What can consumer behaviour tell us about the future of warehouse design and logistics?
Jun 08, 2021
By Jon Walkington, Retail and System Integrator Sales Director, at Schoeller Allibert UK.
For many brands operating today, warehousing and distribution has never been more closely tied to a brand or retailer’s commercial performance. As part of the holistic value chain and the service offering for the consumer, logistics can no longer sit in isolation. How products are stored, handled and distributed have a core part to play in the success of a business.
Noticeably, warehouse designers and system integrators are taking a fresh approach by using consumer behaviour to inform layout. The reason is simple; better and more prolific use of big data is creating new efficiencies. When we look towards the future of warehouse design, there are a number of purchasing trends that are influencing how this vital piece of the retail puzzle is used.
Retailers that have a solid e-commerce platform have found a real competitive edge over the previous year and it’s clear that an online shop is no longer simply an addition to standard distribution procedures. Growth forecasts from intelligence agency eMarketer found that globally, online sales are continuing to increase and throughout 2020, e-commerce accounted for up to a third of all retail sales in the UK according to studies from Smart Insights.
However, with delivery or shipping lead times available at the touch of a button, there also needs to be the logistical prowess to back it up. Where distribution centres designed for brick-and-mortar stores tend to favour volume, optimal use of space and free flow of movement, fulfilment centres designed for e-commerce need a strong focus on individual order speed. This also increases the demand for transparency, with each item tracked individually.
We are seeing an even wider spread of retail segments adopting digital tracking solutions that take advantage of IoT capability such as RFID, which can automatically track SKUs through every step of the fulfilment journey. The benefits can also be seen in loading docks, with smart controls making inventory management and allocation simple and effective, whether semi or fully automated.
From our perspective as a leading supplier of returnable transit packaging, we’ve seen this appetite for IoT-enabled warehouse technology first-hand. Our selection of rigid containers, pallets and dollies can be specified with RFID functionality that provides greater transparency and security through the supply chain. The market for integrated automation such as this is clearly widening, which means it’s an ideal opportunity for warehouse designers and system integrators to explore the diverse benefits.
Online purchases connecting products
Greater use of online platforms for business has made data collection simpler than ever before. In terms of warehouse layout, this changes the game in terms of where products are stored. In a typical facility designed for brick-and-mortar stores, the tendency is to group product types together. However, efficiency gains can be made when catering to the needs of online retail by storing items together that may not be in the same category but are frequently purchased together. With online sales patterns only a few clicks away, it may show up connected items that a traditional distribution layout would not reveal. Over time, this offers potentially huge savings in labour and time.
Accounting for demand fluctuation
Through the past year, the volatility of demand has been on full display. Shopping behaviours changed, with store visits becoming less regular and more planned. High-profile ‘panic buying’ also made headlines, which highlighted the importance of output volume for many brands.
What this tells warehouse managers and system integrators is that efficient use of space and time saving measures in installations are crucial – but sheer analogue volume still counts. Across the board, businesses have moved towards leaner models, with production and stockholding designed to minimise waste and overheads. However, there needs to be a happy medium that also allows higher volume when required, and available on short notice. Examples falling back into favour include larger bays, narrower aisles and overspill facilities.
Flexible order fulfilment
Today’s consumer demands choice, not only in their products, but in how they purchase. As well as browsing in-store and shopping online, hybrid models are flourishing. The most common is ‘buy online, pick up in store’ (BOPUS), also known as ‘click and collect’. There are also newer models on the rise, such as ‘customise online, pick up in store’ (COPUS) and ‘manufacture online, pick up in store’ (MOPUS), which allow simple customisation and fully bespoke products respectively.
Consumers are engaging with these hybrid models for a number of reasons, including the negation of shipping costs, guaranteed stock through reservation, a shopping and browsing experience from the comfort of their own homes and a simpler returns process.
While COPUS and MOPUS present supply complexities, businesses offering this service have usually already accounted for this model in the design of the warehouse and manufacturing facility. BOPUS, on the other hand, is comparatively much simpler to add as a ‘plug in and play’ retail function.
In terms of warehouse facility design, it’s likely that BOPUS capability will be built into an even wider array of business categories. Starting with high order goods such as furniture, BOPUS is now making an impression in larger grocery stores. It’s likely to continue filtering across markets to become a new standard feature of warehouse design.
In summary, despite being self-held for so long, warehouse design is taking more cues from the behaviour and decisions of end consumers. It’s a powerful example of how global trade is both lengthening business reach while seeming to compress the supply chain. Shoppers are purchasing in different way, which naturally influences the logistics involved and must be considered during the design of new facilities. Where a brand’s ability to respond to consumer needs has an impact on bottom line profit, handling and logistics have an important part to play.