A key to successful investment in warehousing is alignment of warehouse and distribution strategy with organizational priorities. That is, warehousing must be part of the strategic planning process and embedded into supply chain processes—this requires senior leaders to better understand the function.
Historically, warehousing was considered a cost center by senior executives—a function that needs to be economized, as if its mere utility is directing bulk product flows. This view, however, is changing. Companies recognize that service excellence must also be a strategic priority of warehouse operations.
In the Auburn study, an executive noted: “There’s a continued hyper-focus on the customer experience and what we can do to resonate with customers. At the same time, we need to be mindful of costs, so that we only invest in what our customers truly value.”
The shifting roles and growing importance of warehousing is driving a structural revision of the fulfillment network to support supply chain service requirements.
According to the Auburn study’s participants, warehouse networks will become regionalized and localized, reducing the time needed to serve customers. Instead of large, centralized warehouses with a million square feet of space, the trend will be smaller footprint, nimble DCs able to provide rapid turnover.
As it’s not always feasible to expand company-owned warehouse capacity in all markets, companies can turn to logistics service providers (LSPs) for additional locations and space.
While most of the Auburn study participants rely on LSPs to fill some or most of their orders, they stressed that outsourcing of the warehousing function cannot be done haphazardly.
For those handling perishables, it’s essential to select LSPs with an extensive distribution network of cold storage facilities, an array of warehousing services, and flexible capacity.
Deploying Technology
As produce companies strive to manage more complex networks, technology will play a pivotal role in ensuring that warehouse operations are fast, flexible, and accurate.
There is a clear consensus among the Auburn study respondents that advanced technology will drive service quality. Greater order accuracy and faster order processing are the prime opportunities.
Technology is also needed to scale operations up and down, which will help produce companies manage seasonality issues and quickly respond to changing market conditions. The most widely deployed tools with the best track record of success support day-to-day operations.
A warehouse management system (WMS) functions as a software control system that improves product movement and storage operations through efficient management of information and completion of distribution tasks.
The fundamental goals are to achieve high levels of control, inventory accuracy, and productivity through directed picking, directed replenishment, and directed put-away. Use of these systems will continue to be an important tool in the future according to the Auburn study participants.
Leading the technology growth curve will be higher use of an order management system (OMS), according to the Auburn study participants.
An OMS aligns inventory and customer orders for fulfillment and shipping across multiple channels. This technology is especially critical to fulfillment success in the future, as noted by a distribution executive, who says facilities must be able to handle much shorter order-to-execution times.
As companies adopt more sophisticated order picking technologies, robotics, and advanced conveyor systems, it will be critical to coordinate these automation tools. This role is played by a warehouse execution system or WES, a rapidly growing spend area.
The WES interfaces with the WMS to organize and optimize the flow of work required to assemble and ship orders. In addition, the WES interfaces with the automation controls to execute the work. Study participants also anticipate broader adoption of predictive and prescriptive analytics to enhance warehouse operations.
“We spend time on the analytics side, to help us find opportunities in pick-path optimization, SKU management inside the DC, and in the packing areas to gain operational efficiency and control transportation costs,” explained a vice president of supply chain management.
Of course, a reality check is always needed as technology adoption comes with significant challenges.
Gaining access to necessary funding is difficult. The risk of not achieving promised benefits from emerging technology deployment and choosing effective technology providers are also barriers to overcome.
Produce companies must ensure that technology, particularly automation, can be tailored to the unique characteristics of fresh fruits and vegetables and the information requirements of the industry.
This is an excerpt from the Supply Chain Solutions Department in the November/December 2021 issue of Produce Blueprints Magazine. Click here to read the whole issue.
