to consumers, they are subject to their unpredictable buying patterns, which means distribution centers have to remain nimble enough to adapt much more rapidly. In order to support this kind of system, warehouses will have to develop new strategies and technology, and give employees a new level of training for these kinds of skills.
4. Different customer behavior and expectations
Consumers behave differently when shopping online than they do in retail stores. For one thing, there is a much higher rate of returned items. According to the B2B marketplace stockshifters.com, items bought online are returned at an average rate of 22 percent, while consumers only return an average of 10 percent of items purchased in stores.
Part of this difference comes from higher expectations. Thanks to e-commerce giants like Amazon, consumers have come to expect the high standards of quick fulfilment, easy returns and minimal delivery fees. So in addition to being able to accommodate higher returns, warehouses will continue to feel pressure to improve delivery and lower their costs.
5. Use of robotics and new logistics technologies
These higher expectations and unpredictable buying patterns are often hard to support under the traditional warehousing model. For that reason, many distribution centers are turning to technology and robotics to help them increase efficiency, accuracy and overall productivity. As geographical considerations of shipping directly to consumers become more complex, many IT companies are expanding their management systems and solutions to allow warehouses to be more flexible to meet these needs. Automation has also become a tool that many facilities increasingly depend on.
Overall, consumer trends suggest that e-commerce will only continue to rise, so warehouses should expect to tackle the new challenges head on and be prepared to adapt to new expectations and shopping patterns over the coming years.