In today's fast-paced market, customer expectations for swift delivery are higher than ever. A significant 91% of supply chain executives report that these expectations have increased over the last 12 months. 94% are striving to meet a two-day or less delivery window for their customers. This demand for speed is not limited to small parcels; for large or bulky items, 38% of customers expect two-day service, highlighting the pressure across all product types.
Businesses must adopt strategic logistics network designs to meet these rising demands while maintaining cost-effectiveness. Hybrid models that blend internal resources with outsourced services are becoming increasingly popular. These models allow companies to manage overflow, seasonal peaks, or specialised project volumes without overextending their resources. This article examines various network strategies, supported by recent statistics, and explores how logistics management platforms can facilitate efficient outsourcing without sacrificing control.
1. Centralised vs Decentralised Logistics Networks
Centralised National Warehouses
Centralised warehouse models offer cost efficiency by consolidating inventory in a single location. This approach reduces working capital requirements and simplifies operational control. Companies can achieve economies of scale, streamline processes, and focus on continuous performance improvements. Managing one facility also simplifies staffing and resource allocation.
However, centralisation can lead to longer delivery times, particularly for customers located far from the warehouse. With 83% of customers expecting delivery within two days or less, relying solely on a centralised model may not meet these expectations. Fixed contracts or long-term leases can become burdensome if business volumes change, resulting in underutilised space or the need for additional overflow storage.
Decentralised Regional Fulfilment Centres
Decentralised fulfilment centres position inventory closer to customers, reducing delivery times and enhancing service levels. For parcel shipments, 38% of customers prefer two-day delivery, and 29% prefer one-day delivery. By having regional centres, businesses can better meet these preferences. This setup allows companies to adapt more readily to regional demand variations and navigate local disruptions. Establishing a multi-tier network enables differentiation in storage and inventory management for fast-moving and slow-moving products.
Despite these advantages, decentralised networks can appear more costly and complex to manage. Coordinating multiple logistics service providers (LSPs) is a challenge cited by 48% of companies, particularly in finding an LSP with a national network. Managing higher overall inventory levels requires effective strategies to prevent stock imbalances. Additionally, 39% of businesses highlight the costs associated with operating multiple warehouses as a significant concern.
Balancing Factors
Choosing between centralised and decentralised networks involves balancing speed, cost, operational complexity, and working capital pressures. With 52% of companies fulfilling orders year-round from multiple distribution points, many find that a hybrid approach allows them to optimise their logistics network to meet specific business needs.
2. In-house Operations vs Outsourced Logistics
Owning and Operating Fulfilment Centres
Operating fulfilment centres in-house offers advantages in terms of branding and direct integration with company systems like Enterprise Resource Planning software. This approach provides a sense of control over operations and alignment with company standards.
However, owning facilities requires substantial capital investment or long-term leasing commitments. Fixed capacities may not scale easily with fluctuating demand, leading to inefficiencies. Personnel management, maintaining systems, and ensuring operational excellence add to the challenges, especially in a market where 91% of executives note increasing customer expectations for speed.
Hiring Warehouse Managers
The role of the warehouse manager is pivotal. As the individual responsible for overseeing the day-to-day activities, a skilled warehouse manager ensures that processes run smoothly and efficiently.
Skills and Qualifications
When hiring warehouse managers, look for candidates with a blend of skills and relevant experience.
Experience in Warehouse Operations: Candidates should have a background in warehousing, logistics, or supply chain management. Having demonstrable experience with various warehouse management systems (WMS), existing warehouse processes, warehouse workflows, shipping operations and the picking process is a significant advantage.
Leadership and Team Management: Effective leadership is crucial. Look for individuals who have demonstrated success in managing previous warehouse staff, resolving conflicts, and fostering a collaborative environment.
Analytical Skills: With the need for real-time data-driven decision-making, the ideal candidates should be proficient in analyzing inventory levels, understanding workflow optimization and inventory tracking. They should also be able to show evidence that they understand what the key performance indicators of efficient operations look like.
Outsourcing to External Logistics Service Providers
Outsourcing logistics functions to LSPs provides flexibility and access to specialised expertise. Currently, 59% of companies use LSPs to achieve improved on-time delivery with faster shipping speeds, and an additional 31% are seeking LSPs to meet this need. External providers often have multi-node networks, advanced operations management systems, and trained personnel who can deliver high-performance fulfilment services. Outsourcing allows businesses to scale capacity up or down in response to demand without significant capital expenditure.
Challenges include dependence on external providers and potential difficulties in integrating their systems with internal processes. Achieving seamless data exchange and automation requires careful planning. To maintain control and oversight, businesses can utilise logistics management platforms that offer real-time visibility and coordination across multiple LSPs.
3. Dedicated vs Shared Warehousing and Fulfilment Capacity
Dedicated Capacity
Dedicated warehousing provides customised solutions tailored to a company's specific needs. This approach offers predictable capacity and service levels aligned with business requirements. It is particularly effective for stable operations with consistent demand and minimal variability.
The drawbacks include a higher total cost of ownership and limited flexibility to handle demand spikes or changes in the product portfolio. If demand decreases, dedicated facilities may become underutilised, leading to increased per-unit costs. In a market where 38% of companies struggle with stockouts and overstocks, the inflexibility of dedicated capacity can exacerbate inventory management challenges.
Shared Capacity
Shared warehousing allows companies to share resources and costs with others, offering greater flexibility and scalability. This model enables access to best practices and advanced technologies that might be otherwise unaffordable. Collaboration opportunities, such as co-shipping and shared transportation, can further reduce costs.
Potential disadvantages include the possibility of lower prioritisation during peak periods and limitations in customisation. Small to medium-sized enterprises may find this model attractive but need to manage expectations regarding branding and service levels.
Making the Choice
The decision between dedicated and shared capacity depends on factors like business size, demand forecasts, variability, and long-term objectives. Companies must weigh the benefits of customisation and control against the need for flexibility and cost efficiency.
4. Additional Benefits of Outsourcing Models: Speed, Agility, Continuous Improvements, and On-Demand Services
Outsourcing offers advantages beyond basic fulfilment capabilities. On-demand services are ideal for handling seasonal demand spikes, project-based initiatives, or entering new markets. This flexibility allows businesses to respond quickly to changing conditions without significant upfront investment.
Fast delivery has a direct impact on business performance. Companies offering delivery within a two-day window see a 47% median increase in conversion rates. Furthermore, 89% of surveyed companies report that faster deliveries have improved their conversion rates. Additional benefits include reduced cart abandonment (73%), higher customer retention (90%), and improved customer experience (95%).
Access to multi-node networks and advanced technologies enables faster response times and improved customer satisfaction, even for smaller clients. External providers often incorporate continuous improvement practices into their operations, benefiting companies through enhanced performance and efficiency.
5. Leveraging Logistics Management Platforms for Seamless Outsourced Operations
In an environment where businesses may work with multiple fulfilment partners and combine internal and outsourced operations, logistics management platforms play a critical role. These platforms centralise control over various LSPs and operational environments, providing real-time visibility, coordination, and oversight.
Effective inventory management is a top concern, with 45% of companies struggling to maintain real-time inventory visibility and 36% finding it challenging to predict cross-channel demand accurately. Common tools used to streamline inventory management include order management systems (51%), artificial intelligence and machine learning (50%), and warehouse management systems (42%).
By integrating with multiple providers, businesses can monitor performance, manage contracts, and handle payments efficiently. Logistics platforms support operational standards and compliance with service-level agreements, enabling companies to maintain control over their supply chain while leveraging the benefits of outsourcing.
For companies employing hybrid models, these platforms offer a comprehensive view of both in-house and outsourced logistics activities. This integrated approach enhances decision-making and optimises supply chain performance.
Conclusion: Finding the Right Balance for Optimal Fulfilment Performance
Achieving the optimal balance in warehouse and fulfilment operations requires a strategic combination of planning, technology, and adaptable logistics models. Outsourcing provides speed, agility, and access to advanced capabilities, allowing businesses to respond effectively to market demands.
With the rising costs of conducting business on online marketplaces—93% of respondents report cost increases—optimising fulfilment operations becomes even more critical. By utilising logistics management platforms, companies can retain full visibility and control over their operations, even when working with multiple external providers or combining in-house and outsourced solutions. This approach promotes alignment across the supply chain, supports continuous improvement, and enhances competitiveness.
Managers responsible for designing and running logistics operations must consider the unique needs of their business, weighing factors such as cost, speed, flexibility, and control. By thoughtfully integrating various strategies and leveraging technology, companies can optimise their fulfilment performance to meet customer expectations and drive success.
Warehouse and Fulfilment Operations FAQs
What are Warehouse Operations?
Warehouse operations encompass the systematic processes involved in storing, handling, and distributing goods effectively within a warehouse environment. These operations are critical for ensuring that products move seamlessly from production to the end consumer, thereby enhancing supply chain efficiency.
What is a Warehouse Operative?
A warehouse operative is a vital member of the supply chain team, responsible for executing various tasks within a warehouse to ensure the smooth operation of logistics and inventory management. These professionals play a key role in managing the flow of goods, from receiving deliveries to picking, packing, and shipping orders. Their contributions help keep the supply chain moving efficiently and effectively.
What does a warehouse operative do?
Warehouse operatives perform a wide array of tasks that are essential to maintaining streamlined operations within the facility. Here are some of the core responsibilities they undertake:
Receiving Goods: Upon delivery, warehouse operatives inspect incoming shipments for quantity and quality. This involves checking items against purchase orders and logging any discrepancies, which ensures that inventory records are accurate from the outset.
Inventory Management: Maintaining inventory levels is a critical duty of warehouse operatives. They regularly count stock, update databases, and track product movements. By effectively managing inventory, they help prevent stock shortages or overages, which can disrupt the supply chain.
Picking Orders: When customer orders come in, warehouse operatives are responsible for locating and retrieving products from their designated storage locations. This requires keen attention to detail to ensure the right items are selected, as errors can lead to customer dissatisfaction and increased operational costs.
What are fulfilment operations?
Fulfilment operations refer to the end-to-end process of receiving, processing, and delivering orders to customers. This critical function bridges the gap between inventory management and customer satisfaction, ensuring that products are delivered accurately and on time. Fulfilment operations encompass various stages that rely heavily on the collaborative efforts of warehouse operatives, technology, and logistics.