Poised to Deliver

E-commerce is making a comeback, but this time, success will be measured brick by brick.

I can hardly believe it’s been a decade since the dot-com frenzy ended. You remember—the Internet was going to change retail forever. The playing field was so level that all you needed was a Web site and an office in your basement. Just open up a virtual storefront and watch the profits roll in.

Blinded by the infatuation with e-everything, online startups like Kozmo.com promised to deliver a wide variety of products straight to consumers’ doors within the hour—and for free. Dot-com entrepreneurs boasted that “bricks and mortar” was best left to retail dinosaurs.

Well, we all know how that turned out.

The problem in 2001 was that “e-tailers” didn’t understand what made companies like Amazon not only survive the digital transformation but thrive long after the novelty wore off. (Amazon, by the way, made AMR’s list of Top Supply Chains of 2010; see Dave Blanchard’s editorial "Reflections on Supply Chain Excellence" for more).

It wasn’t fancy, front-end ordering systems that propelled Amazon to its current position. No, it was old-fashioned bricks and mortar. And I don’t mean physical stores because the online retailer doesn’t have any. I’m talking about buildings where materials are received, handled, moved into inventory, picked, packed and loaded onto trailers for shipping to customers. You know—places where all those unseen, costly “back-end” processes occur.

While many of us would like to forget the dot-com craze and the business implosion that followed, valuable lessons came out of it. Online retailers now seem to understand that orders are worthless if they can’t be filled.

In April, at the NA 2010 show in Cleveland, several technology providers told me their retail customers are increasingly juggling multiple distribution channels. Internet consumers are notoriously hard to please, and these days, they want even more options. So, while retailers continue to manage the traditional distribution methods—picking product in bulk for shipment to stores, for example—they must also learn to master piece picking for direct-to-consumer delivery. And that’s only the beginning. Some say future consumers will demand the ability to order online and then pick up at physical stores, and that brings a new set of logistics challenges.

As a result, companies will have to manage separate material handling processes for each sales channel—all within a single distribution center.

At least that’s what Jean Bélanger, founder and CEO of warehouse performance management software provider Reddwerks, envisions. “The separation of retailing’s ‘church and state’ or ‘storefront operations and distribution’ is coming to an end,” he says. For decades, DCs were designed for full-case processing for large store orders, with direct-to-consumer Web orders being farmed out to smaller facilities dedicated to item-level processing. But that’s quickly changing, says Bélanger, who sees an end to “Internet DCs.”

“Retailing is morphing into multichannel retailing, which will increasingly come to be defined as Internet selling and storefront selling,” he predicts. “All of this will force severe and systemic changes in how goods are distributed and how distribution facilities are designed in the first place.”

And guess who’s at the very center of these changes? Material handling professionals.

Companies can no longer afford to ignore or dismiss the top- and bottom-line impact of warehousing, distribution and logistics. Those who continue to view these functions as costly, “back-end” processes will do so at their own peril.

So, use this opportunity to make a real difference in your organization. The next decade will demand new ways of getting product to market, and material handling professionals are in the best position to deliver.

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