In February, Amazon’s market value hit a record $191 billion a day. Amazon has paved its way to success by mastering one area in particular: e-commerce.
E-commerce has taken the retail industry by storm and is expected to continue growing in the coming years. Along with this, we’re seeing changes in consumer spending habits, as well as changes in the way suppliers and manufacturers deal with this growth. In particular, the rise of e-commerce is changing the way warehouses are designed and operated.
1. Designing Warehouses for New Technologies
Traditional forms of warehouse management are simply not able to keep up with the ever-shifting retail landscape. Today’s consumers are able to review, compare, and purchase items faster than ever. And the advent of Amazon Prime has led many consumers to expect low-priced — yet incredibly fast — processing, shipping, and handling.
To accomplish this, warehouses today look much different than they have in the past. For instance, the size of warehouses has increased significantly over the years as e-commerce has required businesses to not only stock a larger selection of items but also have additional space available for the technology and equipment facilitating the various high-speed processes taking place.
Because efficiency is the name of the game, according to Accenture, 66% of consumers have chosen a retailer over another based on delivery options. As warehouse management technologies advance, many manufacturers are implementing automation as a service, offered by companies like Formic, and on-demand warehousing. To improve supply chain visibility, the Internet of Things (IoT) is fostering better communication between supply chain partners.
Amazon’s warehouses are, on average, 800,000 square feet. These centers have to be large to accommodate merchandise and employees, as well as the robotics equipment carrying out certain processes — for example, self-driving cars that transport merchandise from one end of the warehouse to another. Warehouses today also require much taller interiors to allow for vertical integration of storage, conveyor systems, and so on.
2. Automation
The ability to "hire” a workforce that can run 24/7, never gets tired, and does the job almost 100% correctly is invaluable. That’s where automation comes in.
According to a survey from ARC Advisory Group, 60% of respondents are "very likely” to invest in warehouse automation in the next few years. Advancements in machine learning and related technology have made it possible to automate conveyors, delivery vehicles, and pallets.
Time-consuming tasks like packing, printing labels, and monitoring inventory can now be automated at a high level without the potential for human error.
3. Strategic Locations
Of course, well-planned last-mile delivery and logistics are crucial for any e-commerce business looking to ensure the rapid delivery of its products. To facilitate fast delivery in such a competitive, saturated market, a strategic warehouse location is crucial. Rather than looking for a perfectly priced piece of real estate away from the most expensive areas of the country, e-commerce businesses are seeking “infill locations” to speed up their delivery times. This is done by establishing warehouses either in or immediately adjacent to densely populated urban areas.
Micro-fulfillment centers have also made it possible to boost delivery times. Rather than a traditional, large fulfillment center, mini-warehouses are strategically placed around urban areas.
4. 3PL Partners
The rise of e-commerce is also making managing logistics processes more complex. To simplify the process, many warehouses outsource logistics operations to 3PL experts. This often lowers costs and streamlines process visibility. As well, supply chain as a service, or SCaaS, is becoming more popular.
5. Picking, Not Pallets
Warehousers used to be able to ship large quantities of items to other businesses for sale. Nowadays, however, the model has shifted drastically as the new point-of-sale is in consumers’ palms — in the form of mobile phones, tablets, and other devices — rather than brick-and-mortar locations.
For warehouse management, this means trends in purchasing are more difficult to predict, and warehousers must now stock more items to choose from. Furthermore, those employees and robots working in the warehouse must be able to efficiently pick and package individual items rather than load entire pallets of a single product. This requires a more agile workforce and readily accessible inventory.
The Future of Warehouses
E-commerce has effectively taken over the retail world and is on track for continued growth in the future. To meet today’s shifting consumer needs, warehousing must continue to evolve as well. That means larger, more open warehouses with increased dependence on automation. At the same time, warehouses are moving closer to consumers and metropolitan areas to keep up with customer expectations for fast, affordable delivery directly to their doorsteps.