The Operations & Fulfillment Year in Review

2008 brought about some big changes in the world of operations and fulfillment. As the economy tanked and merchants watched their profits shrink they took an even harder look at where they could cut expenses and find new efficiencies in their supply chains.

The Multichannel Merchant Operations & Fulfillment Advisor ran numerous articles in ‘08 about how merchants have been consolidating to gain economies of scale and reduce operational expenses. This includes the trend of moving from a highly distributed network with multiple DCs to a leaner network with several strategically placed larger facilities.

For example in January we brought you the news about Lifetime Brands consolidating its supply chain by replacing several DCs with one, 753,000-sq.-ft. facility it opened in Fontana, CA. And in November we reported that Replacements, Ltd., which sells replacement pieces for china, crystal and silver tabletop sets, is adding 500,000 sq. ft. to its main distribution center in Greensboro, NC, to bring warehouse operations into one centralized facility.

What’s more, in the October issue of the magazine we ran an in-depth feature about the increasing popularity of “mega DCs” – giant warehouse/distribution centers measuring 500,000 sq. ft. or more.

Of course, we also published plenty of articles about how to find efficiencies in your warehouse and fulfillment operations, such as “Steps for Becoming a ‘Lean’ Distributor,” “Lean Lessons in Supply Chain Management,” “Four Steps For Reducing Pick-Error Rates” and “How to Cope with Rising Shipping Costs.”

The ailing economy also brought about some big changes for the major shippers in 2008. In November we reported that DHL was discontinuing its domestic U.S. ground and air service come January. The courier ultimately lost its battle for U.S. market share with rivals United Parcel Service and FedEx (not to mention the U.S. Postal Service).

2008 also brought about major changes at the U.S Postal Service, mostly stemming from the passage of the Postal Reform Act of 2006. The Act enables the USPS to operate more like a private corporation and gives it the opportunity to become a more serious player in the parcel business and compete against UPS and FedEx.

Postmaster General John E. “Jack” Potter announced USPS’ plan to reorganize itself over the next year by creating a new shipping and mailing services division. The new unit will consolidate all product management, product development and commercial sales, and will allow USPS to take a more competitive position in the shipping market.

The reorganization is partly to prepare for the May 2009 rollout of USPS’ new Intelligent Mail barcode system, which will improve operations and enable customers to track letters and parcels as they move through the mail stream. The 65-bar code will be required starting in May 2009 for companies looking to earn the maximum USPS automation discounts. It replaces the POSTNET and PLANET barcode now in place.

Despite all the doom and gloom, 2008 did bring some positive news. For example, it was a big year for the “greening of the supply chain.” Numerous merchants took initiatives to reduce their carbon footprints and become more eco-friendly. In November we reported that medical, dental and veterinary supplies distributor Henry Schein recently added a new eco-friendly lighting system at its 176,000-sq.-ft. distribution center in Grapevine, TX.

Specifically, the company installed 400 new T5 high output fluorescent lamps in the facility, replacing the 400-watt metal Halide fixtures that came with the building when the company bought it in 1998. The merchant also replaced some 220-watt fluorescent fixtures located in another section of the building with 64-watt T8 fluorescent fixtures.

These initiatives have enabled Henry Schein to cut lighting costs at the DC by two-thirds, while at the same time providing brighter, more natural light than what was delivered by the previous fixtures.
What’s more, the new lighting system has reduced Henry Schein’s carbon footprint by about 935,000 pounds of carbon dioxide per year.

It was also a big year for protective packaging companies to go the green route. This month we ran a feature about some of the new eco-friendly packaging products that are on the market and what the protective packaging companies are doing to green their products – as well as their operations.

One of the biggest operations and fulfillment news stories of 2008 was BlueSky Brands shutting down its operations in March. The company owned the Paragon Gifts, Bits and Pieces, Bits and Pieces U.K., National Wildlife Direct, and Wintherthur catalogs, as well as McLean, VA-based third-party fulfillment provider AB&C Group.

When the company closed down it left the other multichannel clients relying on AB&C Group take and fulfill orders — including Smithsonian catalog, Barrie Pace, Bra Smyth, Healthy Directions, and the United States Olympic Committee — shut out in the dark with no way to gain access to their product.

No question, 2008 was a year of great challenges in operations & fulfillment. And it looks like 2009 will be an even bigger year for change, so stay tuned …

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