Warehouses and distribution centres are becoming more complex, with the changes in customer expectations driven by e-commerce affecting the logistics industry, supply chain and logistics facilities company Industrial Logistic Systems MD Clayton Thomas has said.

Some warehouses are being required to have about 600 000 stock keeping units (SKUs) that must be available at any time. A normal dry goods facility generally has 20 000 SKUs.

This is why random storage is common even in large multinational e-commerce companies' warehouses, while still requiring accuracy for storing, picking and tracking processes, he said during a talk on trends in warehousing at the Chartered Institute of Logistics and Transport South Africa conference, in Randburg, on July 9.

Additionally, while centralisation has been a core strategy for logistics and supply chains, there is a decentralisation trend taking place to have facilities closer to customers to enable faster fulfilment of orders.

These can take the form of micro-fulfilment centres, which are small warehouses built close to demand centres, or picking for e-commerce orders from operational retail stores or using dark stores, which are comparable to large-scale retail stores, but dedicated wholly to fulfilling e-commerce orders for fast-moving consumer goods.

Competition, convenience and the fast pace of e-commerce are the driving forces behind these changes in warehousing. These changes are also having an impact on brick-and-mortar stores, as they are also expected to have items in stock to meet customers' convenience expectations.

This is also driving changes in how retail stores are supplied, said Thomas.

Consolidating customers' parcels is another focus area for e-commerce operators that impacts on warehousing and distribution, with additional requirements for accuracy and traceability.

This creates complexity in the distribution centre, as each order must be picked from multiple SKUs and consolidated.

The need for higher throughput and managing complex orders of multiple sizes of items and temperature ranges while maintaining accuracy is also contributing to changing warehouse designs, he said.

Rack heights are increasing and aisles are typically narrow – between 1.7 m and 2.4 m wide – with the focus being on order picking across multiple zones.

High-density storage is also contributing to changes, with four-way shuttles being used in some warehouses with dense racking to move pallets in four directions, thereby helping to optimise space.

However, regardless of the technology, to ensure throughput and selectivity, data is necessary to support the operations, emphasised Thomas.

For example, automating the management of the warehouse queue is a big focus, but distribution centres must still have a good layout and flow of goods, with operations being supported by technology.

The focus on accuracy, particularly with the growth in warehouse capacity, is driving changes. However, accuracy is a function of picking in the distribution centre. Additionally, packing is one of the functions that cannot be automated in a warehouse, he noted.

“[Online retail and technology company] Amazon has 750 000 robots in its operations worldwide, but cannot automate packing,” he illustrated.

Automation and robotics are being driven by the need for high-speed retail replenishment and high labour costs. In developed countries, robotics are being used to compete against labour costs in developing countries, with the aim of automation being to make warehouse and supply chain operations faster and cheaper.

However, inefficiencies in warehouses will not be solved by technology alone, said risk management, logistics, aviation and business services firm Professional Group of Companies group operations director Gerhard van Zyl.

For example, delays in warehousing operations are caused by pickers travelling to the SKUs, waiting for other pickers at an SKU, the restacking of pallets that do not fit in a given rack or by items not being where the warehouse management system indicated they would be.

The individual delays may be insignificant, but, taken together, they contribute to about 55% of time being spent on movement, delays and corrections that do not generate profit, with only about 45% of time spent optimally, he said.

“The people in the warehouse are busy. The difference lies in effectiveness versus efficiency. The flow in a warehouse is often the root cause of a high non-productive time figure.”

Warehouses must be designed to fit other infrastructure, such as road or rail networks, or are built within existing facilities. These introduce certain inefficiencies, as companies are limited in what they can and cannot achieve at their facilities.

“Improving efficiency within existing operations requires information. Similar to sports, where every metre run is measured and the statistics of each player are used to inform the playbook in real-time, information is needed to improve operations,” said Van Zyl.

Picks per hour is insufficient as a measurement of efficiency. For example, congestion is not being measured, but its impact will be apparent at the end of the shift.

Similarly, truck dock congestion, slotting decisions placing SKUs into the first available rack and leading to two pick faces being created and delays in replenishment of SKUs contribute to inefficiencies.

“The flow through the warehouse must experience minimal interruptions, and warehouses must operate under short decision-cycles and clear priority rules to minimise delays.

“Technology can help, but is only as effective as the information it receives and the people operating it,” he said.

However, companies can ensure decision cycles are short and that their people are empowered to make decisions based on priority rules, instead of waiting for confirmation of a decision.

Similarly, warehouses should ensure slotting decisions support their operations, such as by having SKUs storing fast-moving goods being placed closer to packing areas. This can be addressed through clear priority rules, he illustrated.

Additionally, warehouses can use existing equipment to gather information to inform improvements to their operations. For example, companies can use their closed-circuit television systems to gather real-time data to help them to improve their operations; whether that is improving layout or addressing congestion or delays.

“There are many smaller things that we can do in the warehouse and logistics space that can have a significant combined impact. It is not always necessary to implement big solutions, such as automation, and sometimes it is about using what we have to be more intelligent in how we work and improve our operations,” Van Zyl said.