The document discusses the evolving role of distribution centers (DCs) in the supply chain amid rapid economic changes, emphasizing their necessity for adaptability and efficiency in managing inventory and fulfilling customer orders. It outlines various operational types of DCs, including order assembly and product mixing, and highlights the importance of strategic planning to address challenges such as rising costs and complex logistics. The future of DCs involves leveraging technology and innovative practices to enhance productivity while balancing the demands of a dynamic marketplace.

1. Warehousing & Storage
Count the Ways
Distribution Centers
(DCs) Add Value (Part 2)
Supply Chain Digital’s SECOND of FIVE part
feature shares with businesses how distribution
centers are important to the supply chain
By Thomas L. Tanel CTL, C.P.M., CCA, CISCM
President and CEO, CATTAN Services Group, Inc.Business Unit, Oracle
Visit us online at www.supplychaindigital.com
September 2012

2. Warehousing & Storage
Count the Ways Distribution
Centres Add Value
page 4
R
apid changes confronted by the global economy in the
last years have had a notable impact on the procedures adopted for
global distribution; perhaps more rapidly now than at any time since
the close of the last century. With those changes comes a shift in the
way we handle their challenges and recognise their value to operations.
Companies are searching for efficient distribution methods that enable broad
product assortment, a lower level of inventories, shorter customer order
fulfilment and lower transportation costs in order to achieve a more
efficient procurement process plus an improved level of customer service.
The introduction of corporate portals, online trading exchanges and
internet-driven commerce brings opportunity and challenge. It is not just
a matter of “click, pick, pack, and ship.” The Distribution Centre (DC) must
be more nimble and flexible than in the past as inventory restocking arrives
earlier and remains longer.
As a result, DCs are balancing inventory costs against tight domestic
transportation capacity, rising freight rates and volatile energy prices. An
adverse financial impact has occurred due to huge inventory versus
transportation tradeoffs in time and cost that are taking place in many
companies as supply chain strategies are being challenged.
The concept of distribution has evolved past the traditional DC toward an Distribution centres must balance demands
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September 2012

3. Warehousing & Storage
Count the Ways Distribution
Centres Add Value
emphasis on generating a configurable stock keeping
unit (SKU), product customisation and e-commerce,
plus the creation of a corresponding need for
operations with higher throughput demands and
shorter order cycle response times.
A pull don’t push ordering and planning philosophy
mean DCS have shifted emphasis from an inventorybased logistics to a replenishment-based logistics
orientation. From an e-distribution standpoint, the DC
must now be adaptable enough to handle a confluence
Distribution is becoming a more complex notion
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page 6
of multiple SKUs in the same carton or package. This
trend has resulted in a greater amount of less-thancase picking and “pick, pack, and slap” operations.
At the same time, from an e-fulfilment order
management standpoint, the DC must now be able to
handle online orders that involve a wider range of line
items or SKUs within a given customer order. As these
new e-fulfilment operations face much higher
throughput demands than the traditional DC scenarios,
there is increased use of sortation systems as well as
the need for highly mechanized or automated material
handling and storage equipment options.
Distribution operations have become more complex,
and as order cycle times have become shorter, what
was previously four types of operations have evolved
into twelve. Each one has the potential to add new
value to your operation. Finding the right balance of
storage space and product movement may require
thinking through the various types of operational
concepts.
September 2012

4. Warehousing & Storage
IS YOUR COMPANY
NEWSWORTHY?
As distribution operations
have become more complex, and as
order cycle times have become
shorter, the four types of operations
have become 12. Each one has
the potential to add new value
to your operation
SUPPLY CHAIN DIGITAL IS ALWAYS LOOKING FOR COMPANIES
TO PROFILE IN ORDER TO SPREAD THEIR DIGITAL FOOTPRINT.
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page 8
A PROFILE ON OUR WEBSITE
AN INTERACTIVE WIDGET FOR
YOUR OWN WEBSITE TO SHOWCASE YOUR COMPANY’S SUCCESS
Thomas L. Tanel, President and CEO,
Cattan Services Group Ltd
PRESS RELEASE DISTRIBUTION THROUGH THE WDM GROUP
NETWORK ANNOUNCING YOUR COMPANY’S SUCCESS
6
1. Service Parts DC – the use of a distribution centres to
hold spares or repair parts for the support of capital
equipment with a large inventory investment for a wide
array of external customer needs.
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2. Product Transformation – the use of a warehouse as a
central gathering point for product transformation to a
shelf-ready state in a manufacturing/retail environment,
or altering inventory to meet customer specifications.
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3. Order Assembly – the use of a distribution centre to fulfil
CONTACT US HERE
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September 2012

5. Warehousing & Storage
Count the Ways Distribution
Centres Add Value
unpredictable order patterns, to
accommodate a broad SKU mix and
ship same-day orders, as well as to
use cross docks whenever possible.
cross-docking that involves
switching transportation modes,
usually with unloading and
reconfiguration in between.
4. Product Mixing – the use of a
distribution centres to combine
items in the entire product line for a
single manufacturer from productoriented manufacturing facilities in
different geographic locations.
7. Merge-in-Transit – the ability to
pick up separate loads from two or
more different warehouses,
transports the loads to a location
near their final destination, and
then perform a “merge” operation
by combining components into one
order while the goods are in transit.
5. Cross docking – requires a truck to
pull up to a warehouse dock and
transfer stock directly from the back
of one truck into the back of
another for deployment to different
distribution centres or retail stores.
6. Transloading – a form of
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page 10
Warehousing technology has improved immensely
8. Pre-positioned stock – the
positioning of stock to meet a
perceived or anticipated need in a
‘bonded’ warehouse for ensuring a
timely response to customer order
fulfilment needs.
September 2012

6. Warehousing & Storage
Count the Ways Distribution
Centres Add Value
page 12
9. Postponement – the use of a warehouse as a final step
deferment or postponement until a customer places an
order for a quantity.
10. Flow-through – the use of the warehouse, in order to
support a manufacturing or distribution operation, as an
inventory staging process which relies exclusively on forward
picking locations and fills them with only enough inventory
for the immediate future.
According to Yellow Freight Corporation, a major US trucking
firm, there are four main activities generally included under
the broad heading of flow-through. They are:
• Supplier consolidation – consolidates purchase orders
from multiple suppliers going to a single distribution centre.
• Pool distribution – a truckload of product from a
distribution centre is sorted into individual orders for
delivery.
• Import deconsolidation – similar to consolidation, with
import deconsolidation the product flow originates at the
port and goes to a distribution centre.
• Flow through order fulfilment – product arrives from
vendors in bulk at a flow through centre where it is then
allocated to orders.
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The output expectation of warehouses has increased
11. Order Consolidation – the use of the distribution centre to
gather product which is to be shipped to a final destination.
12. Hub and Spoke Distribution – the reverse of Order
Consolidation.
Adaptation to change
There are two important dimensions of distribution
September 2012

7. Warehousing & Storage
Count the Ways Distribution
Centres Add Value
operations: space and movement. Space involves
storage requirements and protection for physical
handling activities. Movement includes the transfer of
material and products within the DC itself and
between the DC and the transportation system. We
cannot forget that the two dimensions are interrelated;
nor can we overlook the trends that make that
relationship more and more complex.
In a world of increasing uncertainty, scenarios
provide focus on things you can’t avoid. Don’t wait for
page 14
things to happen; plan for contingencies through
scenario planning options.
Look at how distribution assets, resources, and
processes can help your business through constant
consideration about how you will anticipate and
respond to turbulent conditions. DC operators should
think about alternative scenarios and how they would
respond to them before they occur. Scenario planning
tests whether a current strategy makes sense, as well as
points out the limitations for doing business in
All parties should have Supply
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September 2012

8. Warehousing & Storage
Count the Ways Distribution
Centres Add Value
Leading logistics solutions
turbulent times.
Sometimes it’s easy to forget that opportunities are
usually created by difficult, turbulent conditions. DC
operators get paid to manage the exceptions, not just the
routine. According to Philip Kotler, one of the world’s
experts on the strategic practice of marketing, “you need
to be able to withstand stresses, pressures, or changes in
procedure or circumstance and to cope well with
variations in operating environments with minimal
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page 16
damage or alteration.” DC operating management are
used to quickly reacting and rebounding in the face of
risk and uncertainty – however today sensitivity to the
“New Normal” must have a more heightened sense of
awareness than ever before.
If such resiliency is to be exercised and exploited,
companies must have adequate control and visibility of
both its supply and demand chain. To do that, sound
distribution logistics decisions must form the
foundation for the development of strategic flexibility
and responsiveness at the DC level.
For the next several years, DCs are likely to face the
continuing challenge of doing more with less. This
challenge can, and should be, embraced as an
opportunity to make dramatic improvements. Based on
DCs’ costs breakdown, the order picking area is the most
opportune place to attack because of travel time and
distance. Experience indicates that enormous
opportunities for improving the productivity of our
distribution logistics lay ahead if we are smart,
September 2012

9. Warehousing & Storage
innovative, and courageous in rethinking
the status quo. Labour for all activities
below represents 60-70 percent of the
costs inside the four walls of the DC.
Order picking strategies must
consider at least six different
variables:
Count the Ways Distribution
Centres Add Value
page 18
6. rder picking communication and
O
validation approach/technology (RF,
pick by label, voice, RFID, etc.)
Receiving
10%
Ask yourself, “How prepared am I to
keep my distribution centre facilities
Storage
15%
more nimble and flexible than they’ve
been in the past?”
Shipping
20%
Order Picking
55%
The answer lies in recognizing the true
1. Unit of measure (pallet, cases, eaches,
‘Pie chart depicting
value of your distribution centre operations
etc.)
Distribution Centre functions
– and incorporating into your planning
2. torage mode to be used (floor
S
those elements that will keep you flexible and
stacking, selective rack, pallet flow, carton flow,
responsive to an inevitably changing environment.
etc.)
Assessing and adapting your DC early and often can
3. otential use of automation (pick-to-belt, carousels,
P
be one of your best assurances that you’ll survive with
ASRS, etc.)
the fittest. scd
4. rder release method (discrete order release,
O
waves, etc.)
Thomas Tanel is a founder and CEO of CATTAN Services
5. icking method (discrete order pick, cluster
P
Group, Inc. Tom has an international reputation as a
Subject Matter Expert and Seminar Leader in Logistics
picking, batch picking, etc.); this is usually directly
and Supply Chain Management.
connected to the order release method
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September 2012