Executive Briefings

How E-Commerce Is Changing Facility Planning and Design

Analyst Insight: The impact of omnichannel fulfillment requirements and growth of e-commerce have altered the way companies plan and design distribution facilities. The plan and design processes themselves haven't changed as much as the number of variables that must be considered. Today's distribution facilities require greater flexibility to adapt rapidly to changing customer requirements. - Phil Quartel, senior director of operations design, Fortna Inc.

How E-Commerce Is Changing Facility Planning and Design

Over the next several years, the number and types of variables that must be considered when designing distribution operations will evolve. Here are just a few examples:

Labor
E-commerce and omnichannel fulfillment typically requires more labor-intensive unit picking, especially during peaks. More labor is required for unit picking and packing than for bulk (case or pallet) movement. When selecting a site, the availability of workers and skills of the labor pool must be considered. Can you quickly ramp up a temporary labor force to support peak seasons? Is the labor market deep enough to keep the facility adequately staffed over time?

Automation and Speed
Omnichannel requirements drive the need for faster fulfillment, which is often supported by automation. But the facility requirements for automation can be very different from a traditional warehouse. For example, you’ll need to support higher electrical loads and you may need different kinds of dock doors and shipping equipment for direct-load shipments instead of product being staged and loaded in pallets. As you move toward faster fulfillment, with or without automation, the facility yard requirements may change. Inbound and outbound scheduling of trucks must be designed for efficiency. The need to turn trucks faster may mean you need more dock doors and better yard management.

Expansion
One of the biggest mistakes companies make is not setting up their buildings so that they can be easily expanded as the business changes. As omnichannel requirements and order profiles change over time, companies must be ready to easily expand and redesign their operations. The areas and processes that support unit fulfillment should be designed for expansion with space to seamlessly add technological and human resources without the need to tear out existing equipment. Elements such as floor flatness specifications, clear heights, and building firewalls need to be determined with growth and expansion in mind.

Flexibility
Can the facility handle a shift toward smaller, more frequent deliveries to stores? What if your customers suddenly ask you to do more direct shipments? Can you accommodate store-ready deliveries? Can your processes be adapted for same-day or same-hour fulfillment cycles for competitive advantage? To plan and design a distribution center with the flexibility to adapt to change, you will need to look at refined, detailed growth forecasts that consider all of the different product flows and quantities needed for customer and store deliveries. Consider all the ways the business might evolve as customer and store interactions change over time. It’s a delicate balance to strike between investment and flexibility.

Business Case
Justifying capital investments is no longer based solely on cost. The business case more often includes things like supporting growth, reducing inventory, and minimizing risk. Automation investments are sometimes justified by lack of sufficient labor, especially during peak season. The possibility that distribution won’t be able to meet the needs of the business represents enough risk to be included in the business case as well.

The Outlook

Beyond 2020, companies may also need to look at requirements imposed by environmental regulation and customer expectations for greener supply chains. The evolution of technology that supports emerging last mile strategies, like self-driving vehicles and drone and droid deliveries, will play a larger role in the future of facility planning as well.

Over the next several years, the number and types of variables that must be considered when designing distribution operations will evolve. Here are just a few examples:

Labor
E-commerce and omnichannel fulfillment typically requires more labor-intensive unit picking, especially during peaks. More labor is required for unit picking and packing than for bulk (case or pallet) movement. When selecting a site, the availability of workers and skills of the labor pool must be considered. Can you quickly ramp up a temporary labor force to support peak seasons? Is the labor market deep enough to keep the facility adequately staffed over time?

Automation and Speed
Omnichannel requirements drive the need for faster fulfillment, which is often supported by automation. But the facility requirements for automation can be very different from a traditional warehouse. For example, you’ll need to support higher electrical loads and you may need different kinds of dock doors and shipping equipment for direct-load shipments instead of product being staged and loaded in pallets. As you move toward faster fulfillment, with or without automation, the facility yard requirements may change. Inbound and outbound scheduling of trucks must be designed for efficiency. The need to turn trucks faster may mean you need more dock doors and better yard management.

Expansion
One of the biggest mistakes companies make is not setting up their buildings so that they can be easily expanded as the business changes. As omnichannel requirements and order profiles change over time, companies must be ready to easily expand and redesign their operations. The areas and processes that support unit fulfillment should be designed for expansion with space to seamlessly add technological and human resources without the need to tear out existing equipment. Elements such as floor flatness specifications, clear heights, and building firewalls need to be determined with growth and expansion in mind.

Flexibility
Can the facility handle a shift toward smaller, more frequent deliveries to stores? What if your customers suddenly ask you to do more direct shipments? Can you accommodate store-ready deliveries? Can your processes be adapted for same-day or same-hour fulfillment cycles for competitive advantage? To plan and design a distribution center with the flexibility to adapt to change, you will need to look at refined, detailed growth forecasts that consider all of the different product flows and quantities needed for customer and store deliveries. Consider all the ways the business might evolve as customer and store interactions change over time. It’s a delicate balance to strike between investment and flexibility.

Business Case
Justifying capital investments is no longer based solely on cost. The business case more often includes things like supporting growth, reducing inventory, and minimizing risk. Automation investments are sometimes justified by lack of sufficient labor, especially during peak season. The possibility that distribution won’t be able to meet the needs of the business represents enough risk to be included in the business case as well.

The Outlook

Beyond 2020, companies may also need to look at requirements imposed by environmental regulation and customer expectations for greener supply chains. The evolution of technology that supports emerging last mile strategies, like self-driving vehicles and drone and droid deliveries, will play a larger role in the future of facility planning as well.

How E-Commerce Is Changing Facility Planning and Design