I recently heard a presentation at a joint Chicagoland Chamber of Commerce- Chicago Roundtable CSCMP by Andrea Farris, Vice President of Inventory and In Stock at Walgreens and Dan Smolensky, Principle at the Modal Group. The Modal Group is a commercial real estate companuy in Chicago.
Both speakers said the e-commerce has changed the supply chain, logistics and warehouse markets. Consumer’s value prompt delivery. In the past it was about getting of truckloads of products to stores. That is still true. But now individual item (SKU) is also needed to be picked at a warehouse to serve e-commence customers. To be effective in this, more warehouses or distribution centers are needed to serve the market effectively to meet the needs of the e-commerce business.
The implications to this is when you are designing your logistics processes. Lets use the issue warehouse locations planning to illustrate this.
If you have fixed assets like stores you are shipping to you can design a distribution process for them that might functional for the longer term. Multi-year leases for warehousing are less costly per year but limits your flexibility, but may be the most cost effective in that situation. Where a firm needs flexibility such as e-commerce, limited term leases for warehouses and distribution would be appropriate. Not only will customer needs change frequently but technology would be quickly changing too.
Designing your logistics system to allow flexibility where it is needed is the key. It is a way to handle the volatility of the marketplace.