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Increasing Distribution Channels without Increasing Warehouse Space
By Brad Radcliffe
One of the many results that the Great Recession has provided most distributors around the country is the requirement to ‘do more with less.’ Since businesses are asking more of their employees, then they are also demanding much more from their Supply Chain. So while the business environment demands change, many companies are being very careful with how they commit their valuable cash reserves to improve their Supply Chain and stay ahead of the ever changing business environment.
Combining the challenging economic climate with the changing face of the American consumer, and then adding the growing E-commerce, or direct-to-consumer sales channel to the existing wholesale or retail store fulfillment channels, distributors are not short on challenges to tackle. Many companies are asking their distribution networks to absorb additional markets and continue exceeding customer satisfaction without adding real estate. The concept of Multi-Channel Distribution under one roof is not new, but the demands to meet the customer service levels while experiencing growth is straining even the best of networks.
What is Multi-Channel Distribution
While Multiple Channel Distribution often refers to a company’s sales and marketing strategy, we will explore the aspects of Multi-Channel Distribution within the four walls of the warehouse – one critical link in your Supply Chain. To continue growing in today’s challenging economic climate, many companies are looking at new ways to reach their customers or develop new market segments. They look to distribute their products using multiple channels involving: traditional store fronts, mail, phone and electronic mediums (often labeled E-commerce). One of the challenges of developing a multiple channel sales and marketing network is aligning both the external and internal elements of the Supply Chain with the customer service expectations. Traditionally, the warehouse or distribution center operations have been the most overlooked and least understood link in the Supply Chain.
The internet provides the average consumer with more product information than ever before, making the marketplace more competitive. Price is no longer the major consumer influencer; product availability, order accuracy, and delivery time have become equal in the eyes of the consumer. Today, how efficient, accurate, and fast your warehouse and distribution network is will often be the deciding factor in how competitive your product offering becomes. Juan Estrella, Director of Logistics for Pilot Corporation of America, in Jacksonville, Florida. agrees, “Selling on the internet at full retail cost does not directly compete with our corporate partners on price, but it does provide the end consumer with another channel to complete a purchase. Pilot must be able to provide customers with better service than our competitors in order to continue growing in the marketplace. At the same time, adding a new warehouse or distribution center to support the new markets is just not realistic. So we need to make it happen within the current physical constraints.”
Within the Distribution Network, What are the Fulfillment Methods?
Within the four walls of a warehouse there are four main categories of order fulfillment, and they are typically dictated by the sales channel and by the required level of customer service. The four main fulfillment methodologies are:
- Cross dock: Pallet In - Pallet Out
- Pool Point: Pallet In, product sorted- Pallet Out
- Full Case Out: Pallet In, stored / picked - Pallet and LTL Out
- Split Case: Pallet In, stored / each picks from case – Pallet, LTL, or Parcel Out
Many of the largest Supply Chains in the country were designed to support retail and distributor sales channels. They received full pallets into the warehouse, stored them in bulk or in rack and then shipped full pallets out to the store or wholesale distributor so that the product could be stocked on a shelf for the consumer to see and buy. This type of storage and order fulfillment is characterized by relatively low capital requirements and medium labor expense; the age of perfect, instant information is changing that. In order to expand their market base, many companies are using electronic mediums to reach consumers: E-commerce is the quickest growing consumer channel and it requires a fast, flexible, and accurate order fulfillment methodology. E-commerce orders are characterized by the high volume of orders, the low number of items per outbound case, the fast order turn time, and the growing requirement for real time fulfillment visibility. Typically, this requires warehouse design to incorporate multi-level pick modules, automated sortation, and ever increasingly sophisticated Warehouse Control System (WCS) to Warehouse Management System (WMS) interfacing.
How Do I Create a Lean Warehouse with the Flexibility to Exceed Customer Expectations?
The challenge that many companies are faced with is how to align their new marketing strategy, which has the an E-commerce model as its fastest growing segment, with its aging warehouse and distribution network in the face of today’s tough economic climate. Let’s do more with less.
The goal of building a warehouse that can effectively service multiple marketing and sales channels is four fold:
- Create synergy for labor and capital resources
- Create distribution network flexibility
- Reduce cost of distribution
- Exceed customer service levels
A few companies are building new multi-purpose facilities specifically designed to incorporate automation with more traditional fulfillment methods to accommodate all of the varying customer service demands. Many companies, however, are looking to re-engineer existing warehouse space to fulfill both the traditional retail store channel as well as a direct to consumer channel. Integrating the differing requirements into a seamless operation without impacting current business requirements calls for proper planning and the help of industry experts focused on lean warehouse design and any necessary material handling automation. A material handling integrator will help perfect the facility layout, optimize material flow, ensure process improvement, integrate vital automation, and interface with multiple levels of material handling equipment.
If we can agree that the internet is not a passing fad, then we can agree that the market will continue to shift to more direct to consumer channels. Companies will continue to be challenged to provide a larger product offering, quicker delivery times, and transparency within the order fulfillment model. Ultimately, the growth of distribution facilities specifically designed to serve the demands of multiple marketing channels will continue to gain momentum.
Brad Radcliffe is a System Sales Engineer at TriFactor, LLC, a material handling systems integrator based in Lakeland, Fla. He can be contacted at 904-493-2175 or email@example.com. For more information visit www.trifactor.com.