Warehousing future
On a macro level, there will be a number of demand and supply changes
By David Luton -- Modern Materials Handling, 10/1/1999
At the close of the century that has seen the development of items as diverse as the Ford Model T and the Internet, making future forecasts is a risky business. Nevertheless, there are a number of discernable trends with material effects on warehousing that reduce some of the risk.The question, "What does the future hold for warehousing?" will be answered here in a two part series.
While broader business changes are significant, the major demand influences in warehousing are related to current ongoing/ forecast changes in supply chain logistics patterns. For distribution centers, these, in turn, affect storage and handling.
Overall growth of warehouse storage capacity in the supply chain will likely slow or even decline as just-in-case inventories continue to be cut. In supply channels such as retail, the changes will be unequal among supply chain participants.
Retailers with increased emphasis on crossdocking will reduce storage capacity proportionately more so than their suppliers. This change, in turn, facilitates increased centralization of supplier inventories through elimination of their regional warehouses. An important enabler for this process inside DCs is the increasing sophistication of warehouse management system software. Coupled with automatic data capture enhancements and wireless communications, these technologies permit effective real-time management of larger DCs.
For handling requirements in the supply chain the overall trend forecast is less clear. For consumer goods in several retail channels, the adoption of ECR (Efficient Consumer Response) methodologies will reduce overall warehouse handling demands by simplifying the supply chain.
The use of increased cross-docking by retailers will result in increased supplier handling-i.e., higher costs for more order picking. Retailers will increasingly request store- ready orders for their full case handling needs direct from suppliers. For slower moving merchandise, for which less than full case replenishment needs are common at the store level, retailers will continue the more traditional storage and handling methods.
The result will be an increasing number of DCs that combine conventional storage and handling systems with cross-docking in a hybrid facility. (In the grocery industry these are sometimes called mixing centers). Suppliers, with several production facilities/supply sources, but with centralized distribution, will also tend to employ these types of DCs. However, they will tend to be more oriented to full case/full pallet handling.
Offsetting these changes is the increased tendency within the market to smaller order sizes both for regional inventory replenishment and for filling customer orders.
A key factor influencing the ultimate significance of this trend will be supplier pricing. By adopting activity based costing systems, suppliers now have the information to include increased handling costs in their product prices. This could eliminate one of the key cost savings now of cross-docking for many retailers, as most suppliers do not reflect these factors (e.g., changes in order picking costs) in their prices today.
Outside the logistics supply chain one of the most significant trends influencing warehouse change is the potential for new business organizations based on Internet commerce. Retail supply chains for many lines of merchandise may be partially replaced. Functionally, warehouses that supply individuals who order over the Internet are similar to existing mail order catalog or small package warehouses. These warehouses, which service individuals, must have the capability to address broken case handling.
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