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E-Commerce impact measured on warehousing

While much of this change differs from one company to the next, speed to fulfill and options in the final delivery location are similar for most companies.
By Patrick Burnson, Executive Editor
October 25, 2012

The warehousing and fulfillment markets are undergoing significant changes as companies incorporate e-commerce into their overall strategy.

Decisions such as physical locations of warehousing and whether to fulfill e-commerce orders from separate facilities, in-store, from existing warehouses or a combination of all three are among the strategic decisions brick and mortar companies are facing as they compete against the likes of Amazon, eBay and Newegg.

While much of this change differs from one company to the next, speed to fulfill and options in the final delivery location are similar for most companies. Not only that, but the need for visibility over the entire process is in demand as companies’ supply chains are further complicated.

The issue is explored in greater detail in a paper written by Cathy Roberson, of the London-based think tank, Transport Intelligence. In an interview with Supply Chain Management Review —a sister publications—she said the higher volume of e-commerce orders is affecting this need for speed to fulfill.

“For some companies, the use of high-bay racking, product placement and an effective alignment of rack storage are necessary,” she said.  “Also, there is an increasing use of automation within such facilities. The use of robotics is also on the increase, as noted by the acquisition of Kiva Systems by Amazon. The acquisition was questioned by some, but physical order fulfillment reportedly costs the company nearly 9% of its global revenues, thus, reducing this cost will likely improve Amazon’s profits.”

Managing the delivery process is also an increasingly difficult task as delivery locations from warehousing/fulfillment centers are no longer confined to physical stores. Now, these facilities are shipping either directly to the customer, a neutral site (such as a lockbox location, FedEx/UPS store or other retailer) or to the physical store for pickup.

As such, IT companies such as High Jump, Red Prairie, Oracle and others have expanded their traditional warehouse management systems (WMS), transportation management systems (TMS) and other IT solutions to meet this need for flexibility, for not only changing transportation needs, but also for order/inventory management and visibility.

As IT providers offer more innovative solutions for brick and mortar companies to compete with dotcoms, inventive startups are springing up. For example, Shipwire offers global order fulfillment capabilities and warehouse network via its cloud logistics network. According to the company, customers are able to outsource their entire global fulfillment, warehousing and shipping needs to Shipwire. Although not a startup, but just as inventive, Amazon also offers fulfillment services for customers. The company’s ‘Fulfillment by Amazon’ service ships goods from its own warehouses on behalf of its marketplace sellers.

E-commerce has spurred, not only new concepts and ideas within the supply chain, but also new companies are popping up to address logistical challenges resulting from the rise of e-commerce.

About the Author

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Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


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