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."