Operations and Solutions Development

Meeting the Challenges of Future-Proof Scalability

Blog
March, 2020

It’s anything but “business as usual” in today’s DCs. Operators are under pressure to meet new demands from e-commerce, traditional retailers and even consumers themselves. Among their key challenges include:

  • Shorter SLA windows and rising consumer expectations — Customers increasingly want levels of service that were unheard of just a few years ago, from same-day delivery to free shipping. As a result, today’s DCs sometimes have as little as four hours to process an order, but the slightest mistake risks losing that customer’s business.
  • Increased system complexity — Many DCs are still geared toward traditional retail replenishment, which typically required the management of cases or entire pallets. The rise in direct-to-consumer sales significantly has increased the number of single items or “eaches” DCs need to handle, multiplying the complexity of everything from storage and inventory management to picking and shipping.
  • SKU proliferation and package variability — The number of SKUs DCs are expected to handle has increased exponentially. In addition, an ever-expanding range of diverse packaging types creates challenges for automated solutions.
  • Scarce labor — Eighty-four percent of warehouses attempting to hire new employees report there are few qualified applicants, or worse, none at all. In the U.S. alone, 600,000 warehouse jobs went unfilled in 2017. And with sustained job growth in the logistics industry expected to continue at a rate of 270,000 per year, the problem is only going to get worse. 
  • Difficulty predicting change — Customer buying patterns are in a state of flux, making future growth difficult to predict. Today, approximately 12–13 percent of all retail purchases are made online. Where they’ll peak is anyone’s guess. Some industry watchers predict 25 percent or higher, but no one can say how soon. The ease of placing orders on mobile phones is a significant factor in these calculations; “M-commerce” is expected to grow by nearly 50 percent per year through 2022, at least.
  • Order volatility — Sales spike significantly within five peak seasons: Valentine’s Day, Mother’s Day, the back-to-school season, Halloween and the Christmas/Hanukkah holidays. In recent years, e-commerce has accounted for around 17 percent of all sales during these peaks, significantly more than its share over the rest of the year. Seasonal sales such as Amazon Prime Day and Asia’s Singles Day represent another trend creating peak shipping periods. DCs that are unable to scale up temporarily for such peaks risk missing out on a significant portion of e-commerce opportunities.
  • Space constraints — Square footage in warehouses and DCs comes at a high cost, particularly in high-demand locations close to urban areas.
  • Returns handling — Retailers say an average of 12 percent of all online sales are returned, and nearly half of all consumers say they’ve returned at least one item purchased online in the last 12 months. These numbers vary significantly by category, with apparel accounting for the highest proportion at around 43 percent. In addition, almost half of all consumers “bracket” purchases — i.e., they buy multiple items with the intention of returning some of them — at least occasionally. Many consumers now check retailer return policies before they buy, and 67 percent or more will not make a purchase if returns involve restocking or return shipping fees. UPS predicted that it would process 1.9 million return packages on January 2, up 29 percent from 2019. While all of these factors create hassles for DCs, they also offer significant opportunities for operations that are able to make the process as effortless as possible for customers.
  • Last-mile delivery in urban areas — The last leg of the journey is often the most difficult in urban centers, complicated both by congestion and higher costs for real estate.

Fortunately, there are answers to all of these challenges, both in greenfield and brownfield sites. Cost-effective solutions can be developed to “future-proof” your DC, ensuring scalable growth. 

You can learn more about three key strategies for achieving these goals, plus a range of possible options for meeting your operation’s specific challenges, in a free report titled Achieving Future-Proof Scalability in Your DC Operations. While every DC has its own unique challenges, product mixes and customer requirements, there are clear paths for determining which solutions can address your current and future needs. This report also details how you can achieve optimum results from emerging technologies while making the most of your existing assets.
 

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