The growth in e-commerce has transformed warehouse and distribution centers to mega fulfillment centers. The global shift toward e-commerce is changing how the retail and logistics industries operate. This trend affects all aspects of the retail industry including the strategic location of fulfillment centers and total real estate footprint.
As e-commerce retailers seek to drive profitability, to differentiate their offerings and to improve time to market, logistics facilities are increasingly viewed as revenue drivers. As e-commerce logistics models develop, they will drive huge changes in physical distribution networks comparable in many respects to previous changes generated by the rise of global sourcing, or the earlier centralization of deliveries to retail stores via retailer-controlled distribution centers. This will give rise to a new class of logistics and distribution properties including mega e-fulfillment centers, parcel hubs, delivery centers, local urban logistics depots for rapid order fulfillment, and returns processing centers.
The operational requirements behind a successful fulfillment center are also different than for a distribution center, it is the business and operations strategy that drives the order fulfillment network. The capabilities needed for each company’s e-commerce strategy are customized and include developing flexible solutions for shorter time horizons, understanding the balance between automation and constraints, and properly sizing the packing operation. Peak shipping times are more intense in fulfillment centers, orders sizes are smaller, but volume is very high.