The Future of Warehousing: The four cornerstones of competitive advantage

This is an excerpt of the original article. It was written for the July-August 2021 edition of Supply Chain Management Review. The full article is available to current subscribers.

July-August 2021

We all know the old saying: “When the going gets tough, the tough get going.” It has been repeated so often it’s cliché. I’d like to suggest a variation: “When the going gets tough, leadership matters.” To say that supply chains have had a tough time of it would be an understatement. Despite the positive vaccine news here in the United States, global supply chains are not out of the woods yet.

Browse this issue archive.

Already a subscriber? Access full edition now.

Need Help?

Contact customer service

847-559-7581   More options

Not a subscriber? Start your magazine subscription.

Anytime, anywhere fulfillment. Next-day, same-day and even same-hour delivery. Exploding product variety and packaging choices. Hyper-localization. Personalization. Welcome to the age of omni-channel fulfillment, with its promise to serve every single consumer with what they want, when they want it—and how they want it.

For retailers and manufacturers alike, the consumer’s ravenous appetite for speed and choice is making warehouses and distribution centers (DCs) much more central to the competitive equation. Yet most fulfillment operations were designed for a far less challenging era. This stark reality obliges chief executives and chief operating officers to actively envision the larger, more nuanced and more strategically vital role warehouses and DCs are playing in their future supply chain today—and will certainly play tomorrow. Fulfillment capabilities must now be counted among top strategic priorities for executive teams. Without question, those who ignore the future of warehousing risk repeated crises, challenges in meeting customer expectations, expensive work arounds and rushed retooling of this increasingly crucial link in the supply chain.

We see the requisite shifts unfolding along two dimensions in the distribution networks: 1) design and build facilities with capabilities suited for more complex and diverse network roles such as store delivery, customer fulfillment and cross docking and 2) position fulfillment nodes much closer to demand centers with forward deployed inventory (see Figure 1).

The implied investment is substantial, yet strategically imperative. The question is: How quickly should you proceed, in which dimension and on what scale?

Tradeoffs between capex and opex are at the core of your decision. Aggressively investing capital now can substantially lower your ongoing operating costs and strategically position your company to differentiate its service to consumers. Successful companies will free themselves from philosophical constraints to find the optimal balance for capital allocation. For example, companies with existing or growing scale will choose to invest themselves via modular and scalable network solutions, while others may choose to partner with or leverage fulfillment providers. Another key is striking the right balance between investing in response to immediate pressures (which are substantial) versus investing to get ahead of the curve, to build a future competitive edge.

SC
MR