The Impact of E-commerce on Warehouse Space and Pallet Storage Logistics

E-commerce has grown exponentially over the last 15 years, from the days of Amazon and a few net-only retailers to being the cornerstone of nearly every retailer’s omni-channel strategy.

Unsurprisingly, such rapid growth – in contrast to the 100 year or so development of bricks and mortar retailing before it – hasn’t come without significant growing pains, particularly for retailers. Grocers have had to wrestle with the challenge of whether to operate store-pick or warehouse pick models. All retailers have had to re-consider their store models in the context of their own cannibalisation of stores by the web – so size, location, breakeven points and rentals metrics change for a new store; and new ways of using space in existing estates are sought – such as Tesco’s purchase of Giraffe restaurants and Harris and Hoole coffee shops (though Giraffe has been subsequently sold; and the coffee shops are believed to be up for sale). Sainsbury’s acquisition of Argos (where roughly half of sales are now digital) is an even better example of tackling this challenge – using excess space to help deliver the web based service. John Lewis overnight created several hundred collection points for its customers in the shape of Waitrose shops – a move so popular, it was forced to introduce a charge for it.

Clearly, such a major change in the dynamic of how consumers select products and expect them to be delivered has had major implications for the logistics industry. To service this business – often as a pre-condition of keeping existing business – logistics companies have had a lengthy list of new skills and investments to tackle:

  • Real-time warehouse management systems to provide both consumers and retailers with up to date information on individual despatches and aggregated performance to target.
  • More SKUs and pick faces – retail store size and customer friendly merchandising acted as a natural brake on SKU expansion in the pre-digital era; a well segmented website has less constraints.
  • Shorter lead-times: over time, as retailers have discovered that speed of delivery is an important axis of competition, the requirement for some or all deliveries to be sub 48 hours has risen. With UK retail competition so intense, it will be a foolish retailer who backs away from this and only the bravest will attempt to price it in fully.
  • New vehicles to enable smaller, hand-balled deliveries to residential addresses. Clearly this final mile format reverberates back through the supply chain – e.g., drop ship solutions, depots to transfer consignments rom bulk to local, how orders are picked and assembled in central or regional warehouses. Even livery and uniform implications.
  • New transport planning systems to manage urban and residential delivery patterns.
  • Tracking product to the customer’s home and real time reporting of consignment location and status.
  • Consumer facing call centres or, as a minimum, integration of fulfilment systems into CRM systems.
  • Return logistics capabilities from consumer’s homes alongside the traditional store returns path.

These challenges have arrived quickly, their shape sometimes changing faster than the time it takes to react to them and invest appropriately. 3PLs have connected to pallet networks and home delivery partners to build the bespoke end-to-end (and back again!) supply chains their customers need for multi-channel retailing. Courier and parcel companies have grown fast, with broadly similar models but with different levels of success. To cope with the growth, some of these networks use sub-contractors for the ‘final mile’, be it local third party courier/delivery companies or individuals using their own vehicles. However, sub-contracting did not save City Link from going spectacularly into administration at Christmas 2014; nor some other networks from having poor reputations with consumers.

With Black Friday now creating a new spike in the calendar (and one that backs into the Christmas spike), successful e-commerce fulfilment requires the very best systems and the flexibility to perform through peaks and troughs (and make profits in both!).

Zupplychain’s business model delivers the flexibility in storage capacity that those serving e-commerce need to meet customer and consumer expectations with best in class service at lowest cost. With Zupplychain, short term warehouse space – to cope with fluctuations in stock levels, often in the build up to a Black Friday-type delivery spike - can be instantly found and contracted on-line without phone calls or lengthy e-mail trails. Furthermore, Zupplychain’s pallet database allows quick and easy stock management without the set up costs, in terms of time and money, of systems integration for a short operating period.

Zupplychain launched in February 2016 and already has a nationwide network of warehouse providers. To find them, go to our easy to use search page .