Major players in e-commerce sales are using next-day or same-day delivery to motivate their customers to click. This is not sustainable with the current distribution methods. New norms will be transforming the logistics of delivery right before our eyes.
From the peak of the mid-90s only about 60 percent of the U.S. mall population still exists. The continued shuttering of brick-and-mortar stores will continue as more and more people turn to the internet to place orders. This is the largest upheaval of a retail market since Walmart moved out of the South and into a neighborhood close to you.
The current method of building large distribution centers to house pallet loads of inventory to support a region of the market is not suitable nowadays with the velocity of small-volume orders. Even subcontracting 3PLs in lesser markets to fulfill orders won’t help retailers keep up with the amount of business. In today’s online sales market you have to offer next-day and even same-day delivery in order to compete. This means that the DC must be located closer to the customer, with few people touching the order before it reaches the end customer.
Presently, distribution hands the order off to a carrier who moves it through their own sorting center to get it to the local delivery center. Some even hand it off at that point to a third party for delivery. This is too many moves to make next-day and same-day deliveries economical and standard.
For fulfillment to be standard next-day, businesses must have inventory that exists within a 4-hour drive of the markets. Instead of assigning the delivery to a carrier who moves it through a sortation center, an on-the-fly system will need to be created that bypasses this function. The destination area will be assigned at the DC and moved from there in mass to a cross-dock location. Groups of orders can then be moved to a delivery vehicle.
This will mean more and smaller distribution centers that have very simple and direct processes and a little automation, if any. These mini-distribution centers can support same-day deliveries within a short radius of them.
In the next five years, more, smaller warehouses will be built closer to the end customers. Because of the high cost of real estate in urban environments, these warehouses will be very compact and efficient. More and more retail stores will fulfill orders out of their brick-and-mortar presence. Significant emerging technologies will shape the warehouse in the future; these include artificial intelligence, machine learning, autonomous vehicles and drones, robotics, and 3D printing. Urban warehouses will be equipped to make products as well as house them, along with packaging and shipment. The urban DC will support same-day deliveries using autonomous vehicles and drones. Systems will be used within these DCs for even faster picking for faster delivery.
Chuck Doty is Product Manager with UNEX Manufacturing.
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