Concept of smart factory and 5G for industrial. Autonomous Robotic transportation or Automated guided vehicle systems(AGV) operating transfer box in automated warehouses.3d rendering and illustration, Concept of smart factory and 5G for industrial. Autonomous Robot

How companies are achieving distribution transformation at speed and scale

Special thanks to Ron Grove for co-authoring this article.

Redefining the role of distribution centers and deploying a warehouse management system will help improve global supply chain efficiency.

  • Distribution centers play an increasingly important role within global supply chains for organizations seeking to streamline operations and reduce costs.
  • Deploying a holistic warehouse management system can help organizations transform their global distribution networks and improve performance.
  • Three pillars are key to the successful deployment of a streamlined, more efficient global supply chain: prepare, measure and sustain.

The role of distribution centers within the broader supply chain has assumed increasing importance as organizations contend with disruptions triggered by the COVID-19 pandemic, soaring inflation rates and the evolving demands of consumers for quicker delivery.


Moreover, escalating costs associated with distribution — from a 16% increase in rent per square foot to a 5.2% surge in average hourly earnings within the logistics sector¹ — are compounding the pressure on distribution centers across three fundamental areas. Organizations need to address these areas, defined as optimizing the operating environment, fostering improved workforce performance and elevating technology to streamline workflows, as they transform their distribution networks by deploying a warehouse management system (WMS).


However, most organizations task their IT department with implementing a new WMS, which sometimes leads to a lack of alignment with current and forward-looking capabilities and the overarching business strategy. This often results in a deployment burdened with legacy constraints, limited scalability, unmet performance targets and a suboptimal return on the investment, all of which leave organizations questioning: What went wrong?


The foundation for building and enabling differentiating capabilities, and overcoming challenges, lies in a warehouse transformation framework. This approach contains three pillars: prepare, sustain and measure. These three pillars cover the entire realization program from assessment through deployment, as well as ongoing performance management, enabling the organization to achieve value at speed and scale.


A warehouse operations improvement program executed prior to the design phase heavily informs the WMS blueprint with a business-centric alignment of processes and operating strategies, while identifying quick wins to accelerate program benefits. The program also develops a long-term roadmap for post-WMS go-live initiatives. Leveraging extensive warehouse design and operations experience, analytics tools are employed to enhance insights for this program, potentially leading to immediate improvements, such as increased labor productivity with 10% gains in the short term and 20% gains in productivity over time.


In addition, utilizing our Supply Chain Intelligence Platform, executed through all phases, drives transformational business outcomes by tracking and measuring critical areas of the supply chain. This enables project teams with visibility into both program-related and end-to-end KPIs to identify other possible “hot spots” of opportunity to further reduce supply chain costs and optimize working capital.


A run-to-target program, executed during the deployment and performance management phase, will help codify performance management and build sustainable client capabilities that drive performance in the new environment. This can enable a step change in warehousing performance through a comprehensive approach that deploys tools for effective daily management and coaching, developed to align with the new WMS and capabilities. By leveraging a standardized playbook-based implementation approach with ready-to-use training materials, templates and examples focused on building the client’s capabilities, organizations can achieve a 10% to 30% increase in productivity and a 5% to 10% improvement in on-time shipments.


In this intensely competitive environment, the imperative for speed and certainty of outcomes underscores the significance of the hybrid-agile methodology as the catalyst for distribution transformation. By providing the capacity to adapt swiftly, streamline processes and encourage collaboration, the hybrid-agile approach facilitates accelerated results and delivers enhanced adaptability to evolving requirements.


Beyond technology


The advantages of this methodology extend beyond technological advancements. Groundbreaking research conducted by Ernst & Young LLP in collaboration with Oxford Saïd Business School revealed that human emotions play a pivotal role in transformation success, with six specific drivers identified, amplifying the success factor of programs by a staggering 73%.


Moving forward, an enhanced governance methodology emerges as another key step in the transformation journey. This goes beyond mere oversight and provides strong direction when backed by a centralized structure, real-time insights and a supportive project management office. Continuous refinement, stakeholder engagement and proactive risk management create a dynamic environment that supports sustainable success.


Transitioning to the critical aspect of WMS value tracking and creating a baseline business case for a warehouse transformation program, digital transformation success is intricately linked to the up-front definition of benefits, including a transparent return on the investment. Businesses need to start with a framework that defines specific value levers for each business case as they apply to distribution centers, operating environments, processes and products. Managing leadership expectations is also key and must be done before the program goes live. This is particularly critical for success in the three- to five-year time frame required for these transformations.


The complexity of these transformations necessitates a dedicated approach that relies on a well-built strategy and strong engagement across all levels of the organization. Client ownership, early appointment of a business lead and system training for critical users are also imperative. To properly develop a solution architecture, organizations must clearly understand the business’s end goals and effectively discourage customizations.


In conclusion, the distribution center plays a key role at the intersection of the customer and employee experience, laying the groundwork for the organization to achieve its strategic goals. Recognizing the transformative potential within a distribution system’s implementation, one that goes beyond a conventional “lift-and-shift” approach, is paramount for realizing organizational goals amid evolving expectations and emerging pressures.


Facilitating new capabilities within a distribution center network requires organizations to adopt a holistic, business-centric and inside out program that seamlessly aligns with its strategic vision, ultimately enhancing both the employee and customer experiences. The success of this transformation hinges on the adept integration of technical capabilities, appropriate technology platforms, a tight integration with current and future business needs, and a steadfast commitment to sustaining long-term value.

Special thanks to Antoine Al Oudaimy for contributing to this article.


Organizations can address rising supply chain costs and inefficiencies by deploying a warehouse management system that helps them optimize their operating environment, achieve improved workforce performance and deploy new technology to streamline workflows.

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