DC Velocity recently reported on Amazon.com’s e-commerce distribution strategy to setup new distribution centers (DCs) in six states, bringing their total DC count in the U.S. to 39. The publication speculated that “by all accounts, Amazon’s explosive expansion will support its plan to make overnight delivery standard and offer same-day delivery for an additional fee.”
The prospect of a behemoth like Amazon being able to standardize on next-day ground shipments is bound to strike fear into the hearts of other online retailers. Commonwealth offers these three suggestions for companies seeking an effective response to this e-commerce distribution move by Amazon:
1. Maximize Your Own Network Optimization: Often, companies that import goods from Asia and sell to U.S. retailers operate from a single DC which is very close to the inbound port of entry (often in Los Angeles or New Jersey). This model keeps inbound shipping costs low, and often the retailer pays the outbound freight and absorbs these higher costs. However, relying on a single DC in a port city is not an effective way to service e-commerce clients. Companies should consider setting up a centralized DC in the mid-section of the country to handle e-commerce distribution (potentially using a 3PL). Commonwealth’s report, “Supply Chain Network Optimization – Getting Past the Feasibility Stage” outlines inexpensive ways to conduct network optimization studies.
2. Practice Effective Distributed Order Management: For companies that have multiple DCs, or that have retail stores which can be used to fill orders, choosing the correct facility to fill an e-commerce order can be vital. If customers are willing to pay for expedited shipments, perhaps an e-commerce order can be filled from a retail DC or retail store that is closer to the customer. Distributed Order Management software can help make these decisions.
3. Extend Order Cutoff Times: Filling more e-commerce orders faster involves a fundamental change in distribution center design. Commonwealth’s report “E-Commerce in the Distribution Center: Making a Graceful Transition” outlines ways to do this, including cluster picking, zone picking, conveyor-based pick modules, and AS/RS systems. Companies that have already automated may benefit from a concept called “wave-less picking” which allows high priority orders to be dynamically inserted into a work queue and picked sooner.
Related Reading:
Paper: E-Commerce in the Distribution Center: Making a Graceful Transition – Download Now
Report: Supply Chain Network Optimization – Getting Past the Feasibility Stage – Download Now