You probably know that e-commerce sales have been soaring over the past few years. This website shows that retail e-commerce sales grew roughly 25 percent annually worldwide from 2014 to 2017. Statista, a statistics website, also reports that e-commerce’s share of retail sales has risen from 5.8 percent in 2013 to a projected 10 percent in 2018.
What you might not know is the effect of e-commerce’s growth on warehouses. You might think, for example, that companies are struggling to find places to store their goods or that the cost of building warehouses and hiring employees negates the growing sales.
Today’s Warehouses Are Much Different Due To E-Commerce
Well, you need to stop worrying because e-commerce has helped the warehouse industry. Let’s look at some headlines for proof.
“How Ecommerce Is Changing Warehouses for the Better,” is the headline on this Entrepreneur magazine story.
“Ecommerce Fuels a Warehouse Boom,” reports this article by the Federal Reserve Bank of Atlanta.
“Warehouses are 143% bigger thanks to e-commerce,” states this article in the publication Supply Chain Dive.
In fact, warehouses have changed so much that some experts don’t even use the term “warehouse” as they explain how e-commerce has changed the industrial supply industry.
“The growth in e-commerce has transformed warehouse and distribution centers to mega fulfillment centers,” wrote Victor Coronado, The Onyx Company's director of supply chain and operations, in this article. “The global shift toward e-commerce is changing how the retail and logistics industries operate.”
Coronado added that e-commerce will impact distribution networks as much as companies building manufacturing plants in foreign nations to save money affected the networks in the past. He predicts that e-commerce will spur new mega fulfillment centers, parcel hubs, delivery centers, facilities for rapid orders, and return processing centers.
The Federal Reserve Bank of Atlanta article details the boom in warehouses due to e-commerce. In the past five years, warehouse construction spending soared 29 percent annually. In the previous 19 years, it rose 1 percent annually. That’s not a typo. In addition, the average warehouse’s size since 2007 has increased 143 percent to 184,693 square feet and its height has increased almost four feet higher to 32.3 feet, Supply Chain Dive reported.
A white paper by the Arizona State University W.P. Carey School of Business entitled “Warehouse of the Future” details the evolution of the warehouse from the 1970s when “a computer in the warehouse was rare” through today, when almost every American company with a warehouse has automated warehouse management systems that track what is delivered to and from a warehouse as well as where the goods are being sent to and from. Today’s warehouses also often have robots because they are more efficient, reports this Forbes magazine article.
“Man travel is among the most unproductive, time-consuming tasks within a warehouse,” the article reports. “The new forklifts, called “vision-guided fully autonomous mobile robots,” not only address this specific issue, but also have the ability to process orders (pick and on-board for delivery) four times faster than a human.”
Evolution Or Revolution?
The Arizona State white paper details the “evolution of warehouse types” but there has been so much change in the warehouse industry that “revolution” might be the more appropriate word.
“Companies must think about both efficiency and productivity as they move more aggressively to e-commerce,” the paper reports. “However, in many cases, it is difficult to determine where the journey to e-commerce will lead. Because of Amazon, most firms are feeling pressure to move to a 1- or 2-day delivery timeframe. In some cases, firms feel the need to be able to deliver on the same day utilizing more than one format.”
Entrepreneur magazine details how warehouses have evolved in the past two decades. The changes include:
- Innovative storage systems, including Amazon’s “chaotic” system of placing new items on the first available shelf. Warehouses using these kinds of systems look like a mess, but modern technological tracking systems can make them more efficient.
- Better tracking systems. When you scan a product, all of its information is available instantly. You can communicate information on a product’s price, function, etc. to suppliers and customers in seconds.
- Better training and technology. Well-trained employees can better plan when to order products if they can use software that projects sales. Knowing when inventory is projected to run out maximizes the chance that the product will be available when customers want it.
E-commerce has also spurred changes in the types of warehouses that are used. The new kinds of warehouses include:
- Centralized return centers.
- Customer facing.
- Flow warehouses.
- Futuristic facilities.
- High ceiling facilities.
- On demand warehouses.
- PopUp warehouses.
The 24-page white paper explains the details of these warehouses as well as the technology within distribution centers, including robotics, and various supply chain software products. The bottom line is that warehouses are evolutionary and revolutionary.
“The rate of change across supply chains is accelerating and the seismic shifts in the market are being felt by manufacturers, retailers, logistics service providers, transportation providers, wholesale distributors and, most significantly, by consumers,” the paper says. “These changes and disruptions are a global phenomenon.”
About Michael Wilson
Michael Wilson is AFFLINK'S Vice President of Marketing and Communications. He has been with the organization since 2005 and provides strategic leadership for the entire supply chain team. In his free time, Michael enjoys working with the Wounded Warrior Project, fishing, and improving his cooking skills.