Warehousing 2018: from cost centre to growth centre


Warehousing operations and IT professionals need to respond positively to the significant changes and challenges that will be influencing the industry over the next five years – or face disaster. 

At its most basic, warehousing is a simple concept. It’s about storing materials or goods and filling orders from one end of the supply chain to the other. But in the real world of today, tomorrow and especially five years from now, growing complexity means warehousing is evolving to become anything but simple. Today’s warehousing professionals are feeling significant pressures from multiple internal and external sources.

The global recession affected the industry in many ways. In an effort to free up capital, there were major cuts in held inventory, adding capacity was deprioritised and expansion of existing or construction of new warehouses and distribution centres was scaled back or halted altogether. Now, as the economy has begun to grow, warehouse operations are growing again. But as they grow, they are also being transformed by a number of issues that go well beyond simple increases in volume and throughput.

New warehousing realities

Today’s warehouse professionals face a series of significant changes in the ways warehouses, distribution centres and the entire supply chain operate. More facilities and larger spaces demand high-speed mobile communications virtually everywhere on or off the floor. A virtual acrossthe- board customer demand for personalisation is driving an increase in the number of SKUs, leading to increased inventory visibility, accuracy and efficiency needs. New regulations call for more accurate product tracking and tracing. Fuel cost volatility impacts logistics and much more. The growth of omnichannel transactions creates the need for increased inventory control, flexibility and faster, more accurate fulfillment. All these factors contribute to the need to convert warehouses and distribution centres into assets for competitive differentiation.

Top alignment opportunities

Today, the reality in many, if not most, warehouse operations is the existence of separate islands of information. The vision for the future is the linkage, integration and consolidation of the Warehouse Management System (WMS) with Enterprise Resource Planning (ERP), the Yard Management System (YMS) and Transportation Management System (TMS). These linkages help remove inefficient information silos, promoting collaboration and increasing the recognition that changes in one process can and will affect others downstream and upstream. For example, changes in packing and staging can affect load plans, trailer drops, route selection, rates and more. Anticipation of – and response to – these effects is crucial to not only improve warehouse efficiency and productivity, but also to create a more synchronised and agile supply chain.

Ensuring IT and Operations alignment

However, before a company can start planning for the future, the organisation must first identify its current status, honestly answering the question, “where are we now?” Then management must clarify its vision of where the company wants to be in two, three, four and five years, and make the critical decisions of where to invest, and what types of investments should be considered.

To maximise warehouse and DC productivity, operations and IT leaders must be on the same page in terms of technology systems and business processes. Although partial alignment usually exists between IT and operations today, in many instances there is still a basic technology divide. It starts with differences in overall assessment of current capabilities and risk perspectives for the future. Survey results demonstrate that today IT often perceives higher levels of WMS integration with other systems than does operations; in addition, IT projects higher incremental integration rates by 2018 than their operations counterparts. Today’s IT departments also tend to be more aggressive in setting new standards and deploying new tools to reduce technical risk – and to be more accepting of business risk – than operations, which is usually more risk-averse and focused on running the day-to-day operations of the warehouse with minimal technical disruption. Bringing the two departments together to share a common vision is one of the most crucial goals moving ahead in the next five years.

As the industry prepares for the future, it’s vital for IT and operations to be aligned in terms of WMS plans, since these systems are the backbone of the entire warehouse/supply chain operation, and the seed from which all automation plans grow. One thing both departments usually agree on is the need for substantial increases in process automation and mechanisation; another is the critical importance of the WMS.

The batch access battleground

One of the most glaring differences is a divide in the projected use of batch mode access versus real-time access to the WMS and other relevant business systems. This is especially problematic in the cycle counting process. Historically, cycle counting has been much less automated than picking, but that’s about to change. Although both IT and operations agree that cycle counting needs to become more automated, operations predicts a movement away from the computer-on-wheels or handheld batch access model, to providing workers with mobile handheld technology with immediate, direct access to the WMS.

Streamlining to flawless fulfillment

As warehouse professionals are facing increasing pressures to deliver more top- and bottom-line value, they are taking a broader view and re-evaluating their capabilities across all their major warehousing processes. The goal is flawless fulfillment, and it calls for a pragmatic, workflow-driven analysis of how management wants to run the warehouse. The technology keys are increased flexibility, automation, integration and real-time access to the WMS with purpose-built, yet adaptable, solutions that can demonstrate lasting value in the face of changing demands. Order picking and filling remains the top investment priority due to its relatively high costs and greater opportunities for errors. But in today’s warehouse environment, the search for increased efficiency, accuracy and productivity also requires a broader, more holistic workflow and process evaluation.

Inbound handling

Receiving and put-away processes can have a domino effect on virtually every other warehouse process. The harsh reality is, receiving and put-away inefficiencies are a significant cause of potential problems upstream and downstream. In response, today’s warehousing professionals are currently trying to solve a number of significant inbound handling issues.

Pick and fill

The picking and replenishment processes – which can account for up to 70% of operating costs in a warehouse – remain the top priority for warehouse professionals to address with advanced technology solutions. As the industry continues to reduce pick and fill costs and increase worker efficiency and productivity, it is turning to innovative processes, such as task interleaving, and innovative mobile technology, increasingly using wearable, vehiclemounted and handheld devices capable of multimodal operation.

An evolution from cost centre to growth area

What steps should an organisation be considering in response to the major changes that will impact warehousing operations today and in the next five years? The time to start is now, and the best way to begin is by carefully analysing the issues and evaluating the steps to be taken to help warehouses increase productivity while decreasing costs.

As customer satisfaction and supply chain efficiency become more important drivers of warehousing operations, the industry is re-examining its perceptions of the business. Fewer organisations continue to view warehouses and DCs simply as commoditised links between endpoints of the supply chain. Senior business executives across all market segments can no longer afford to simplistically look at warehouses as necessary evils that are fundamentally cost centres.

Increasingly, industry professionals are viewing warehouses and distribution facilities as historically underleveraged centres that can drive competitive differentiation and, by doing so, increase profitable growth. This reshaped vision of warehouse operations as a fundamental driver of top-line and bottomline business value, points the way to achieving the ultimate objective of flawless fulfillment.

Written by:Acknowledgement to Zebra Technologies
Date:17 February 2016