Decentralized Warehouse Models Offer Innovation Opportunity

Michael Clark
Wed, Jul 19, 2017
The Industry 4.0 movement is transforming the distribution and fulfillment sector.
The Industry 4.0 movement is transforming the distribution and fulfillment sector.

Decentralizing a business' warehouse setup creates overhead and complexity that has long left companies working to bring resources into a central location. However, the rise of robust data collection and integration tools has eliminated many of the challenges associated with warehouse diversification, giving organizations an opportunity to spread out their inventories in a strategic way.

This is particularly evident for smaller organizations, as a Supply Chain Management Review explained that these companies have a simple opportunity to improve the supply chain by moving some asset storage on-site. In this situation, businesses that have long relied on the supply chain to deliver goods just in time for production while keeping few resources on site can partition off a part of their facility to serve as a warehouse, allowing for more flexibility. This may be a simple version of a distributed warehouse model, but even this method is highly reliant on careful collaboration between supply chain and warehouse managers.

Now consider the situation for larger organizations. An e-commerce company could open distribution centers on both coasts of the country, and one in the Midwest, to more easily get data out to customers in those areas. In this situation, however, inventories would need to be managed across the entirety of the supply chain, at each warehouse and in stores to provide complete transparency into operations. This type of complexity meant that, for a long time, only the largest businesses with the most capital to spare could establish distributed warehouse models. The Internet of Things is among the trends changing this situation.

IoT Disrupting Warehouse Models
A Deloitte report explained that the Industry 4.0 movement, which entails the convergence of IoT devices and digital technologies in industrial sectors, is creating an environment in which the entire warehouse sector is changing. For a long time, most warehouse operations centered around stockpiling goods and providing a safe, secure repository for assets. In more recent years, the move toward Industry 4.0 has led to a greater degree of velocity and flexibility in the warehouse, contributing to the rise of the distribution center - a warehouse focused on getting products out to customers or project stakeholders.

All of this is made possible because of Industry 4.0 technologies that bring together digital and physical systems to provide visibility across the supply chain and out through production. Deloitte said that the warehouse industry has long relied, to some degree, on connected technologies to automate some data management procedures. Industry 4.0 adds a greater degree of connectedness to the enterprise, giving businesses a chance to automate more processes, 

Using Mobility Systems as the Foundation for Innovation
Imagine you run a small manufacturing plant creating consumer goods. The business has established a direct-to-consumer sales method based around an e-commerce site and the general workflow involves bringing in raw materials from suppliers, completing production runs and shipping goods out to customers.

In a centralized warehouse model, you'd probably end up with one major warehouse and distribution center located near your production lines. This way, your suppliers, who would offer everything from raw materials to manufactured parts that you need, would be able to deliver items directly to where they will be used. To support this model, you will need some sort of communications setup between your production teams, warehouse management and suppliers to make sure inventory levels remain solid at all times. In most cases, this will happen within an enterprise resource planning system, as the ERP will keep track of inventory levels, analyze work orders for production and reorder products through a purchasing module as needed. This is only possible, however, if the ERP system is integrated with warehouse management technologies, including dedicated solutions such as mobile data collection devices like barcode scanners.

Of course, while all of this is happening, you must also move products out to customers. This represents an entirely different workflow. Instead of accepting and processing large shipments from partners, your warehouse teams need to quickly process, package and distribute individual orders. Those orders may be compiled onto pallets and sent out in bulk, but the administrative work must still be done for each order as its own entity. The ERP integration and mobile data collection offered in Industry 4.0 models is especially important when operating at the pace, as letting users quickly make and receive updates is essential.

The underlying issue in all of this, however, is that having both of these major processes happening in a single warehouse leaves two teams operating alongside one another even though they have vastly different needs. Decentralizing the warehouse model eliminates this problem by placing distribution and fulfillment centers in strategically viable locations based on your customer base. The mobile data collection and ERP integration systems we've already discussed still allow for seamless communication between stakeholders. The big difference is that the smaller distribution centers can notify the warehouse of when they need stock - often through automated restocking orders - and the central warehouse can prepare and ship those orders in bulk.

A decentralized warehouse model offers more flexibility and allows for greater strategic alignment with warehouses. After all, getting fulfillment centers close to the location where goods are needed simplifies many aspects of operations. This is made possible by the rise of Industry 4.0. Connected devices spread across facilities and user groups lay the foundation for rapid data gathering. Whether users have mobile barcode scanners or voice picking headsets, they can make quick updates to inventory management systems. Furthermore, modern remote facility management technologies make it easier to interconnect diverse warehouse locations without running into data synchronization problems.

The Industry 4.0 movement describes an idea built around using data to inform and accelerate operations across a variety of settings. In the warehouse, the technological trend can make it easier for organizations to decentralize their warehouse models, potentially simplifying supply chain management and allowing for strategic resource use within distribution settings. This isn't necessarily for every business, but foundational technology is needed in a centralized warehouse model as well.

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