Although more and more business is being conducted through cyberspace, one historical constant remains: customers (both business to business and business to consumer) still expect the real, working, three-dimensional products they ordered to be delivered to their doorstep. Failure to do this well means big trouble for the shipper. Doing this extremely well can mean tremendous prosperity for all companies involved in that success, including public warehouses.

As dot.com companies continue to proliferate, many are forced to face a harsh reality. Their business models have not taken the current shortcomings of the supply chain into account -- particularly in the area of public warehouses -- which they assume are able to handle whatever transactional demands they supply. In fact, these warehouses are often unprepared technologically to do business in today's e-commerce world.

Understanding the E-commerce Reality
"The ability to accept and incorporate e-commerce business into its operation gives a public warehouse a tremendous strategic advantage," noted Carl Brewer, president of Integrated Warehousing Solutions in Oak Brook Terrace, IL. "It allows you to play in a realm of business where the technology is required to get the deal. It's a case of, 'If you don't have this, you do not get our business. Period. End of conversation.'"

Integrated Warehousing Solutions is a Warehouse Management System (WMS) provider to the warehousing industry. According to Brewer, the crux of the problem lies in many warehouses' inability to grasp, adapt, and adopt the power of today's technology. And that is keeping warehouses that are getting by, or that are moderately successful, from joining the party and becoming runaway success stories.

"Warehouse managers who are uncomfortable with technology remain unconvinced about the tremendous advantage technology can give them," said Brewer. "Some of the people running warehouses have been with their operation for 40+ years and know the operation from the ground up. But if they're unwilling to embrace and employ the kind of technology that will let them compete for e-commerce business, they're going to miss out on a whole new frontier of profits that's been opened up."

It doesn't have to be that way. E-commerce has brought a lot of money to the table that warehouses can be positioned to share in, if they satisfy the shippers' requirements. Dot.com companies are searching for warehouses that can do business with them, and their customers, over the Internet. They won't fax orders to a warehouse. They don't want to send files. They want to work with a paperless, web-based warehouse partner that uses technology to interface with customers, improve customer service and order accuracy, reduce costs, and be responsive to the demanding supply chain market. "If you operate a public warehouse and you can do that, you are going to be very profitable," said Brewer.

Incorporating Technology To Win New Business
As an example, Brewer cites his company's experience with Dart Warehouse in Naperville, IL, just outside of Chicago. Five years ago Dart had three small warehouses in the area and was struggling to remain profitable. Today, located in Illinois' 'Technology Corridor,' the company operates one of the largest warehouses in the midwest and, in addition to handling a roster of blue-chip customers, it is a model of how public warehouses need to transition in order to grow.

How did they do it? Herb Duggan, General Manager of Dart Warehouse Midwest, is quick to credit Dart's decision to invest in cutting-edge software to run in their facilities. "We knew we needed a robust system that could handle significant volume-millions of shipments at a crack-because that's what we wanted to get more involved with. We needed to become a 'paperless warehouse' and offer web-based visibility. We needed to provide piece-picking/packing for the dot.coms, which was a service we didn't previously offer. We also wanted technology that would help us maximize the use of the warehouse and give us tracking visibility for knowing the location of every item in our facility at any given time. We visited Integrated Warehousing Solutions customers that were using IRMS software and became convinced that it could meet these objectives."

Grasping the Opportunity
"The ability of Dart's management to understand that warehousing without technology is only a commodity business, and that participating in the e-commerce revolution meant accepting rather than ignoring technology's benefits, played a huge role in their successful transition," said Brewer. After the transition they were no longer a commodity warehouse business, but a valuable business partner to shippers needing logistics solutions.

"One of the most important aspects of this software is the ability it gives us to receive orders over the Internet," Duggan commented. "In fact, we have multiple ways to receive orders now: EDI, Internet, T1 direct lines, modems, flat files and disks. There's a lot of versatility with this system."

This kind of foresight by Dart and the solution availability from Integrated Warehousing Solutions led directly to a very substantial increase in business from long-time customer Sears Roebuck and Company, which was looking for a warehouse partner that could satisfy the demanding fulfillment needs of its catalog business.

"With Sears, for instance, orders are forwarded to us over the Internet instantaneously upon approval of the customer's credit. The technology makes it possible for their order to be shipped the same day the customer places it. And this technology provides real-time order status visibility to the shipper as well.

"The ability to retrieve orders in a web-based environment has also allowed Dart to move from a reactionary to a proactive stance, controlling their own destiny within their operation," said Brewer. "Instead of reacting to a stack of paper that the shipper sends over on their networked printer every day, Dart can now say, 'I'll print and manage the orders based on current circumstances and our service level agreement.' It places the control in the warehouse manager's hands."

99.99% Order Accuracy
Dart used the IRMS Warehouse Management System developed by Integrated Warehousing Solutions to improve the internal efficiencies of the warehouse as well. The order accuracy rate has been increased to a near-perfect 99.99%. Data entry by humans has been reduced by 75%, lowering the possibility of error from 1-in-300 down to 1-in-5 million due to the scanning technology that has replaced it. Radio frequency technology interfaces with computer technology to certify the product and item location of the order generated online. Volume (as measured by cases-per-man-hour) has actually increased while overall labor costs have been reduced by 50%.

In the warehouse management system industry, it has been calculated that a company going the WMS route will save 25% to 35% right off the bat with productivity gains. Dart managed to gain a 53% savings. These productivity gains were largely realized by the reduction of employees' "travel time". "Sixty percent of a warehouse employee's time is spent 'traveling'," noted Brewer. "Software can optimize travel and make it more efficient. How? Through things like transaction interleaving, A-B-C analysis or stock velocity slotting, which might tell you to move certain hot products closer to the door, or closer to your output areas. This control allows you to positively impact the single biggest use of your employees' time and pick up productivity gains."

The IRMS software also gives Dart the ability to "model" the warehouse and manage its physical space into sections, each of which can "increase" or "decrease" in size depending on given business circumstances. "The first section is for fulfillment, whether it is catalog or e-commerce; the second is for retail replenishment; and the third section is for bulk storage of food goods," said Duggan. "This kind of balance gives me the ability to hold staffing throughout the course of the year and offset the seasonal aspects of the business."

Said Duggan, "Dart had been doing business with Sears for 30 years, and I've been involved with them for 20 of those years. When they relaunched the Sears catalog they kept going with the most requested book, the Sears Wishbook, which became available on the Internet a year ago. Sears needed a strong partner to make that successful, and our operation convinced them that we were that ideal partner for entry onto the internet. Now, in addition to the Wishbook, we're also handling Sears.com, Sears Retail, and we have done 'Comfort and Style' and 'Hollywood Collections' catalog fulfillment for them as well. Additionally, Dart has gone on to service other high tech companies such as Canter Education, Baby C, Kelloggs, Levis, Crate & Barrel and numerous others. "Dart now has so much more to offer than any paper-based warehouse could ever have," commented Brewer. "And that's what shippers today are looking for. They don't want to call with questions and get pulled into some paper chase, they want to be electronically updated by a business partner that knows what's going on."

Defining the E-business Warehouse
The defining point today is transitioning from a traditional, full-pallet warehouse to a split-case and piece-picking-and-packing operation doing full service fulfillment. Right now, split-case fulfillment is what breaks most public warehouse's backs. Today's technology makes direct customer shipping feasible.

"Warehouses need to be part of the shipper's supply chain," Brewer continued. "They must be able to integrate information back into corporate host systems and be part of the inventory and corporate functionality. They must be able to handle and process returns, and provide a seamless interface with both corporate and consumer requirements."

A traditional warehouse today has few choices. They can continue as-is and hope that their customers stay as technologically-deficient as they are. They can be late-adapters and achieve some success, but because they'll be so far behind on the learning-and-experience curve they won't be considered on most short-lists of potential vendors. Or they can adapt and adopt technology and its benefits now, and be at the forefront of a new business tidal wave.

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