With Cyber Monday outperforming Black Friday, the spotlight is on e-commerce order fulfillment automation and the growing need for industrial distribution space.

For the very first time in American consumer shopping history, Cyber Monday generated more revenue than Black Friday. In total, US e-commerce exceeded $400B in 2015, up 25% YOY (year over year). Soon the US Commerce Department will announce that fourth quarter sales accounted for nearly 40% of online sales for the year. This growth trend is not surprising and retailers are still a part of the rise in new mega e-fulfillment centers.

Robert Carr reported in National Real Estate Investor that fundamentals for warehouse space have improved steadily over the past five years. The availability rate for industrial properties declined to 9.6 percent nationally in the third quarter, according to a report from commercial real estate services firm CBRE.

Net demand for industrial space is on pace to exceed 200 million sq. ft. this year, and the vacancy rate dropped to 7.3 percent, almost a full percentage point down from the third quarter of 2014, according to report from Cushman & Wakefield. Demand for class-A logistics product will continue to fuel the rapid increase in construction into 2016.

Dwight Hotchkiss, president of brokerage services and the national director of industrial with real estate services firm Colliers, says warehouse demand from retailers has been one of the top reasons for the improved industrial picture. Increased online purchasing, driven by rising smartphone and tablet use, has corresponded with retailer demand for more distribution center space. 

Bill Bastian II, former CEO of Bastian Solutions, reported that with much higher wages for warehouse workers in 2016, we see a dramatic growth in automation solutions, such as goods-to-person robotics. Here are some of the big e-commerce distribution centers planned for 2016 – 2018:

• S&S Activewear, a national promotional apparel wholesaler, will locate a new distribution center in Olathe, Kansas, creating 200 jobs in the Kansas City region. According to Trade and Industry Development, "The additional Midwest warehouse puts us over 1.5 million sq. ft. of inventory, with a big portion of that inventory in the most accessible region of the country. It will give our customers a larger overnight delivery area with later cut-off times," said Margaret Crow, director of marketing at S&S Activewear. "It will also have a positive impact on our service level in Bolingbrook by shifting some of that volume to Kansas City. We're always working to improve our shipping speed and accuracy and this is an important step in that direction."
   
• Dollar General Corporation started construction on its new state-of-the-art distribution center in Janesville, Wisconsin. Dollar General Corporation announced it has begun construction on its new state-of-the-art distribution center in Janesville, WI. It will be the 14th facility in the retailer’s growing distribution network. At full capacity, the approximately one million square-foot Dollar General facility is expected to employ more than 550 people to serve stores in WI and surrounding states. Dollar General plans to begin hiring in late summer 2016 with operations expected to begin in December 2016.
   
• Ulta Beauty said sales at its stores increased 22 percent in the third quarter of 2015 as the company continued to expand. Merchandise inventories for the quarter totaled $884.4 million, up $174.7 million from $709.7 million during the same period in 2014. Average inventory per store increased 10.9 percent in the quarter, which was primarily driven by the opening of a distribution center in Greenwood, IN, as well as investments in inventory to ensure high in-stock levels to support sales growth and incremental inventory for new brands and in-store prestige brand boutiques.

The efficacy of cost-efficiency with consumer migration away from brick and mortar retail shopping can only be sustained through automation. Unemployment rates in some of the locations referenced above are at ten year lows, driving wage pressure. Warehouse and distribution center workers who garnered under $10 per hour last year (according to the Bureau of Labor Statistics) are now commanding $15 per hour (and higher).

The high-SKU, rapid picking, ten thousand boxes per day shipped by 3pm distribution is required to evaluate and select automation solutions to offset the wage pressures on bottom-line profitability. Bastian Solutions insists if robots bring the product to the packers, there is a great improvement in productivity, job satisfaction and retention, and costly mis-picks are avoided. Businesses highly focused on e-commerce sales have decided it is time for distribution centers to automate.

Here are a few questions to ask when making that determination:

• Are my sales increasing? Has there been a growth trend over the past 2-3 years?
• Am I affected by seasonality? Did our operation handle the peak holiday season well?
• How many mis-picks occurred? Are we now struggling with returns processing?
• Did our customers receive timely order deliveries?
• Is my employee turnover high?

If responding with a resounding “yes” to many of these, then it is likely time to invest in material handling automation for large distribution e-fulfillment centers.

Beyond improving throughput, automation provides:

• Improved employee ergonomics by reducing travel between picks
• Better employee engagement and retention; you are not asking employees to walk miles a day, and high-tech systems are easy and enjoyable to use.
• Picking accuracy at or above 99.9%, providing better customer service and reducing returns
• Scalability to handle slow and peak seasons as well as future growth
• Reduced order cycle times to get products to customers’ doors faster

Learn more about e-commerce fulfillment automation from Bastian Solutions including customer case studies, popular technologies, and downloadable resources.

Author: Thomas Cutler