Online Shopping’s Direct Impact on Warehouse Operations

Published on 14 August 2020

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The definition of what constitutes a warehouse today is hard to pin down, largely because of a transformation that has been occurring over the last decade or so. Companies that operated warehouses were forced to adopt new practices as customers, both business and retail, became far more demanding. These new warehouse operational practices are driven by data technology that has also wrought enormous change throughout the entire supply chain structure.

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No company would dispute that today’s customer expects and demands more and, in the case of a retail consumer, is more willing to jettison brand loyalty in favor of top quality service. We live in a customer-centric world, one of the many characteristics of a world that is digitally-powered.


What this has meant for the warehouse is a wholesale shift from merely storing inventory to effectively transforming into a distribution center. According to the supply chain website, SupplyChainMinded, in a traditional supply chain, warehouses had to “store the maximum quantity of every product, everywhere, every time”. This was critical, says the website, because of a lack of information flow and planning mechanisms in the supply chain. Hence, warehouses were jammed with inventory for long periods before the products were needed and eventually shipped.


Industry 4.0 And Shifting Business Models


This traditional view of a warehouse and supply chain may seem antiquated today but it’s important to remember that it has only been nine years since the term “Industry 4.0” came into being in 2011, thanks to the German Ministry of Education and Research who were looking for a way to describe how cyber-physical systems could be responsible for the evolution of new business models in manufacturing.


As those business models evolved, so, too, did everything else associated with manufacturing, including supply chains and, ultimately, warehouse operations. Today, supply chains can be as digitized as manufacturing operations and, in fact, they have to be, so they can be agile enough to respond to changing market and economic conditions. That is especially true for warehouse operations which must now deal with several different types of orders on a daily basis: the traditional pallet orders along with single orders coming from online commerce.


Where Dollars Are Ones and Zeros


In a digital world, everything is moving faster than ever, especially commerce. In the late 1990s, when companies experimented with websites on which to advertise and sell their products, other companies developed the software that would facilitate financial transactions over the internet. E-commerce was born.


The early days of online commerce were fraught with challenges such as how to make transactions secure, how to handle the fulfillment of online orders, and how to ship those orders quickly and cost-effectively. Once again, technologies were developed to solve the problems.


Online retail, or e-commerce, has seen enormous growth in a very short period. In 2007, online purchases represented 5% of total retail sales; by 2019, that number had climbed to 16% of all sales (excluding fuel, restaurant purchases, and items not usually bought online such as automobiles).


Put another way, online sales have more than tripled in 12 years. According to eMarketer, 2020 online sales should top 18% while those in brick-and-mortar stores are projected to plummet by 14%.


Fear Brings Change


The reason that 2020 has seen such a spike in e-commerce boils down to one factor: Covid-19. People are staying away from stores in droves and turning to their tablets, laptops, and smartphones to shop.  Surveys indicate that this shift could become permanent; Amazon’s purchase of Whole Foods in 2017 brought the notion of online grocery shopping to the fore. Wal-Mart began selling groceries online in 2018. Both companies are witnessing dramatic rises in their e-commerce food businesses in 2020, propelled by people’s fear of going into stores during the pandemic.


As a result, food distribution firms are facing enormous pressures. Food, especially fresh fruit and vegetables, has a finite shelf life. The increased online demand from consumers for food has meant that food distributors must rely on the quality of their Warehouse Management Systems (WMS) to ensure that deliveries are timely. Expiration date tracking, batch tracking, first-in-first-out (FIFO), first-expiration-first-out (FEFO), and top-notch transportation and route planning are the core elements of a WMS. The pandemic makes these elements critical.


The digital age has forced a morphing of old warehouse operations into technology-driven distribution centers where data is captured at numerous points and analyzed, driving AI-based predictions and recommendations for warehouse operators, all in the name of efficiency, speed, and cost-effectiveness.


Sharp Growth In Warehousing


In order to deliver goods fast and on-time to customers, the number of warehouses-cum-distribution centers has grown. There has been an increase of nearly 3600 warehouses, a 25% jump, in the U.S. in just the past 10 years. Experts attribute this to two factors:

 

  • Technology-driven improvements in manufacturing since 2009 that have also driven improvements throughout the entire supply chain
  • The continued growth of e-commerce in America that has created a demand for more warehousing space

“A chain is as strong as its weakest link”, goes the adage. Every link in a supply chain is critical but it could be argued that logistics is the most critical since it involves the movement of raw materials, partially or fully finished goods, and the short or long-term warehousing of those items. Not a single element within the logistics component of the supply chain can be the weak link or the entire supply chain is adversely affected. Fortunately, that no longer has to happen, thanks to the paradigm shift in supply chain management that has resulted from the benefits of technology.


Software platforms designed and implemented to ensure that every aspect of the supply chain function is taken care of are game-changers. Yet, it is also paramount to deal with a software technology firm that not only can implement such solutions but can create them, to begin with. Generix Group North America is part of Generix Group, a global company specializing in collaborative supply chain solutions in more than 60 countries around the world.


Generix Group North America offers software technologies across the supply chain with its Supply Chain Hub, covering every critical component in a modern chain. We invite you to contact us today to learn more.