Omnichannel distribution creates multiple challenges

The growing importance of omnichannel distribution—and the problem of how to meet the challenges it creates—has attracted significant attention from retailers and their suppliers.

And no wonder. E-commerce is one of the fastest-growing parts of the economy. Forrester Research projects online retail sales will reach $262 billion this year, up 13 percent over last year. And the company expects e-commerce to grow at a 9-percent compound annual rate through at least 2017.

It's business that retailers are actively courting. A separate Forrester study, done in conjunction with the National Retail Federation's Shop.org, found that retailers are shifting marketing dollars to pursue mobile traffic, a response to the rapid adoption of smartphones and tablets by consumers as a way to shop.

What does all that mean back at the distribution center? A great deal. "It means we need to redefine the warehouse," says Mike Khodl, vice president of solutions development for Dematic. "It can be the retail store, your supplier, a dealer's warehouse, a dedicated retail store distribution center, a dedicated e-fulfillment operation, as well as a multichannel distribution center."

Khodl says businesses looking at how to design DCs to support omnichannel distribution have two particular challenges: forecasting future demand to ensure the facility is the right size, and choosing a material handling solution that can handle wide swings in demand, particularly in the e-commerce portion of the business. "It's also about balancing and accommodating changing SKU velocity, SKU growth, daily order volume, order quantity, warehouse space, [and] seasonal and promotional peaks," he says. "Most designs incorporate a storage buffer strategy that shares inventory across multiple distribution channels. Furthermore, these solutions have peak capacity flexibility built in to accommodate seasonal, promotional, and weekend pooled order surges."

Dematic, a major provider of material handling and logistics systems for customers across a number of verticals, sees omnichannel distribution as a significant development for its retail customers. It has made omnichannel distribution a major focus of its annual Material Handling and Logistics Conference, which takes place in Park City, Utah, from Sept. 8-11. The conference includes several presentations specifically aimed at issues in omnichannel distribution, including "360 Degree View of Omni Channel Distribution" and "Committing to a DC Design When the Future Is Fuzzy."