Past Trends & Challenges of Warehouse and Distribution Center

Warehouse (WH) is a commercial building which is for the storage of goods for varying amounts of times until demanded by customer. On the other hand, Distribution Centre (DC) is a specialized warehouse that caters to rapid movement of goods such as break bulk facility whereby incoming bulk shipments are broken into smaller shipments, then distribute to retailers, wholesalers or directly to consumers. The operations are based on the purpose of the DC – including order fulfillment and cross-docking. A DC normally serves a much larger geographical territory than a warehouse and is used more in the outbound flow of finished products.

In relation to our selected topic, we will be categorizing our elaborations into: the past, as well as the current trends and challenges facing warehouses and DC.

In the past, many old warehouses were built using brick walls as bricks were commonly used in construction. However, this restricted any expansion or structure change in the warehouses. The constant application of traditional warehousing approach had limited the ability to share information such as transportation & shipping, inventory counting and control, as well as performance management solutions. In addition, the old approach had also emphasized on batch shipments – this inevitably lengthened the lead time of the goods to be sent to various customers.

In warehouse and DC, Bar-coding labeling had also been extensively used for identification and picking accuracy of the storage good. However, bar-codes can run the risk of getting wet and scratched due to mishandling or a harsh environment, which prevents accurate reading by the scanner. Human intervention is labour intensive and costly. Manual method could also be a hindrance to ensure if the inventory remains up to date due to oversights, errors, and internal shrinkage. Automated Storage and retrieval systems (AS/RS) in warehouses was introduced in the 1950s to eliminate the walking which accounted for 70% of manual retrieval time, therefore improving productivity and efficiency would result in the reduction of overall cost.

(bar-code technology)

Also, warehousing and distribution centers had to cope with a variety of emerging business trends and forces. Competitive forces have been influencing the operations of a warehouse. The buying habits had dramatically changed for manufacturers, wholesalers, retailers and consumers alike. Service levels had become increasingly more demanding as well. These trends manifested themselves in numerous ways. Distribution operations had been obliged to manage less inventory levels, smaller order sizes, larger SKU, quicker order turnaround, increased customer packaging, and valued-added service requirements.

Additionally, Just in Time (JIT) was introduced to the Distribution Center in the early 1950s to ensure a significant cost-reduction, as well as to improve the returns on the investment of the business by reducing on-hold inventory. For most Distribution Centers, cross-dock has also been a popular system as they are able to achieve economies of scale, thus reducing overall cost.

Traditionally, companies would prefer to own or lease their private warehouses instead of using public warehousing approach. In addition, they would also secure a longer contract relationship with the leaser, resulting in inflexibility in deploying capital and the inability to adapt to the changing market development.