Wednesday, October 24, 2012

Warehousing and fulfillment requirements and solutions are changing due to ecommerce

Warehousing and fulfillment are undergoing changes as companies incorporate ecommerce into their overall strategy. Decisions such as physical locations of warehousing and whether to fulfill ecommerce orders from separate facilities, in-store, from existing warehouses or a combination of all three are among the strategies brick and mortar companies are facing as they compete against the likes of Amazon, eBay and Newegg.

While much of this change differs from one company to the next, speed to fulfill and options in the final delivery location are similar for most companies. Not only that but the need for visibility over the entire process is in demand as companies’ supply chain is further complicated.

The higher volume of ecommerce orders is affecting this need for speed to fulfill. On average, the layout of warehouses is important. For some companies, the use of high-bay racking, product placement and an effective alignment of rack storage are necessary. Also, there is an increasing use of automation within such facilities. Robotics is on the increase as noted by the acquisition of Kiva Systems by Amazon. The acquisition was questioned by some but physical order fulfillment reportedly costs the company nearly 9% of its global revenues, thus, reducing this cost will likely improve Amazon’s profits.

Managing the delivery process is also an increasingly difficult task as delivery locations from warehousing/fulfillment centers are no longer confined to physical stores. Now, these facilities are shipping either directly to the customer, a neutral site (such as a lockbox location, FedEx/UPS store or other retailer) or to the physical store for pickup. As such, IT companies such as High Jump, Red Prairie, Oracle and others have expanded their traditional warehouse management systems (WMS), transportation management systems (TMS) and other IT solutions to meet this need for flexibility for not only changing transportation needs but also for order/inventory management and visibility.

As IT providers offer more innovative solutions for brick and mortar companies to compete with dotcoms, inventive startups are springing up. For example, Shipwire offers global order fulfillment capabilities and warehouse network via its cloud logistics network. According to the company, customers are able to outsource its entire global fulfillment, warehousing and shipping needs to Shipwire. Although not a startup, but just as inventive, Amazon also offers fulfillment services for customers. The company’s Fulfillment by Amazon ships goods from its own warehouses on behalf of its marketplace sellers.

Ecommerce has spurred not only new concepts and ideas within the supply chain but also new companies are popping up to address logistical challenges resulting from the rise of ecommerce. Next month, Transport Intelligence will launch the first report in its eCommerce series, North America Ecommerce Logistics, that will look at these challenges as well as new companies and how traditional logistics providers such as UPS, FedEx, DHL and others are responding to these changes. Europe Ecommerce Logistics, Asia Ecommerce Logistics and a Global eCommerce Logistics Whitepaper will follow in first quarter 2013. For more information, please contact Cathy Roberson at