The rise in e-commerce has been accelerated by the COVID-19 pandemic.
E-commerce requires three times the warehouse space over brick-and-mortar retail operations. A real key to managing a warehouse efficiently is inventory throughput. Wayfair, for example, focuses on throughput and uses a chase demand strategy to staff warehouse operations to obtain efficiency.
- Inside An E-commerce Warehouse (Oct 12, 2016, NDTV)
- E-Commerce Automation at Newegg’s Robotic Distribution Center (Oct 16, 2018, Bastian Solutions)
- Designing an Efficient Warehouse Layout for eCommerce, Assembly and Distribution with Shipedge (Jan 28, 2019, ShipEdge Systems)
- The Evolution from Warehouses to e-Fulfillment Centers (Sept 28, 2018, Layton Construction)
This post is based on the Supply Chain Dive article, Prologis: Demand for warehouse space will rise alongside e-commerce growth, by Matt Leonard, June 18, 2020, and the YouTube videos in the Spotlight. Image source: vitpho/123RF
1. Wayfair uses a chase demand strategy to staff the warehouse operations. What other aggregate planning strategies could Wayfair employ? Is the chase demand strategy the better option? Why or why not?
Guidance: Students should consider all the aggregate planning strategies in the textbook. Lead the discussion by asking about the pros and cons of using each strategy as applied to an e-commerce company like Wayfair. Students may recommend a hybrid strategy as a better option or agree that the chase demand strategy is still the top choice. A level production strategy is not likely to be the most efficient or applicable. This is a good question to review the basic tenets of aggregate planning strategies.
2. Why is inventory throughput the key metric at Wayfair?
Guidance: It may be good to review throughput as a metric before proceeding to a discussion. Wayfair, like any retailer, needs to move inventory quickly to cut costs and satisfy customer demands. Throughput is a bottom-line metric for warehouse efficiency. Ask students what other metrics of warehouse operations are most relevant for inclusion in a Balanced Scorecard for Wayfair. This should lead to a wider discussion of the importance of warehouse operations in driving costs down, requirements for internal financial investment in warehousing, and impact on the customer.