How the role of the US warehouse has changed and evolved in the last 10 years
Warehouse Management Blog
Warehouses and distribution centers are the central hub of the supply chain, and as with all facets of a business in these economically demanding times, these days the warehouse is expected to improve performance with less resources.
Ten years ago in 2003 there was a report looking at US warehousing and it’s future, published by Arnold Maltz, Ph.D., associate professor at Arizona State University and Nicole DeHoratius, DBA, assistant professor at the University of Chicago. Maltz and DeHoratius interviewed a sample of supply chain and logistics executives across 15 companies, including manufacturers, distributors, retailers, and third-party logistics providers.
What Arnold Maltz found is that "Customers in general want more for less and warehouses are continually asked to do more things because warehousing labor is generally less expensive than manufacturing labor. Therefore the warehouse can often perform light manufacturing activities for less cost. As a result, many warehouse facilities are beginning to resemble light manufacturing plants”.
Arnold Maltz noted that the customers of the companies surveyed expected increasing speed, decreasing costs, continuous improvement, and a greater choice and customization from their suppliers. Information today is better and more readily available than it was ten to fifteen years ago, enabling more accurate real time analysis. Global competition and pricing pressures mean that companies need to continue to reduce costs rather than increase prices.
What the Maltz Report focused on was that although the warehouse's contribution, including space and location, labor, and knowledge, remains largely unchanged, the minutiae and every day details had changed. Value-added services in the warehouse is given a greater priority today than ever before, as reflected in the fact that warehouses are being defined by extra curricula functions they perform, in addition to their basic storage function. The emphasis and focus on the primary function of the warehouse has changed dramatically in the last ten to fifteen years not least because of the massive increase in e-commerce / online retail. Accordingly warehouses are now known euphemistically as distribution centers, operations centers, return centers, or fulfillment warehouses.
Manufacturers, distributors, and retailers are moving more activities to the warehouse, due to lower costs. Activities performed in today's warehouse may include product configuration, finishing, packaging, labeling, ticketing, pricing, and creating shelf-ready product displays. This expansion of activities is taking place in both company-owned-and-operated facilities, as well as those operated by third parties.
Arnold Maltz points out: "The warehouse is no longer an island—it's an integral part of the supply chain. In addition, warehouses are increasingly the place for systems, and for improvement. It's the warehouse that can suggest the next level of improvement”. He goes on to describe today's warehouse as being customer- and knowledge-driven, full of rich data about customers and their buying practices.
Into this increasingly more sophisticated warehouse environment, come new dynamic warehouse management system providers like Snapfulfil who launched their innovative Cloud based software ( Software as a Service ) into the US market in 2007. Having initially opened an office in Charleston, last year saw the company open its second office in Chicago. The Snapfulfil warehouse management system offers a greater level of functionality, flexibility and versatility to meet the demands of the increasingly more diverse and multi-purpose warehouses in the US.
Gavin Clark, CCO for SaaS warehouse management system provider Snapfulfil, explains: “The concept behind the SaaS model is to replace upfront hardware and software costs with a pay as you go / monthly installment model. This way companies are not locked into a rigid three to five year payback period, typically experienced with conventional software. As SaaS costs are governed by the level of usage, they can be scaled easily and quickly according to fluctuations in the marketplace, either enforced through changing seasonal consumer demand or the erratic economic conditions we have experienced in the last five years”.
He expands further: “With the Snapfulfil SaaS warehouse management system, training requirements are greatly reduced whilst upgrades are automated. This is an important point as labor costs in non-automated warehouses account for around 50% of total warehouse costs. With Snapfulfil we firmly believe and know that once the infrastructure, maintenance, support and implementation costs have been calculated, our SaaS model will offer a much lower cost of ownership”.
Gavin Clark concludes: “By adopting the ‘No Capex’ Snapfulfil SaaS warehouse management system, not only do companies make cost savings through improved efficiency and accuracy, but they are also assured of the high level of excellence in customer service that comes with a managed SaaS model”.