UT Study Ties Distribution Management to Success in Online Business

E-commerce in the United States grew by an average of 15 percent in each quarter of 2013 and 2014, outpacing the total national retail spending growth by almost double, according to the US Census Bureau.

Internet sales are becoming pivotal to retail success, but to truly compete, online companies must rethink distribution networks built to serve the brick-and-mortar store model.

In response to this growing demand on supply chains, faculty at UT’s Haslam College of Business have identified best practices for modern distribution centers across eleven key functions.

UT supply chain management faculty surveyed more than 200 companies and worked with one of the nation’s leading third-party logistics companies in conducting the research that is collected in its new report, The ABCs of DCs.

The research concludes that distribution centers must be dynamic to meet customer expectations as Internet orders increase.

Cost can no longer be the sole motivator for warehouse management.

Distribution centers must routinely seek to optimize their networks and adopt modern tools like advanced shipping notices and warehouse information systems to maximize accuracy and efficiency.

Those who do adapt early are reaping the benefits. In 2013, Amazon posted larger sales than the next nine online retailers combined, and a major differentiator was its product delivery efficiency.

“Logistics professionals who operate distribution centers are expected to improve customer responsiveness, decrease cost, and manage higher volumes every year,” said Paul Dittmann, executive director of UT’s Global Supply Chain Institute. “We found that the most efficient distribution centers found innovative ways to meet all three of these demands rather than suboptimizing one of the three.”

The ABCs of DCs is the fifth in the UT’s Game-Changing Trends in Supply Chain Series. Kenco, a leading provider of integrated logistics solutions and technology, sponsored the report.

“This study outlines the most significant challenges we’ve seen our clients facing over the past few years, and it conveys creative solutions to meet the growing demand on warehousing providers for information technology and value-added services,” said David Caines, chief operating officer at Kenco. “It’s worth noting that the trends identified in the study cut across virtually every warehouse business model.”