Distribution Dot.Com

May 20th, 2008

What’s the right distribution model? 

 The dot.com bubble might have burst some eight or nine years ago, but increasingly, companies are asking KOM International about e-commerce distribution.  Either they are looking at e-commerce as a complimentary channel for their products or it is their sole means of selling to a customer.  Sometimes, companies want a greenfield design for an exclusively e-commerce fulfillment center or they want to re-engineer an existing operation to incorporate an e-commerce space. 

Like any distribution design, e-commerce fulfillment begins with modelling the entire operation from receipt to shipping.  Product will be received, putaway, replenished into pick slots, picked, packed and shipped.  At each stage, the appropriate design is a function of the physical characteristics of the operation it will support, not how the order got into the queue.  In fact, it is a mistake to think that two e-commerce operations are alike and would have similar distribution designs.  Consider an electrical supplies company doing B2B and a grocery company doing B2C:

The electrical supplies company might have much smaller orders (e.g., 1 - 2 lines) versus the grocery company (e.g., 20 - 25 lines).  The electrical supplier deals with a single temperature zone in distribution and delivery, the grocer - three or more.  Inbound, the electrical supplier might have almost everything coming in LTL whereas the grocer has truckloads of some very specific items (e.g., Coke and bottled water).  On the shipping dock, the grocer is loading delivery trucks which run within a service area; the electrical supplier might be doing parcel and LTL shipments across North America.  Both companies are dot.coms, but they would not look alike.

Two more thoughts:

1) Avoid re-inventing the wheel.  The forebearers to the dot.com fulfillment center are consumer-direct catalog operations, home shopping network distribution centers and the folks who ship you the Magic Bullet when you phone the 1-800 number at the end of an infomercial.  These businesses have been handling small orders across wide sku ranges for decades and the lessons they have learned can be profitably applied to e-commerce.

2)  Because your website is full of bells and whistles doesn’t mean your operation must be.  Often, merely saying “e-commerce” translates into expectations of million dollar budgets for automated picking and sorting technologies and miles of conveyor.  Sometimes, that’s called for - but only when the numbers support it.  Wonderful technologies exist to help companies manage throughput requirements and/or labor availability issues - but simple, conventional handling systems can be the optimal solution which get overlooked due to the high-tech aura associated with the dot.com business.

Entry Filed under: Design & Layout