Inventory Throughput is Key for E-Commerce Warehouses

August 1, 2020
Inventory Throughput is Key for E-Commerce Warehouses

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.

Video Spotlight:

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

Discussion Questions:

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.


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