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What Will the Distribution Center of the Future Look Like?

The distribution center has undergone many changes from the old days of mail-order catalogs to high-tech operations centers that automatically fulfill orders placed online. Leaders in distribution center management must rapidly react to take advantage of new technologies and best practices to meet evolving customer demands.

Ritesh Chaturbedi, Chief Operations Officer at Global Industrial, has a unique perspective of how the distribution model will continue to shift. In a recent interview, Chaturbedi shared current distribution center best practices and a peek into the exciting potential of the distribution center of the future. Keep reading to learn how this industry expert anticipates change to this ever-evolving industry.

Increased automation for order fulfillment

As we’ve already seen happening at large retailers and logistics operations, many parts of the fulfillment process can be partially or fully automated. Much of the challenge around automation relates to the size of the package. Current robotics and distribution center automation technologies can easily move many items and packages. Machines struggle if the item or package can’t conform to a cube or traditional box shape.

“If you're talking about a product that is small and in a cube format, you can use a lot of [automation] methodology to cut down the time as well as the costs for that product to get to your customer,” Chaturbedi explained.

“But if the product is what I call ‘nonconformative’ to that cube—if it's very heavy, very bulky, or very large—it becomes extraordinarily difficult to ship in a short amount of time because it requires special handling. It requires special packaging. It requires special unloading.”

Chaturbedi notes that it may take some time for machines to learn how to handle nonconforming packages and items. But for lightweight items that fit into a traditional-shaped box, automation like carton sealing machines is already available—and will continue to appear in distribution centers worldwide.

Large warehouses still play an important role

Chaturbedi shared that the old distribution center (DC) relied most heavily on large, centralized warehouses. These DCs will begin to play a slightly different role in a chain of up to four layers, depending on a company’s size and needs.

“As customer preferences and needs have changed and companies have begun competing on speed, and not just price, the single-tier centralized DC network is no longer viable,” Chaturbedi explains.

Large, bulky, and long-tail items are best kept in the bigger, centralized distribution centers in rural areas that are associated with lower storage cost.

Smaller distribution centers will enable faster deliveries

According to Chaturbedi, the most efficient distributors may use four layers in their networks:

  1. Large Distribution Centers: Large, centralized distribution centers, likely in rural or low-cost areas
  2. Cross Docks: Smaller facilities enabling rapid unload, transfer, reload, and shipping operations
  3. Regional Distribution Centers: Mid-sized buildings that are ideal for pallets and cases rather than truckloads
  4. Forward Deploy Fulfillment Center (FDFC): The smallest and higher-cost facility located very close to end consumers, potentially in lockers or large office buildings

The fourth layer is the newest addition to the DC model. If you’ve ever walked into a grocery store and noticed a designated area for third-party pickups, these are considered a type of FDFC. They are a growing part of consumer-focused distribution networks.

Chaturbedi says of FDFCs, “Imagine instead of a retail store really close to you, it’s a mini-warehouse really close to you.” Consider people who live in large apartment complexes. With FDFCs becoming more prevalent, they could place an order for necessities like batteries and have them available for pickup without needing to leave their building.

Larger FDFCs can be up to the size of a retail store. These put commonly-purchased goods so close to consumers that you can reasonably provide same-day or next-day delivery.

Detailed forecasting required to keep up

Computers, robotics, and automated conveyors quickly move items from place to place around warehouses. But with so many moving parts and as many as four DC layers, incredibly detailed forecasting is required for everything to work smoothly.

Chaturbedi explained that “inventory, forecasting, and placement” are among the most critical problems for distribution and logistics companies to solve today. To ensure the right item is at the right place at the right time, your business must rely on hard data. Poor estimates lead to higher costs, higher inventory needs, and slower distribution.

He recommends that businesses use their data to forecast which products are destined to sell quickly, both in the long term and based on demand reflective of seasons or occasions. “You don't need every product in the world to be delivered to you on the same day,” Chaturbedi notes. “It should be a very small selection.”

Get ready for dark distribution centers

In some manufacturing industries, we see “dark factories,” where an operation can run without human workers at all. Chaturbedi expects automation will lead to larger DCs that can operate with less human input.

Many operations that ship products easily fitting into cube or box shapes can be automated almost entirely, creating the opportunity for dark DCs. Large facilities that are only distributing box-shaped items may be able to run with just one or two employees to oversee the system and resolve exceptions as they arise.

In fact, for any task that can be easily repeated and mechanized in distribution, Chaturbedi expects to see more automation as time moves on.

Don’t count human workers out

However, Chaturbedi won’t count out human labor just yet. As companies add layers to their distribution models and continue to try and meet quick delivery demands, there will be an increased “move from physical labor to knowledge work.” He shared that call centers have gone from Rolodexes to CRMs. Machines are taking over mundane work—but human workers “drive that outcome of the future.”

While you can expect distribution centers to continue to evolve, they are not going away anytime soon. As a leader in distribution and material handling for over 70 years, Global Industrial can supply the equipment you need to prepare for the future.

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