Trends and Challenges facing Warehouses & Distribution centres

Hey mates, this will be a brief introduction to the various trends & challenges facing warehouses and distribution centres in our industry today.

In the past decade, warehousing and distribution operations have had to cope with a variety of emerging business trends and forces. The days of straight fulfillment operations have given way to a more complex world. Buying habits have dramatically changed for manufacturers, wholesalers, retailers and consumers alike. In the foreseeable future, companies are expected to increase material handling equipment, related software & systems to keep pace with expanding business activities. Service levels have become increasingly more demanding and mergers and acquisitions have caused distribution networks to be revamped at a rapid rate.












The functions and operations of warehouses & DCs have also changed over time. Today, processes to handle value-added services were an important part of the design, as customers are looking for distributors to take over many of the supply chain functions they once handled in-house. For example, quality control tasks, repacking, compliance documentation, labelling and kitting are some of the activities that require extra handling at the warehouse.



Basic functions in a warehouse include storage, movement and information transfer. This information transfer is essential to the efficient operation of many warehouses in today’s ever-changing industry. Just to name a few, information technology such as Radio Frequency Identification (RFID), Automatic Data Collection (ADC) and Electronic Data Interchange (EDI) are value-added advantages in our warehousing process.

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Some large retailers like Wal-Mart have set the stage for RFID to be one of the most dominating technologies in distribution in the coming years. For it has the potential to help supply chains lower operating costs, improve inventory accuracy, increase throughput, enhance product authentication, reduce inventory levels, and increase visibility. Below is a photo of workers at the Walmart Distribution Centre in the United States.

RFID will prove to become a crucial technology in the coming years for the efficiency it provides in warehouse and distribution operations. Current trends indicate the market for RFID technology will grow quickly in the next decade. We will go into details for this technology in our next few posts.

Other trends in warehousing include the outsourcing of their warehouse and distribution functions through third-party logistics providers (3PL). A 3PL provides the ability to leverage an external entity's distribution infrastructure and experience instead of internally developing and supporting logistics resources.

A growing warehouse trend is to engage the services of public warehouses. To give you all a basic idea, public warehouses offer greater flexibility in space and provide certain specialized services. Companies who want to concentrate on certain product offerings and preserve capital for other investments, prefer to tap on the advantages of public warehouses. Increasing trends show that public warehouses are moving away from their niche of being just a warehouse for storage of products, to becoming “information warehouses”.

Another growing public warehouse trend is the engagement of contract warehouses. Contract warehouses are known to provide customized logistics services. In the past, companies wanting to reduce costs concentrate on their manufacturing. Nowadays, companies outsource its logistics operations and concentrate on primary businesses.

An important point to take note of, is of course the implementation of different kinds of value-added services. Companies that used to offer only limited offerings are expanding their service capabilities and value adding roles.

Just to name a few services include:

• Transportation consolidation
• Product Mixing
• Service
• Contingency Protection
• Smoothing
• Postponement

We will elaborate on these value adding roles in the following posts.

The importance of fulfilling customer service levels, efficiency and speed in performing operational areas in both warehouses and distribution centres cannot be underlined and these are trends and challenges that companies are facing and adapting to. Computerising the warehousing operations has been developed in requisitions, stock locations, open and back orders as well as working standards. "Paperless" warehouse picking has also become increasingly popular and the impressive thing is that, such computerisation has the benefits of improved pick productivity, reduced error, improved throughput, better work satisfaction, improved customer service levels and most importantly a competitive edge.

Through such trends, comes the challenges of living up to these wonderful advanced technologies in our world today. Nowadays, warehouses and customers alike expect zero tolerance for errors. The expectations of having the right product at the right time and at the right place are becoming more evident and this is definitely essential. The challenge comes in the integration of our supply chain and how well this integration is managed by everyone in the supply chain. For example, postponement strategies, cross docking, efficiency in order picking and good productive storage layout and systems planned.

To elaborate, order picking rates can be enhanced with the use of mechanised systems such as the Vertical or Horizontal Carousel Systems. Just for a brief idea, this carousel system was witnessed at the ALB field trip we went to two months ago. It provides good order picking rate, uses a well developed part-to-picker concept.

The adoption of JIT practices is one of the key measures that allows the right product to be at the right place, at the right time and finally, at the right cost. The postponement strategy and cross docking will be covered on in our next entry. Stay tuned!

Next on, we move on to trends and challenges with specific details, their usefulness and constraints.