The future of retail distribution

The retail supply chain is a complex animal that has been affected by everything from the uptick in e-commerce to the move to omni-channel distribution to the so-called “Amazon effect,” to name a few. Highly dynamic and customer-focused, these end-to-end supply chains require a high degree of synchronization and collaboration—both of which are being made easier by technology.

“As more people made their purchases online versus going to a store, the need for highly flexible supply chains has grown exponentially,” says Dinesh Dongre, vice president of strategy at Softeon, Inc. No longer restricted to holding inventory meant for their end users, for example, retailers are procuring goods from multiple global sources and often turning to their suppliers to drop ship orders to their customers. This, in turn, helps companies better accommodate their customers’ changing wants and needs. “Consumers are fickle. They want their orders to arrive within the next hour, if possible,” says Dongre. “Because of this, the traditional approach no longer works effectively for retailers that either want to sustain or improve their market share.”

In lieu of that “traditional approach,” a growing number of retailers are turning to technologies like distributed order management (DOM), warehouse management software, robots and even blockchain to run their supply chains more effectively and efficiently. Here are five technologies that will shape the retail distribution landscape in 2018 and beyond. 

1.) Distributed Order Management (DOM)

Facing challenges like the proliferation of customer choice,s to demands for same-day and next-day delivery, to the Amazon effect, more retailers are using DOM to manage their omni- and multi-channel operations. As a system that brokers orders across various systems and processes that multiple parties use to fulfill demand, DOM usage “continues to grow,” according to Dwight Klappich, research VP at Gartner, Inc., with such systems now being tied into store point-of-sale (POS) systems. “Manhattan has certainly been talking about this tie-in,” says Klappich, “and other vendors are trying to take POS and move it up into the DOM layer.”

Defining DOM as the “ability to orchestrate an order lifecycle,” Dongre says these solutions have historically focused on fulfilling orders across multiple distribution centers (DCs). Fast-forward to 2018 and retailers are using a combination of store, vendor-based and DC fulfillment—all of which come together to create one big, multi-node facility.

To support this evolution, Dongre says DOM must evolve into a more comprehensive solution that incorporates high levels of visibility across the entire network, including the activities of the various vendors that drop-ship orders to end users. The solutions will also need to handle inventory rebalancing, or the movement of inventory to the right locations and according to demand; dynamic orchestration (which answers the question: Where is the best place for us to fulfill from?); collaborate across suppliers; and optimize inbound freight. “The next generation of DOM will incorporate these various elements and positively affect total delivered cost for retailers,” says Dongre. 

2.) Warehouse Management and Execution Systems

A workhorse of the typical DC or warehouse, WMS controls the movement and storage of materials within those facilities. Warehouse execution systems (WES) manage inventory records and materials handling equipment within the facility. Together, these two software platforms continue to play a significant role in the typical retail supply chain.

“WMS is important to the retail sector, which is working with myriad different ways with going to market via e-fulfillment, omni-channel, multi-channel, or another method,” says Dongre. “Each requires different types of market reach and different behavioral expectations.” And while WMS hasn’t historically been able to manage comingled inventory, Dongre says next-generation solutions can perform functions like the dynamic repositioning of inventory (e.g., item availability for each channel and how much inventory is available at each point of the fulfillment network).

Luke Nuber, Fortna’s emerging technology specialist, points to WES as the “subsystem” that ties distribution technology together and sees these solutions playing an important role in the retail supply chain during the year ahead. “There are a lot of efficiencies and productivities that can be gained by tying and fully integrating an entire facility together,” Nuber says. “WES really enables that by putting people, processes, technology and assets into a single control system that has end-to-end visibility throughout an entire facility. This allows retailers to prioritize tasks and optimize those tasks on the fly.”

For retailers, WES also provides insurance for technology purchased from vendors that either get acquired by another company or go out of business. “A good WES system provides a lot of flexibility to swap out different systems—or the components—should they become no longer available,” Nuber points out. “This provides a definite plus for the retailer that’s looking for long-term solutions to their key distribution challenges.” 

3.) Autonomous Robots

The image of the autonomous warehouse is coming into clearer focus as more hardware and software manufacturers develop innovations that remove much of the “human” component from the distribution process. According to Peerless Research Group’s most recent automation survey, 45% of companies surveyed want to invest in robotics (palletizing, picking or other solutions) and 43% are interested in conveyor and sortation systems, automated storage and automatic guided vehicles. Other warehouse and DC automation that companies are interested in includes shuttle systems, goods-to-person picking solutions and weighing/cubing/dimensioning equipment.

From his vantage point at Gartner, Klappich says he’s seeing a “marked increase” in the number of retailers that want to invest in various forms of automation. On many of those “must have” lists right now are autonomous mobile robots. For example, Deutsche Post AG’s DHL is testing “swarming” robots at one of its facilities, and Quiet Logistics Inc., which fulfills online orders for retailers like Bonobos and Inditex SA’s Zara, is using the same type of mobile robots in one of its warehouses, according to the Wall Street Journal.

Expect to see more retailers jumping on the autonomous robot bandwagon in 2018, says Klappich, as vendors like Fetch, Otto, IAM Robotics and Locus find ways to build affordable robots that meet the needs of small to mid-sized retailers. “These firms may not be able to afford a $50 million or $100 million automated warehouse,” Klappich says, “but they can buy robots to supplement their labor forces. As that technology continues to evolve, I think we’ll see even more interest in robots for this use case and certainly more large-scale deployments of this technology.”

4.) Augmented Reality

With applications that range from simple text notifications to instructions on how to perform a life-threatening surgical procedure—and everything in between—augmented reality (AR) is coming into focus in the retail supply chain. Using an existing, natural environment, AR basically overlays virtual information on top of that environment to help users experience a new and improved world where virtual information is used as a tool to provide assistance in everyday activities.

“In distribution, AR basically translated into the specialized headsets or glasses that place a glass in front of the wearer’s eyes to project data on top of what he or she is looking at ,” says Nuber, who notes that in most cases AR can be divided into two categories: smart glass, which projects some type of data into the corner of the headset or glasses, and the type of AR that projects a full-view display across the user’s full field of vision.

“There are a couple of interesting applications for this that we see on the near-term horizon, including those that will facilitate DC picking, which tends to consume the most labor in an operation,” says Nuber. Using AR, for example, supervisors will be able to project visual cues and instructions to workers as they are performing their picking tasks, such as an arrow pointing to the next location or the next pick, or a specific quantity to pick at a certain location.

“Some of these technologies can even show a verification image so that users can do comparisons to the item they have in their cases versus what those items are supposed to be,” says Nuber, noting that the same concept can extend into a DC’s receiving and put-away operations. “This is a user-friendly technology that allows retailers to get seasonal workers up to speed quickly, troubleshoot in far-flung corners of the facility and even perform remote maintenance.”

5.) The Future: Blockchain

The hoopla over blockchain isn’t limited to investors that want to get their piece of the Bitcoin pie. Blockchain, which is the underpinning technology that maintains the Bitcoin transaction ledger, could play a key role in the retail supply chain in the near future. Eric Peters, CEO at SensorThink in Los Gatos, California, sees this trend developing over the next three years to four years. “Particularly on the retail grocery side, blockchain is going to accelerate from something nobody knew about nine months ago to being in every conversation you have about supply chain by late-2018,” says Peters.

For example, a domestic company that buys blueberries from a farmer in Chile, and then sells them to a U.S. wholesaler or distributor, will likely ship the fruit from Santiago to Atlanta. From there, the blueberries will be sent to a DC for eventual sale to a grocer like Walmart. Between the time that the fruit is picked and when a consumer takes it home and puts it in her refrigerator, the blueberries will have passed through multiple countries, changed ownership seven or eight times and have been handled by a variety of supply chains.

The retailer that wants to understand what the cold chain integrity of that product was from start to finish (including handling times, days in transit, etc.) can utilize blockchain as a single ledger of activity for every single thing that happened to those blueberries between the original farmer and the point of sale at Walmart.

“As an unbreakable, shared ledger that everyone agrees to, blockchain provides all of the information in one, secure place that everyone can access and utilize,” says Peters, who expects more retailers to incorporate blockchain into their supply chain strategies in the future. “Walmart is already testing it with food safety; it’s definitely one of the most exciting transformational things that’s going to happen in the retail supply chain in the near future.”