Dive Brief:

• As a side effect of an acquisition in 2012, DC Dental's warehouse needs grew by 54% overnight, leaving the company's 30,000 square foot warehouse to near capacity, according to a Kardex Remstar press release.
• Looking for a solution, the company decided not to partner with a third-party logistics provider, but instead invest in a pick and pass fulfillment automated solution. The solution allowed the company to handle the volume increase, using 73% less floor space and spending 67% less on labor costs.
• The new technology allowed the company to employ only four order pickers, compared to the previous 12 order pickers required, recover 9,500 square feet in storage space, and extend cutoff time by an hour due to speed of picking. The company stores 20,000 common dental products for quick fulfillment.

Dive Insight:

The case study highlights the various interrelated needs warehouse managers must consider: space, handling capacity, handling speed, labor, safety and customer service.

DC Dental's 2012 acquisition may have allowed it to increase its scale, but its warehouse managers had to deal with the side effect of a boost in inventory that was previously unaccounted. This rapid increase in turn took up large amounts of space and allowed the company to consider whether, previously, space and picking processes were not being efficiently used.

Of course, it does not take an acquisition to lead to a surge in supply. Short-term shortages in competitive products, new clients and adjustments to increases in consumer demand may also have a similar effect on warehouse space. While the warehouse manager will typically account for safety stock, etc., in the facility's floor plans, rapid growth may come suddenly. Technology, as DC Dental shows, can help fill in that gap.

The problem of sudden surges in supply are more often faced by 3PLs, but the reason for adopting new technology to adapt to these shifts remains the same. The warehouse manager's product is its customer service, and given a disruption the company has the option of shifting any input except speed and quality of fulfillment. Controlling customer service is essential for a distributor, so outsourcing is less enticing.

In other words, labor, space, handling speed and capacity can all be upgraded to meet the demands. A 10% increase in volume may require more temporary labor, or temporary disorder in space, but a 54% rise likely requires a full shift in the production possibility frontier. 

The DC Dental case study shows but one example of a shift that is occurring at the national level. Simply, warehouses are getting larger and more automated as their clients' needs shift. At the retail level, for example, statistics show e-commerce volumes continue to boom — which has brought with it a new challenge for distribution centers: sorting larger volumes of diverse SKUs into individual packages. At the manufacturing level, meanwhile, inventory levels continue to contract, which means companies are storing less independently and likely rely more on outsourced storage providers for storage and delivery of emergency parts and components.

Hence, the logistics boom. However, many worry that as this trend of increased capacity needs forces distribution centers to fulfill more, more quickly, the baseline of labor needs will decrease. As of now, employees benefit from an overall increase in the capacity pie, but some fear the share of involvement will decrease.