Adaptingwarehouseoperationsanddesigntoomni-channellogisticsAliteraturereviewandresearchagenda
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International Journal of Physical Distribution & LogisticsManagementAdapting warehouse operations and design to omni-channel logistics: A literaturereview and research agendaJoakim Hans Kembro, Andreas Norrman, Ebba Eriksson,Article information:To cite this document:Joakim Hans Kembro, Andreas Norrman, Ebba Eriksson, (2018) "Adapting warehouse operationsand design to omni-channel logistics: A literature review and research agenda", International Journalof Physical Distribution & Logistics Management, https://doi.org/10.1108/IJPDLM-01-2017-0052Permanent link to this document:https://doi.org/10.1108/IJPDLM-01-2017-0052Downloaded on: 29 August 2018, At: 05:22 (PT)References: this document contains references to 99 other documents.Access to this document was granted through an Emerald subscription provided by All users groupFor AuthorsIf you would like to write for this, or any other Emerald publication, then please use our Emeraldfor Authors service information about how to choose which publication to write for and submissionguidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The companymanages a portfolio of more than 290 journals and over 2,350 books and book series volumes, aswell as providing an extensive range of online products and additional customer resources andservices.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of theCommittee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative fordigital archive preservation.*Related content and download information correct at time of download.Downloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
Adapting warehouseoperations and design toomni-channel logisticsA literature review and research agendaJoakim Hans Kembro, Andreas Norrman and Ebba ErikssonDepartment of Industrial Management and Logistics, Faculty of Engineering,Lund University, Lund, SwedenAbstractPurpose–The purpose of this paper is to increase the understanding of how warehouse operations anddesign are affected by the move toward integrated omni-channels.Design/methodology/approach–A structured literature review is conducted to identify and categorizethemes in multi- and omni-channel logistics, and to discuss how aspects related to these themes impact andpose contingencies for warehouse operations and design.Findings–The review revealed a lack of focus on warehouse operations and design in multi- and omni-channels. Instead, most articles published in scientific journals discuss changes in consumer demand andimplications for the network level, concerning aspects such as the organization and management of material andinformation flows, inventory management, resources, actors and relationships. Ten themes in omni-channellogistics were identified and grouped into two categories: the value proposition and channel management; andthe physical distribution network design. The themes and related aspects have implications for warehousing,and by combining these with general warehousing knowledge, the authors derive a comprehensive andstructured agenda is derived to guide future research on omni-channel warehousing.Research limitations/implications–This paper outlines a research agenda, including detailed researchquestions, for advancing the theory on warehouse operations and design in omni-channels.Practical implications–The agenda can inspire practitioners in their work to understand the upcomingchallenges and address relevant issues in omni-channel warehousing, taking into consideration itsinterdependence with value proposition, channel management and network decisions.Originality/value–This is the first comprehensive review focusing on and synthesizing available literature onomni-channel warehousing. This topic has until now received limited coverage but is of increasing importance toscholars in the field.KeywordsLogistics, Literature review, Retail, Research agenda, Omni-channel, Channel integration,Material handling, WarehousePaper typeLiterature reviewIntroductionRetailers increasingly integrate their physical stores and online channels into a seamlessworld of shopping, a concept often referred to as omni-channel retailing. In omni-channels,inventories and order fulfillment are conflated, and customers can place their orders in onechannel (e.g. on a smartphone), pick up or receive through another channel (e.g. homedelivery), and return products in a third channel (e.g. physical store) (Brynjolfssonet al., 2013;Piotrowicz and Cuthbertson, 2014; Saghiriet al., 2017). Omni-channel retailing representsa competitive and continuously changing landscape (Ishfaqet al., 2016), and it has becomeInternational Journal of PhysicalDistribution & LogisticsManagementEmerald Publishing Limited0960-0035DOI 10.1108/IJPDLM-01-2017-0052Received 3 February 2017Revised 7 September 201714 March 201816 June 201820 June 2018Accepted 20 June 2018The current issue and full text archive of this journal is available on Emerald Insight at:www.emeraldinsight.com/0960-0035.htm© Joakim Hans Kembro, Andreas Norrman and Ebba Eriksson. Published by Emerald Publishing Limited.This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone mayreproduce, distribute, translate and create derivative works of this article (for both commercial andnon-commercial purposes), subject to full attribution to the original publication and authors. The full termsof this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcodeThis research study was funded by The Swedish Retail and Wholesale Council, and the HakonSwenson Foundation.Omni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
more important and more difficult to design effective and efficient distribution systems(Agatzet al., 2008; Beck and Rygl, 2015). Essential considerations for distribution systems(also referred to as omni-channel logistics) include, for example, how and where to keep stockand fulfill orders for store replenishment and e-commerce, and how and where to handle theincreasing return flows (Bernonet al., 2016; Hübner, Wollenburg and Holzapfel, 2016).A critical aspect of distribution systems is represented by the warehouse operationscarried out at the various material-handling nodes (Faberet al., 2013; Hübner, Kuhn andWollenburg, 2016). One major challenge is, for example, to effectively combine the handlingand shipment of small consumer online orders with large store replenishment orders, ordersand shipments that previously were handled in separate channels (Hübneret al., 2015).As argued by Rouwenhorstet al.(2000, p. 515),“the efficiency and effectiveness in anydistribution network is largely determined by the operations of the node in such network,i.e. the warehouses.”Having previously been considered as a burden because of high capitaland operating expenses (De Kosteret al., 2007; Bartholdi and Hackman, 2016), warehouseoperations are now increasingly regarded as a strategic component of supply chains andomni-channel retailing particularly (Hübner, Holzapfel and Kuhn, 2016), and the topic ofwarehousing is attracting increased attention (Kembroet al., 2017).Despite the growing strategic importance of warehouse operations, there is a lack ofa structured and comprehensive overview of the context of omni-channel retailing.A number of reviews have looked at multi-channel and omni-channel logistics, primarilyfrom the overall network perspective (see, e.g. Agatzet al., 2008; Hübner, Holzapfel andKuhn, 2016; Melaciniet al., 2018). Meanwhile, there are several literature reviewsconducted on the topic of warehouse operations and design (see, e.g. De Kosteret al., 2007;Guet al., 2007, 2010; Davarzani and Norrman, 2015). However, none of these have focusedon the link between omni-channels and the requirements, challenges and opportunitiesthat arise for warehousing. In addition, there seem to be parallel discussions going onacross several disciplines, including: management (Leeet al., 2013; Gallino and Moreno,2014); information technology (Lewiset al., 2014; Piotrowicz and Cuthbertson, 2014);retailing (Xing and Grant, 2006; Verhoefet al., 2015); marketing (Neslin and Shankar, 2009;Vinhaset al., 2010); operations management (Faberet al., 2013; Hübneret al., 2015);operations research (Agatzet al., 2008; Rodriguez and Aydin, 2015); and logistics andsupply chain management (Kullet al., 2013; Hübner, Kuhn and Wollenburg, 2016).It is time to bring knowledge from these streams together and provide a structured andcomprehensive overview of omni-channel logistics with a focus on the implicationsfor warehouse operations and design. Such a review would also contribute to filling therecently highlighted lack of research investigating back-end omni-channel logistics(Galipogluet al., 2018; Marchetet al., 2018).The purpose of this study is to increase our understanding of how warehouse operationsand design are affected by the change toward integrated omni-channels. To address this, weconduct a literature review following a structured approach (cf. Durachet al., 2017) toidentify and categorize themes in omni-channel logistics and discuss how aspects related othese themes impact and pose contingencies for warehouse operations and design.To provide a foundation for the literature review and a resulting research agenda foromni-channel warehousing, the next section includes an overview of extant literature onwarehouse operations and design. We use the term warehouse as a representation of variousmaterial-handling nodes that are used in omni-channels. Such nodes include, for example,distribution centers, direct fulfillment centers (designed to handle e-commerce orders andship directly to consumer) and forward fulfillment centers (FFCs) (using retail stores aslogistic hubs located closer to the consumer). We also use the term network as arepresentation of a distribution system consisting of transportation links connectingmultiple nodes such as material-handling centers, suppliers and retail stores.IJPDLMDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
Warehouse operations and designWarehouses can, according to Bartholdi and Hackman (2016, p. 3), be described as“thepoints in the supply chain where [the] product pauses, however briefly, and is touched.”Therational for using a warehouse is, for example, to match supply and demand, to consolidate arange of products and to reduce transportation costs and lead times (Faberet al., 2013).Figure 1 presents an overview of warehouse operations and design and highlights theimportance of tailoring the operations and design to a number of contextual factors in orderto reduce cost and improve service to customers.Most warehouses have operations for receiving, put-away, storage, picking, sorting,packing and shipping (see, e.g. Van den Berg and Zijm, 1999; Petersen and Aase, 2004).Along with increased e-commerce, many distribution warehouses also have extensivereturn operations (Bernonet al., 2016). First, when products arrive at the warehouse, theyare checked for quality and registered before being put-away in the assigned storagelocation (Bartholdi and Hackman, 2016). Storage includes a reserve area and a pickingzone (Frazelle, 2002). The latter includes a limited quantity of each product, also referredto as a stock-keeping item (SKU), that can be easily retrieved (Rouwenhorstet al., 2000).SKUs are either dedicated or randomly assigned to a location. A common approach is tocombine dedicated and random storage (class-based storage), which implies that SKUs arededicated to a certain zone, but within each zone, the SKUs are randomly placed. Thisapproach draws on benefits of both dedicated and random storage, enabling reducedtravel while avoiding congestion (Guet al., 2007). According to Frazelle (2002), utilizing80 percent of the total storage space is appropriate for flexibility and planning, andbeyond 86 percent, effectiveness, efficiency and safety decline exponentially for everypercentage-point of increase.Picking represents most of the operations cost and has by far been the most-researchedtopic in warehousing (see, e.g. Le-Duc and De Koster, 2005; Bottaniet al., 2012). Picking efficiencyFactors that impact and pose contingencies foroperations and design Warehouse OperationsWarehouse Design and Resources• Purpose of warehouseReceiving• Physical layout (e.g. placement of docks, aisle configuration, lane depth and stacking height)• Storage equipment (e.g. different types of racks)• Handling equipment (e.g. different types of forklifts for put-away and picking)• Automation solutions (e.g. conveyors, robots)• Information systems (e.g. WMS)• Labor and activities (e.g. ergonomy, scheduling, rotation, shifts)Put-awayand StorageCross-dockingPicking andSortingPacking andShippingReturns• Product portfolio• Order profile• Demand profileFigure 1.Overview ofwarehouse operationsand designOmni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
can be improved by putting the fastest moving products in the most convenient locations(Guet al., 2007) and by selecting the appropriate picking methods. The four common pickingmethods include single, batch, zone and wave (see, e.g. Hassan, 2002; Bartholdi and Hackman,2016). Eventually, orders are packed and shipped (Guet al., 2007) while, if an order involvesmultiple flows (e.g. wave picking or cross-docking), the first step is to sort and merge the variousorder lines per customer and destination. SKUs are thereafter registered for departure and put atthe allocated gate and time window (Bartholdi and Hackman, 2016).To make warehouse operations effective and efficient, multiple design aspects andresources must be considered, including: physical layout, e.g. placement of docks, aisleconfiguration, lane depth and stacking height (Huertaset al., 2007); storage and handlingequipment, e.g. different types of racks and different types of forklifts for put-away andpicking (Rouwenhorstet al., 2000); automation solutions, e.g. conveyors and robots (Bakerand Halim, 2007); information systems, e.g. the warehouse management system (WMS)(Faberet al., 2002); and labor management, e.g. scheduling, rotation and shifts (De Leeuwand Wiers, 2015). Design goals that have been discussed in the literature include improvedcapacity and resource utilization (both space, equipment and labor), increased throughputand reduced material-handling time by, for example, eliminating double-handling andlimiting congestion, and increased flexibility in operations and design (see, e.g. Cormier andGunn, 1992; Petersen and Aase, 2004; Le-Duc and De Koster, 2005; Huertaset al., 2007).These goals can be complex to balance considering that many design components areinterrelated. Focusing only on separate parts may therefore lead to sub-optimization(Baker and Canessa, 2009). In addition, the design process may involve several (re)iterationsand trade-offs (Rouwenhorstet al., 2000), and it can be difficult and costly to makesignificant layout changes at a later stage (Huertaset al., 2007).The contingency approach (Donaldson, 2001) of tailoring operations and design to theparticular context is receiving increased attention in the warehousing theory. Lowerperformance would thus be expected if there were a misfit between warehouse operationsand design and a number of contingency factors. Factors that have an impact on theoperations and design include the purpose of the warehouse, product portfolio, order profileand demand profile (Frazelle, 2002; Guet al., 2010; Bartholdi and Hackman, 2016). Forinstance, a production warehouse and a distribution warehouse have different needs interms of required operations (Van den Berg and Zijm, 1999), the SKU characteristics definethe need of storage and handling equipment (Rouwenhorstet al., 2000), and the ordercharacteristics impact the choice of picking method (Bartholdi and Hackman, 2016).Meanwhile, understanding the characteristics and size of current and forecasted demand,including seasonality and growth of overall demand and variety within the productportfolio, is critical to assign appropriate capacities for storage and labor (Rouwenhorstet al., 2000; Frazelle, 2002; Guet al., 2010).Next, a structured literature review is conducted to identify omni-channel themes andrelated aspects that are subsequently used to discuss the implications for warehouseoperations and design. We will thereafter revert to Figure 1 and present a structured agendawith research questions addressing how warehouse operations and design need to beadapted to omni-channels.Methodology for the literature reviewTo identify publications related to omni-channel logistics, we followed six steps highlightedin Figure 2 based on common guidelines for conducting a structured literature review(see, e.g. Durachet al., 2017).First, a pilot review of the research field was conducted to identify the gap and define thegoal of the structured literature review, and to identify relevant terminology. A workshop withsenior logistics managers was arranged to discuss the focus of the project. This workshopIJPDLMDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
confirmed the importance and lack of a warehouse-operations framework in omni-channelretailing, and emphasized that the network, strategy and management of omni-channelsimpact and pose contingencies for warehouse operations and design in various material-handling nodes. The workshop thus directed the review toward understanding the variousthemes and contextual factors that must be considered for omni-channel warehousing.Second, criteria were established for identifying relevant literature. Considering the focuson logistics systems in multi- and omni-channels, studies focusing only on one channel,either pure-store channel or online channel, were excluded. Selected literature should focuson the logistics network and/or the warehouse. Studies focusing solely on transportationandlast-miledistribution,andpublicationsexclusivelyinvestigatingthecustomerperceptions or perspectives of retail, sales or marketing, were excluded. A broad range ofempirical, analytical and conceptual studies across a variety of published material wasconsidered, for example, scientific journal papers, book chapters and industry reports.No limitations were made in time, outlets or research methods.Third, to minimize the risk of excluding relevant literature, we employed twoelectronic, complementary and commonly used databases (see, e.g. Leuschneret al., 2014;Durachet al., 2017): Business Source Complete (via EBSCOhost) and the Web of ScienceCore Collection. Based on the pilot review of literature, the following keywords wereidentifiedandcombinedusingBooleanoperators[OR,AND]:[omni*channel;multi*channel; dual*channel; cross*channel; channel multiplicity; e-tailing; bricks-and-clicks; clicks-and-mortar] and [warehousing; warehouse operation; material* handling;material flow; physical flow; goods flow; distribution center; distribution network;distribution system; logistics; supply chain].Fourth, by searching in document titles, we identified 343 publications (Figure 2).Removing duplicates and applying the inclusion/exclusion criteria resulted in a subset of101 documents. Two of the authors then carefully read the full-text version of eachpublication and thereafter jointly decided if the papers should be included. A total of 44studies were excluded based on the following rational: 19 investigated only one channel,15 focused on the perspective of the customer, sales, pricing and/or marketing rather thanlogistics, and 1 focused solely on last-mile distribution. In addition, we excluded oneeditorial, six work-in-progress papers and two journal publications that discusseddefinitions rather than themes related to omni-channel logistics. To reduce the risk thatour review excluded relevant literature, we thereafter compared our list of primarystudies with the authors, articles and reference lists included in a recent specialissue on omni-channel logistics (Saghiriet al., 2018). This validation resulted in addingseven publications, resulting in a final synthesis sample (cf. Durachet al., 2017) of 64publications, including: 51 journal articles, 11 popular-science publications, 1 dissertationand 1 book. The identified literature does not solely focus on omni-channel retailing, butrather includes perspectives of how the implementation of multiple channels potentiallyimpacts different aspects of back-end fulfilment.1. Conduct pilotreview andworkshop- Pilot literature reviewto identify gap anddefine goal ofstructured literaturereview- Workshop with seniorlogistics managers todiscuss the focus of theproject2. Establishinclusion/exclusion criteria3. Select databasesand developkeywords4. Conduct searchand apply selectioncriteria5. Analyze andsynthesize identifiedliterature6. Report findings- Descriptive analysisand creation of text,tables and figures- Research agendacreated withstructured overview ofresearch questions- Focus on multi- oromni-channel (studiesfocusing on only onechannel were excluded) - Business SourceComplete (BSC) andWeb of Science CoreCollection (WoS)- Keywords: [Multi- oromni-channel+synonyms]; [Warehousingor logistics network+synonyms] using Booleanoperators [OR, AND]- 343 publicationsidentified: BSC (174);WoS (169)- 101 remaining afterremoving duplicates andscreening abstractsbased on defined criteria- 64 remaining after full-text reading andcomparison with recentSI on omni-channellogistics - Qualitative contentanalysis, including codingand categorization ofthemes- Excel database includinginformation such as title,authors, year ofpublication, journal, unitof analysis, method,focus and a shortsummary on theconclusions- Focus on warehousingand/or logistics network(studies focusing solelyon, e.g. transportation,sales, marking, orpricing were excluded)Figure 2.Overview of the sixliterature-review stepsOmni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
The fifth step included an analysis and synthesis of the identified literature. We firstanalyzed publication trends such as outlets, publications per year, applied unit of analysesand research methods employed. Next, two of the authors independently conducted aqualitative content analysis (Combset al., 2011) to identify research themes. The codingcategories were derived directly from the text where identified themes were given uniquecodes. The two researchers then jointly analyzed the codes and, guided by the literature,grouped related codes together into common themes. Examples of codes that were mergedinclude: competencies and capabilities (see e.g. Grant, 1991); and performance metrics andincentive systems. A third researcher assessed the generated codes and facilitateddiscussions to reach a consensus (Gioiaet al., 2013). The research group discussed variousways that the themes relate to each other and how they could be categorized in a structuredoverview. This categorization is a first attempt to structure the omni-channel logisticscontext, and we acknowledge that other categorizations could have been possible and putforward. Our classification must therefore be validated in future research. The next step ofthe analysis focused on how aspects related to the different themes impact and posecontingencies for warehouse operations and design.The final step reports these findings in text, tables and figures. A descriptive analysiswas conducted, including the mapping of the identified publications based on, for example,research method applied, publication outlets over years and number of papers per theme.The analysis of themes and related aspects, and their impact on warehouse operations anddesign, was used to develop a research agenda for researchers, consisting of a structuredand comprehensive overview of research questions focusing on omni-channel warehousing.The final agenda, which is presented in the implications section, builds on Figure 1 such thatthe research questions are structured according to warehouse operations on one axis, andwarehouse design aspects on the other. Finally, the analysis was also used to presentmanagerial implications.Overview of extant literature: publications per journal, year and methodResearch on logistics systems in multi- and omni-channels is published in a large numberof outlets and disciplines such as logistics, supply chain management, operationsmanagement, general management, operations research, marketing and retailing. The top-two outlets in terms of publication count include theInternational Journal of PhysicalDistribution and Logistics Management(total 13) and theEuropean Journal of OperationsResearch(6). The relatively low number of journal publications per year (average 3.4,2007–2017) confirms the lack of focus on omni-channel logistics as noted by, for example,Galipogluet al.(2018). Most journal articles focus on the network level, concerning aspectssuch as the organization and management of material and information flows, inventorymanagement, resources, actors and relationships. Similar to conclusions drawn from aliterature review conducted a decade ago (Agatzet al., 2008), our review revealed a lack offocus on warehouse operations and design in multi- and omni-channels (see Table I).Only seven scientific publications, mainly authored by one research group, wereidentified as focusing on warehousing to some extent (cf. Hübneret al., 2015; Hübner,Holzapfel and Kuhn, 2016; Hübner, Wollenburg and Holzapfel, 2016, Hübner, Kuhn andWollenburg, 2016; Wollenburget al., 2018). These studies have explored the generalchallenges for warehousing when integrating e-commerce with an existing store channel,focusing mainly on three aspects: integration of inventory, picking activities and capacityconsiderations.The predominant research methods include mathematical modeling and simulation(total 24). Qualitative methods that have been applied include interview studies (five) and casestudies (three). The multi-method and mixed-method approaches have been used in two papers.Surprisingly, although mathematical modeling and simulation are dominant methods inIJPDLMDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
warehousing research (see e.g. Davarzani and Norrman, 2015), we did not find such researchfocused on omni-channel warehousing. Reasons might be that researchers have either notexplicitly mentioned the omni-channel strategy, or that specific challenges related to thistransformation have not yet been modeled.Popular-science journals were also considered in the literature review, and for these outlets,warehousing is more often in focus; we found six popular-science papers that specificallydiscuss different aspects of warehousing related to omni-channel retailing (Andel, 2014;Michel, 2015; Bond, 2016a, b; Kembro, 2016; McMahon, 2016). These publications indicatea recent surge in interest among practitioners in omni-channel warehousing.Themes in omni-channel logisticsWe identified ten themes in omni-channel logistics and grouped these into two categories,namely,aspectsanddecisionsrelatedtomeetingtheconsumers’requirementsandexpectations as well as the organization and management of resources, actors and relationshipsin the omni-channel (referred to as value proposition and channel management); and aspectsand decisions related to design and planning of the physical flow of goods from supplier tocustomer through the network of nodes and links (referred to as physical distribution networkdesign). An overview of the categories, themes, descriptions and references is shown inTable II. Next, we describe the themes and thereafter discuss how aspects related to thesethemes impact and pose contingencies for warehouse operations and design.Value proposition and channel managementDifferences in demand profiles and increased assortment. The store-order size often differssignificantly from the size of orders placed online by a single customer. Hübner, Wollenburg andHolzapfel (2016) describe an example where the average items per store order were 34 timeshigher than online orders placed by end-customers. This difference is a central challenge in thetransformation to omni-channel logistics when trying to integrate store- and online orders andcreate time- and cost-efficient warehousing operations (Hübneret al., 2015). The particular impactand challenges for the picking operation are recurring themes (e.g. Agatzet al., 2008; Hübner,Kuhn and Wollenburg, 2016), whereas the impact on other aspects such as inventory andautomation is focused on only in a few publications (e.g. Hübner, Wollenburg, and Holzapfel,2016). The literature highlights the connection between demand profile, product characteristicsand store replenishment operations, and the impact these aspects may have on the abilityto integrate e-commerce with store replenishment (Ishfaqet al., 2016; Hübner, Holzapfel andMethod/perspectiveValue proposition and channelmanagement+physical network designWarehouseoperations anddesignaModel/simulation24Literature review61Survey61Interview study54Conceptual4Case31Mixed-method (qualitative+quantitative)1Multi-method (qualitative+quantitative)1Secondary data1Total517Notes:aAll 51 scientific journal articles address the network level. Of these, seven also address warehouseoperations and designTable I.Methods applied inscientific journalsOmni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
Kuhn, 2016). Another important consideration is the increasing product assortment madeavailable through e-commerce and online marketplaces (Wollenburget al., 2018). This expansionmay entail a higher complexity in warehousing, for example, precipitating an increased need forstorage space as well as an increase in the numbers and types of storage locations visited duringorder picking (de Koster, 2002b; Hübner, Wollenburg and Holzapfel, 2016).Development of channel management strategies. To meet the challenges related todemand profiles and expanding assortments, many retailers consider integrating differentThemeReferencesValue proposition and channel managementDifferences in demand profiles andincreased assortmentAgatzet al.(2008); Bernonet al.(2016); Boldt and Patel (2015); Cao(2014); De Kosteret al.(2002a); de Koster (2002b); Hobkirk (2015);Hübneret al.(2015); Hübner, Holzapfel and Kuhn (2016); Hübner,Wollenburg and Holzapfel (2016); Hübner, Kuhn and Wollenburg(2016); Ishfaqet al.(2016); Michel (2015); Napolitano (2013);Wollenburget al.(2018)Development of channel managementstrategiesBernonet al.(2016); Cao (2014); De Kosteret al.(2002a); Galipogluet al.(2018); Gulati and Garino (2000); Hobkirk (2015); Hübner, Holzapfeland Kuhn (2016); Hübner, Wollenburg and Holzapfel (2016); Hübner,Kuhn and Wollenburg (2016); Ishfaqet al. (2016); Lang and Bressolles(2013); Larkeet al.(2018); Leeet al.(2013); Marchetet al.(2018);Rabinovichet al.(2007); Wollenburget al.(2018)New services requiring new types ofcompetencies and capabilitiesBernonet al.(2016); Ishfaqet al.(2016); Ohet al.(2012);Wallaceet al.(2009)The role of logistics service providersBernonet al.(2016); Murfieldet al.(2017); Napolitano (2013);Rabinovichet al.(2007)Performance metrics and incentivesystems for risk and gain sharingBoyaci (2005); Caiet al.(2012); Chiang and Feng (2010); Lu and Liu(2015); Mangiaracinaet al.(2015); Neslin and Shankar (2009); Rabinovichand Bailey (2004); Rodriguez and Aydin (2015); Vinhaset al.(2010);Webb (2002); Xing and Grant (2006); Xinget al. (2010); Zhang (2009)Physical distribution network designIncreasingly complex distributionand returns processAcimovic and Graves (2014); Alptekinoğlu and Tang (2005); Bairdand Kilcourse (2011); Bernonet al.(2016); De Kosteret al.(2002a);de Koster (2002b); Hübner, Holzapfel and Kuhn (2016); Hübner,Wollenburg and Holzapfel (2016); Hübner, Kuhn and Wollenburg(2016); Ishfaqet al.(2016); Lang and Bressolles (2013); Larkeet al.(2018); Maharet al.(2014); Marchetet al.(2018); Melaciniet al.(2018);Melacini and Tappia (2018); Wollenburget al.(2018)The retail store’s potential role asmaterial-handling nodeAksen and Altinkemer (2008); Alptekinoğlu and Tang (2005); Bairdand Kilcourse (2011); Cao (2014); Hübner, Kuhn and Wollenburg(2016); Ishfaqet al.(2016); Larkeet al.(2018); Maharet al.(2009);Marchetet al.(2018); Piotrowicz and Cuthbertson (2014);Wollenburget al.(2018)Inventory management inincreasingly complex networksAgatzet al.(2008); Alptekinoğlu and Tang (2005); Bendoly (2004);Bendolyet al. (2007); Boyaci (2005); Bretthaueret al.(2010); Hübner,Holzapfel and Kuhn (2016); Kullet al.(2013); Lang and Bressolles(2013); Maharet al.(2009, 2012); Melaciniet al.(2018); Xuet al.(2017);Yaoet al. (2009)Capacity planning and allocationAgatzet al.(2008); Hübneret al.(2015); Raoet al.(2009);Xieet al.(2014)Integrated information system fordistributed orders and handlingAlshawi (2001); Bond (2016a, b); Cao (2014); Gallino and Moreno(2014); Hellberg (2016); Hübner, Wollenburg and Holzapfel (2016);Larkeet al.(2018); Mahar and Wright (2009); Napolitano (2013);Ohet al.(2012)Table II.Overview ofcategories, themes andreferences identified inthe structuredliterature reviewIJPDLMDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
channel activities. Such a change is, however, far from trivial considering the complex,dynamic and continuously changing environment of omni-channels and consumer behavior(Rabinovichet al., 2007; Hübner, Holzapfel and Kuhnet al., 2016). Ishfaqet al.(2016, p. 559) findthat:“the omni-channel retail logistics landscape is continuously evolving. These transitionsare caused by complex dynamics which arise from actions of large online retailers, other omni-channel retailers and demanding customers.”Omni-channel retailers aim to create a seamlessfront-end experience for their customers, but there is still a lack of research on how companiesaddress the increasing complexity in back-end fulfilment and to what extent they choose tointegrate or separate their different channels (Wollenburget al., 2018). One stream of researchsuggests that companies follow maturity models where, for example, they move from havingseparated inventories toward having integrated inventories for both store replenishment ande-customers (Cao, 2014; Hübner, Wollenburg, and Holzapfel, 2016). Another research streamsuggests that a range of factors, such as assortment, demand profile, current distributionnetwork, customer expectations, and market and organizational characteristics, impact theappropriateness of integrating back-end fulfilment (e.g. Lang and Bressolles, 2013; Larkeet al.,2018; Wollenburget al., 2018). Researchers have recently combined the two streams,suggesting that companies consider contextual factors and follow maturity paths. Ishfaqet al.(2016, p. 559) discuss further:“Handling the underlying complexities of omni-channel retailmay require firms to follow different paths to a steady-state omni-channel physicaldistribution process. Further research is needed to fully understand these dynamics and toidentify potential maturation paths followed by omni-channel retailers in pursuit of an optimalomni-channel distribution strategy.”Similarly, Marchetet al.(2018) recently conducteda study showing that companies adopt their channel-management strategies to bothcontextual factors and omni-channel maturity.New services requiring new types of competencies and capabilities. In the dynamic andrapidly changing omni-channel environment, retailers will likely be required to add newservices in order to meet the demands from customers. Examples of such services include newpackaging solutions, new tools for channel tracking and new solutions for customeraccessibility to return points (e.g. Wallaceet al., 2009). Bernonet al.(2016, p. 599) describefurther that,“an increasingly important dimension for retailers will be customer accessibilityto return entry points and the capability retailers have to develop their own solutions orengage with specialist service providers […] will become a point of differentiation.”Recentstudies suggest that the ability to reallocate resources and develop new services will be highlyrewarding (Ohet al., 2012; Ishfaqet al., 2016), and that it will be critical for retailers tounderstand the new set of capabilities and competencies that are required for these newservices, e.g. store personnel’s ability to manage more complex information systems. Researchon this theme is, however, limited.The role of logistics service providers (LSPs). LSPs could play an important role indeveloping unique capabilities and new omni-channel solutions. Engaging with specialistservice providers to develop new omni-channel solutions may, in fact, become a point ofdifferentiation for retailers (Bernonet al., 2016). However, the few existing studies focusingon omni-channel warehousing indicate that retailers initially prefer to consolidate and takecare of integrated order fulfillment and distribution in-house (Hübner, Wollenburg, andHolzapfel, 2016). Later, as volumes increase, the size and complexity of the operation at somepoint outgrow the existing network and facilities. Outsourcing could then be considered anoption for both short- or long-term solutions, where LSPs could offer economies of scale or atemporary surge of capacity to deal with rapid growth or seasonality (Napolitano, 2013).Outsourcing decisions should ultimately be based on the analysis of potential savings andwhether the required logistics functions fit with the core competencies of the retailer, and, asRabinovichet al.(2007) note, if asset specificity is reduced, firms are expected to increaseOmni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
their use of LSPs. In a recent study, Murfieldet al.(2017, p. 285) conclude that timeliness ofdeliveries is the single most important aspect of logistics service:“Logistics serviceproviders need to emphasize speed and reliability of their delivery processes for omni-channel consumers. If managers do not account for these distinct omni-channel servicerequirements, then retailers risk alienating this growing and important customer segment.”Performance metrics and incentive systems for risk and gain sharing. The increased level ofintegration in back-end fulfilment and the involvement of LSPs could lead to a number ofchallenging questions in the management and coordination of multi- and omni-channels. Forinstance: in what channel was the sale generated; how is the appropriate channel“credited”; andhow should the costs and gains be shared between omni-channel members (Neslin and Shankar,2009; Chiang and Feng, 2010; Caiet al., 2012). Similarly, Vinhaset al.(2010, p. 229) argue thatretailers must update their performance metrics and compensation systems in order to promotevalue creation and avoid outdated channel structures. Retailers will also need to adopt anintegrated approach to performance management to avoid channel conflict, which could reducethe performance of the entire omni-channel (Webb, 2002). Another related and important aspectis the control and measurement of sustainability. Omni-channels have made it possible forretailers to reach additional customers and increase their sales, resulting in increasing materialflows. At the same time, retailers offer generous return policies, which has triggered a growingnumber of returns that drives increases in logistics handling costs but maybe not always giveextra revenue or profit. Exactly how these increased flows affect sustainability aspects isuncertain, and the topic has not received much attention in the literature. Mangiaracinaet al.(2015, p. 584) conclude:“there continues to be a general lack of quantitative models for measuringthe environmental impact of B2C e-commerce and dividing it among the supply chain players.”Physical distribution network designIncreasingly complex distribution and returns process. The literature describes an increasinglycomplex distribution and returns process, which needs to be able to serve diverserequirements from multi- and omni-channels. Retailers“orchestrate various dispatchinglocations and enable the shipment to various points, whereas for a single-channel retailer thephysical flow of goods is more or less linear”(Hübner, Holzapfel and Kuhn, 2016, p. 290). Thedecision of where an order should be picked and shipped from (e.g. manufacturer, distributioncenter, retail store) is complex, involving aspects such as lead times, transportation costs,handling costs,fixed operating costs, holding costs and backorder costs (Lang and Bressolles,2013; Hübner, Kuhn and Wollenburg, 2016; Ishfaqet al., 2016). Research has predominantlyfocused on the cost evaluation of omni-channel distribution networks, and only recentlystarted to incorporate environmental impacts into the decision (Melacini and Tappia, 2018).The complexity of the network design is further increased because of liberal return policiesand increasing return flows (Bernonet al., 2016). In addition, there are multiple return options,such as return to store, send via post to distribution center and return directly to supplier.While generous return policies and multiple return points are convenient for the customer,they pose major challenges for retailers and raise the question of how to design the optimalnetwork with high accessibility and low logistics cost (Hübner, Holzapfel and Kuhn, 2016).Recent research shows that companies adopt different approaches to handling returns.Marchetet al.(2018), for example, observe that many Italian retailers do not allow in-storereturns, whereas Larkeet al.(2018) find that Japan’s largest and most profitable retail chainenables customers to return products in all of their retail stores. Meanwhile, Maharet al.(2014, p. 619) use mathematical modeling, showing that not all physical retail stores should beavailable to accept returns:“not all retail stores should be offering in-store pickups and/orreturns […] optimizing the set of pick up and return locations may reduce system cost overbaseline marketing policies where these services are set up at all or none of a retailer’s stores.”IJPDLMDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
The retail store’s potential role as material-handling node. Along with the development ofomni-channels, stores take on a new and bigger role in the network, acting, for example, aspick-up and support points in the handling of returned products (Ishfaqet al., 2016). Researchalso highlights the potential benefits of using selected stores as FFCs (Maharet al., 2009). Thismeans a store could create additional value for retailers by simultaneously being responsiblefor displays, marketing, customer service, direct sales, pick-ups, returns and order fulfillmentfor e-customers (Cao, 2014). Interestingly, researchers have found that grocery retailerscurrently utilize stores more frequently for order picking, partly because of the low onlineorder volume and the difference in order characteristics between online orders and storereplenishment (Marchetet al., 2018; Wollenburget al., 2018). It is important to consider thisnew role when designing the actual retail stores. It may be that some of the responsibilities ofthe store are in conflict with each other. As an example, designing a layout for displayingproducts with the purpose of increasing sales is significantly different from designing a layoutthat supports efficient order fulfillment (Hübner, Kuhn and Wollenburg, 2016). The new role ofthe physical store may also impact the design of the omni-channel network, where aspectssuchasproductavailability, returns,delivery options,reverseflows andinventorymanagement across channels must be considered. Piotrowicz and Cuthbertson (2014, p. 10)conclude:“the future role of the physical store is not clear, and it may end up being determinedby the product category and customer segment. The traditional store could change its role to a‘hub,’the focal point which would integrate all sales channels.”Inventory management in increasingly complex networks. Optimizing inventory levels in anomni-channel distribution network with several different types of material-handling nodes is acomplex undertaking (Bretthaueret al., 2010; Melaciniet al., 2018). There are standard modelsthat provide a foundation for determining inventory levels in omni-channels. These modelshowever need extensions and new approaches to deal with the complexity of omni-channels.Agatzet al.(2008, p. 352) argue:“Many standard operations research models provide a basis foraddressing supply chain planning issues in e-fulfillment and multi-channel distribution. Yet,specific issues warrant modeling extensions and novel approaches.”Important aspects concernthe mixing of online/offline inventories and determining re-order points at the various nodes.Xuet al.(2017) underline the need for more complicated models including multi-item andmulti-level models, to account for multiple points for order fulfillment, pick-up and returnswhere,“minimizing inventory cost is just one cost component and may not lead to a selection ofonline fulfillment locations that minimizes total cost (holding, backorder, transportation,handling, and fixed operating costs) for the firm”(Bretthaueret al., 2010, p. 129). Thiscomplexity is further increased by the potential for drop-shipments made directly frommanufactures to consumers, and the fact that stores are increasingly used as FFC, withpossible transshipments between stores (Hübner, Holzapfel and Kuhn, 2016).Capacity planning and allocation. One of the major challenges not only to inventorymanagement, but also to capacity planning and allocation, concerns demand fluctuations.High uncertainty in both long- and short-term demand makes capacity planning andallocation complex (Agatzet al., 2008; Xieet al., 2014). Despite its importance, there is littleresearch focusing on the challenges of increasing or decreasing different capacities in theshort- vs long-term perspective in an omni-channel environment. The literature has mostlyfocused on workforce planning, largely neglecting infrastructure and physical capacity issuessuch as storage area and equipment (Agatzet al., 2008; Hübneret al., 2015). Raoet al.(2009,p. 121) discuss:“while it is likely that multi-channel retailers can piggyback on their existinginfrastructure, where is the tipping point?”One measure addressing capacity issues that hasreceived some attention in the literature is the postponement of orders across channels. Thisapproach is used to shift e-commerce and store replenishment orders forward and backwardin time primarily in order to balance the workforce in the network (Hübneret al., 2015).Omni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
Integrated information system for distributed orders and handling. The literaturesuggests that the growing complexity of omni-channel distribution networks calls for theimplementation of an integrated information system (Ohet al., 2012). Larkeet al.(2018,p. 468) conclude that:“For [omni-channel retailers] to work to its full potential, IT thusbecomes critical as the driver behind the whole system. In particular, development of anintegrated customer database across touchpoints, and efficient information exchange withsuppliers across categories, becomes a prerequisite.”An integrated system could make itpossible to coordinate inventory information and increase the visibility of inventory acrossall material-handling nodes in the network (Hübner, Wollenburg and Holzapfel, 2016). It alsomakes it possible to facilitate the decision-making process of how and where orders shouldbe fulfilled in order to improve service levels while decreasing total costs, including costs forholding, backordering and transportation (Mahar and Wright, 2009). Related featuresinclude the possibility to reserve inventory and prioritize orders, track customer orders andfacilitate communication with customers as well as manage return flows (Gallino andMoreno, 2014). An integrated system for handling these features is often referred to as adistributed order management (DOM) system (Napolitano, 2013). The DOM system can beregarded as an enabler of“a true [omni-channel] logistics solution resulting in a seamless[omni-channel] experience for retailer and customer”(Hübner, Wollenburg and Holzapfel,2016, p. 578), and offers“a promising opportunity for retail firms to enhance theirrelationship with their customers and firm performance”(Ohet al., 2012, p. 368).Implications for omni-channel warehousingThis section derives implications for warehouse operations and design, summarized in aresearch agenda for omni-channel warehousing (Figure 3). The structure of the agendabuilds on Figure 1, such that the research questions are structured according to warehouseoperations and design aspects. The identified themes and the change that each of themrepresents have a varying array of implications for warehouse operations and design. Onetheme can have implications for several different aspects of warehouse operations anddesign, and decisions regarding one aspect (e.g. level of integration in DC) may create newconditions for another (e.g. inventory management across the network). Meanwhile, multiplethemes can have implications for the same operations or design aspect. This complexity ofhow themes and implications interact (with multiple many-to-many relationships) makes itdifficult to describe a single impact that one theme may have on one aspect of warehouseoperations and design. It is also worth pointing out that some of the highlighted themes andissues can be handled by already-existing technology, and new technologies are currentlybeing implemented and tested in pilot schemes. From a research perspective, it would bebeneficial to study these implementations as well as how the technologies can be used on alarger scale.It is critical to understand the particular role of a warehouse in an omni-channel,considering that material-handling nodes can take on many different roles and shouldtherefore be uniquely designed (Ishfaqet al., 2016; Wollenburget al., 2018). A majorchallenge for warehousing is the increasing number and types of warehouses and stores in agiven network and the growing mix of channels (Guet al., 2010; Marchetet al., 2018). Inaddition to integrating e-commerce and store replenishment, large branded retailers havestarted selling their goods through giant marketplaces like amazon.com. This developmentmay imply different scenarios of increased drop-shipment where, for example, the retailersdeliver consumer packages directly to another e-tailer’s customers, and omni-channelwarehouses will ultimately be required to handle and coordinate a wide range of incomingand outgoing flows (Bartholdi and Hackman, 2016; Hübner, Holzapfel and Kuhn, 2016).These changes will have implications for warehouse operations and design. In order toIJPDLMDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
Receiving(Suppliers)Receiving(Returns)Put-away andStoragePicking andSortingPacking andShippingGeneral• What challenges do OC retailersencounter in designing thereceiving layout whenintegrating multiple flows in onewarehouse?• How do increased return flowsimpact layout considerations forthe receiving area?• What factors impact thedecision to separate orintegrate receiving layout forcustomer returns and incominggoods from suppliers?• How do OC retailers manageincreased complexity (largerassortment and mixed order size)in the design of storage space?• How do OC retailers designintegrated picking areas withdifferent order profiles (mixedorder size)?• What factors impact theappropriateness to integrate orseparate physical shipping areasfor different types of packingand consolidation activities?• How should the overall warehouselayout be designed to enable flexibilityto handle extreme demand peaks(such as Black Friday)?• How should the layout of a retail storeacting as an FFC be designed tosuccessfully cater to a range of activities(e.g. sales, marketing, order picking, actas pick-up point, returns handling)?• How should investments, risks, costs,and gains related to new storage andhandling equipment necessary for OCactivities be shared, especially if thechannel consists of independentdecisionmakers (e.g. franchise)?• What warehouse operations andactivities are required in various MHnodes and what KPls should be usedgiven their different roles, operationsand activities?• What warehouse operations andactivities do OC retailers outsourceandwhy?• How do OC retailers overcome thechallenges with increasing anddecreasing warehouse capacity in ashort- and long-term perspective?• For what type of flows is it possible touse cross-docking and what factorsimpact the decision?• What new competences and capabilitiesare required in a MH node to handle anincreased use of complex automationsolutions and other technology?• What are the challenges andopportunities for human–robotinteraction?• What new competences and capabilitiesare required in MH nodes to handle anincreased use of complex IT solutions?• What are the challenges andopportunities with integrating WMSwith other network IT systems to bestsupport OC logistics?• What mix of equipment isrequired to manage increasedcomplexity in picking (e.g. largerassortment and mixed ordersize) and what factors should beconsidered?• To what extent is sortingrequired in OC warehousing andwhat are the layoutrequirements?• What handling and storageequipment is required tosupport effective and efficientreceipt of return flows and whatfactors should be considered?• How do the expected increasein returns impact therequirements on staffcompetencies?• How should OC retailersapproach the integration orseparation of activities relatedto customer returns andincoming goods from suppliers(e.g. utilizing time windows)?• To what extent is it possible andvaluable to automate thereceiving of customer returnsand what factors should beconsidered?• How can OC retailers improvesystem registration of customerreturns to enable fast re-integration of goods toinventory?• What factors should beaccounted for in a WMS todetermine optimal storagelocation of SKU (e.g. store- andonline demand profiles,campaigns, product category andsize)?• How can automation be used toimprove picking and sorting, e.g.to meet big and rapid changes indemand, or to handle a varietyof order types and flows?• How can IT systems supportsorting, consolidation, andcoordination of multiple flowsto avoid scattered shipments(considering a wide range offinal destinations and shippingtimes)?• What functionality in IT systemsare required to support effectiveand efficient picking and sortingof a variety of orders and flows(e.g. e-commerce and storereplenishment)?• What factors impact the extentto which picking activities forstore- and online orders shouldbe integrated or separated?• How does increased complexity(mixed order size and newcustomer requirements such aslabeling) impact the choice ofpacking and shippingequipment?• How should packing activitiesfor consolidation of multipleflows/orders/packages bedesigned to support delivery ofsingle shipments to customers?• How do changing requirementson e.g. labeling and giftwrapping affect the design ofpacking activities?• How should the packing andshipping operation be designedto meet requirements onshorter lead times fromcustomer order to delivery?• How do varying packagingcharacteristics andrequirements from store ande-commerce impact theappropriate type and level ofautomation?• To what extent is it possible andvaluable to automate the put-away and storage and whatfactors should be considered?• Who should perform MHoperations such as put-away andstorage in stores: logisticians orsales people?• How is the overall inventoryoptimization strategy andincreased use of drop-shipmentsaffecting the inventory strategyand stock levels in various MHnodes?• How should OC retailersprioritize between online- andstore orders when there is alimitation in inventory orcapacity?• How should the picking andsorting operation and activitiesbe designed to meetrequirements on shorter leadtimes from customer order todelivery?• How do OC retailers decide whichSKU level to store (i.e. single unitsor case packs) when integratinginventories for store ande-commerce?• How can the next-generationequipment be used to manageincreased complexity (largerassortments and variety) andmake the put-away and storagemore effective and efficient?• What factors impact the decisionto integrate or separate thestorage layout for store- andonline orders?• How should the receiving layoutbe designed to manageincreased cross-dock flows?• What are the challenges andopportunities in the choice ofhandling equipment to manageincreased complexity ofmultiple incoming flows in thereceiving operation?• How should the receivingoperation and activities bedesigned to supportcombinations of flows thatmove either into storage ordirectly to packing andshipping?• To what extent do OC retailerspool and balance workforce andcapacity for different flows inthe receiving operation?• How can automation be used toincrease effectiveness andefficiency of the receivingoperation and what factorsshould be considered?• How can OC retailers improveregistration of received goodsthrough IT systems? (e.g. pre-arrival notice)?IT SystemsAutomationLabour and ActivitiesEquipmentLayout• What are the requirements onIT systems to enable effectiveand efficient cross-dock flows?Notes:Omni-channel, OC; material handling, MH; key performance indicator, KPIFigure 3.Research agenda foromni-channelwarehousing, andquestions guidingpractitionersOmni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
handle incoming goods from multiple suppliers as well as increased consumer returns,retailers need to consider time windows for arrival of goods and the possibilities for thepooling and balancing of warehouse space and workforce (Petersen and Aase, 2004;De Leeuw and Wiers, 2015). Other requirements for receiving include larger areas anddedicated staff with new skills and competencies to handle registering and sorting of goodsfor quick input into the warehouse (Hübner, Holzapfel and Kuhn, 2016).The integration of multiple flows in the same warehouse will also have implications forpacking and shipping. Integrating storage for the online and store channels may requiremixing picking and sorting methods (e.g. single vs batch picking), which are adapted to thecharacteristics of each channel. Store deliveries and e-commerce also come with differentpacking requirements, such as specialized areas, equipment and staff expertise, and theremay be unique features such as labeling and gift-wrapping that need to be integrated withinthe existing operation. Furthermore, the multiple flows (e.g. cross-docking, mixed order sizesand zone picking for different goods sizes) need to be coordinated to avoid scattereddeliveries to stores and e-customers (Larkeet al., 2018). These requirements will increase thedemands on the sorting of goods, so a dedicated sorting area may become necessary to copewith increased throughput. Customer requirements for home delivery and shorter timewindows (Hübner, Kuhn and Wollenburg, 2016) may also increase the complexity of sortingactivities considering the variety of final destinations and shipping times. These complexand time-consuming sorting activities increase the need for sophisticated WMSs andfunctionalities (Faberet al., 2002), and may require retailers to consider automationalternatives such as conveyer belts (de Kosteret al., 2007). Meanwhile, there might be a needto implement“WMS light”in smaller material-handling nodes (e.g. FFC) with the possibilityto install and close such installations with short notice. Various systems will also need to beintegrated with each other to enable the sharing of inventory and order information acrossthe omni-channel (Ohet al., 2012; Napolitano, 2013). This transformation comes with theneed for big investments in information technology, which calls for increased attention fromsenior management to warehousing issues. It also leads to the questions of who will carrythe costs and how to share risks and benefits. This will be an especially sensitive issue inretail chains characterized by more decentralized ownership/decision makers such asfranchise takers or independent dealers cooperatively owning a joint brand (Caiet al., 2012;Wollenburget al., 2018).Another implication and big challenge for warehousing is that the time from order todelivery has increased in importance for omni-channels (Marchetet al., 2018). Customersexpect shorter lead times, which puts pressure on reducing throughput times inwarehouses, that is, the total time required from order placement to it being picked, sorted,packed and shipped (Hübneret al., 2015). To cater for reduced lead times, omni-channelwarehouses may experience an increase in cross-dock flows where the put-away, storageand picking operations are cut out and goods instead move directly from receiving topacking and shipping (Bartholdi and Hackman, 2016). Another implication of reduced leadtimes is an increased level of automation of various warehouse operations to improve thespeed of material handling (Hübner, Kuhn and Wollenburg, 2016). There is also a widerange of new technologies such as video technology and augmented reality that havebeen developed and tested to make material handling more effective and efficient(Kembro, 2016; Kembroet al., 2017).In parallel with shorter lead times, the trend of urbanization has led to omni-channelwarehouses often being located close to cities where accessing land is difficult andexpensive. Considering also the rapid growth in demand, primarily driven by e-commerce,retailers seek ways to maximize capacity utilization in their existing premises. In the shortterm, a big challenge will be the ability to retain sufficient, qualified workforce(Michel, 2015). In the long term, one of the main challenges will be insufficient warehouseIJPDLMDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
space where retailers must consider leveling strategies to balance demand and capacityover time. Hübneret al.(2015. p. 98) conclude:“potential capacity management levers arehighly dependent on the structural characteristics of the warehouse.”A critical aspect ofcapacity is the integration of inventory and storage, avoiding having multiple, separatedstockpositionsfore-commerceandstorereplenishmentinthesamewarehouse(Marchetet al., 2018). The literature highlights the benefits of integrating capacitiesrelated to using the same warehouse space, similar processes, joint safety stock andshared personnel for handling storereplenishment and e-commerce, forexample.Particularly, integrated inventory systems make it possible for the retailers to keep lessinventory and create an opportunity to achieve a higher overall service level due toinventory pooling (Hübner, Holzapfel and Kuhn, 2016, Hübner, Wollenburg and Holzapfel,2016). Integrated inventory systems will however lead to more complex inventorymanagement,andjointinventoryformultiplechannelsmightleadtodifferentrequirements on service levels that must be aggregated into an overall inventory policy(Agatzet al., 2008; Hübneret al., 2015).A related aspect is that warehouses must cope with yearly, weekly and daily demandfluctuations where capacity peaks for stores and e-commerce often are similar over theyear but can differ over the week. While retailers may operate with fixed delivery patternsfor stores, the online order volumes are often harder to forecast (Hübneret al., 2015).Demand fluctuations and uncertainty put pressure on warehouses to be able to quicklyincrease or decrease capacity, for example, by distributing or shifting labor resources overthe week and across operations (Agatzet al., 2008). An example is the demand peaks andvariations connected to marketing campaigns such as Black Friday and Cyber Monday,where new bottlenecks emerge as orders and deliveries are significantly higher than theaverage volumes. Flexibility in terms of capacity, which is typically difficult to achieve instreamlined warehouse operations, has thus become significantly more important for thesuccess of omni-channels. The importance of flexibility has also increased for storage andpicking equipment to manage a large mix of SKUs, due to the wider assortment and morerapid rate of new product launches, and the need to handle a variety of order sizes cateringto both physical retail stores and e-commerce (Hübner, Holzapfel and Kuhn, 2016).Another aspect of flexibility is the importance of dealing with prioritized orders (betweenstore and online) and real-time changes and allocations in picking (Hübneret al., 2015).Considering this escalated need for multi-faceted flexibility, companies evaluate if andwhat warehouse operations should be carried out in-house vs the pros and cons ofoutsourcing to an LSP (Napolitano, 2013; Bernonet al., 2016).Along with the increased focus on shorter lead times and increased flexibility,competition pushes retailers to cut logistics and warehousing costs (Hübner, Kuhn andWollenburg, 2016). One of the main focuses will be on improving picking operations,considering their large share (often around 50 percent) of total warehouse costs (Bartholdiand Hackman, 2016). However, while integrated picking operations for store and onlineorders have several advantages, such as economies of scale and flexibility in short-termcapacity allocation, this approach implies a more complex picking system, which requires“assimilated infrastructures, resources and know-how for picking orders of both channelsto handle outlet volume and single parcel volume”(Hübneret al., 2015, p. 90). Therefore, itis difficult to make integrated picking operations cost efficient (Hübner, Kuhn andWollenburg, 2016), and the decision to integrate picking of store and online orders mustconsider a range of factors such as the characteristics of the product assortment to bepicked, the similarity between order sizes in different channels, the range of appliedpicking methods and equipment as well as store size and replenishment frequency(Faberet al., 2013; Hübner, Holzapfel and Kuhn, 2016; Marchetet al., 2018; Wollenburget al., 2018). In general, the more differences there are between the two channels, the moreOmni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
difficult it is to integrate the picking activities. Hübner, Holzapfel and Kuhn (2016, p. 275)add: integrated DC locations for both channels increase the complexity of warehouseoperations,”where integrating flows could result in too much complexity for handling therange of products and orders. Thus, retailers need to measure and evaluate if the gainsfrom integrating inventories and pooling capacities outweigh the increased complexity inpicking, or if it would be better to separate part of the flows into different warehouses.Marchetet al.(2018) highlight this issue by identifying four clusters of companies thateither separate, or, to varying degrees, integrate inventory and picking activities at thewarehouse level.In summary, omni-channels have multiple implications for warehouse operations anddesign, and research increasingly stresses the importance of tailoring warehouses to theparticular context. Nonetheless, there is a lack of research on how to design warehouseoperations in terms of layout and the activities needed in an omni-channel warehouse. Agatzet al.(2008) present general models that could be applicable for designing pickingoperations, but do not adapt them to the omni-channel context. Hübneret al.(2015) initiate adiscussion regarding design options, mentioning picking zones and scheduling. We extendthe extant knowledge, based on our discussion of implications, to develop a comprehensiveandstructuredresearchagendawiththepurposeofguidingfutureresearchonomni-channel warehousing (see Figure 3).Managerial implicationsThis study offers practical implications by pointing out different themes in omni-channellogistics and implications for warehouse operations and design. The identified themes andrelated aspects pose challenges for managers in retail every day, but to different degrees, assomeretailersareleadersandotherlaggards.Managersmustunderstandhowomni-channel strategies impact their companies’value proposition and future demand(e.g. variation and lead time), the potential changes of future network structure and the rolesof different material-handling nodes. As more nodes (e.g. stores) in the omni-channelnetwork seem to get involved and partake in material-handling responsibilities fore-commerce orders (such as click-and-collect), there will be implications for where and howwarehousing theory should be applied.Neither research nor practice seems to provide“one right answer”of how to adapt orimprove warehouse operations and design in omni-channels, and in practice, many differentmodus operandi are currently being tested and evaluated. The themes and set of researchquestions presented in this paper could help practitioners as a checklist of important topics toconsider when deciding between alternatives for warehouse operations and design in thetransformation to omni-channel logistics. With limited resources, managers must prioritizewhich activities to focus on, and analyze which design element and pioneering practice(e.g. IT and handling equipment) could, and should, be applied to improve currentperformance. For this purpose, we suggest a simple four-step process: first, understand thechanging omni-channel context and the transformation of value proposition, network design,and the need of new types of material-handling nodes. Second, assess the current performanceof different warehouse operations at different nodes (e.g. related to cost, lead time andflexibility) compared to competitors’and best practice. Third, analyze how warehouseoperations and design aspects should be configured for each material-handling node toimprove performance. Also consider if and which nodes, flows and warehouse operations thatshould be outsourced vs managed in-house, and how an external partner such as an LSPcould contribute to developing omni-channel logistics and warehousing. Fourth, prepareimplementation by analyzing warehousing investments, costs and benefits for different actorsand logistics nodes, and suggest a risk and reward-sharing mechanism that distributes risksand rewards in a fair way.IJPDLMDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
ConclusionsAlthough warehousing is critical for omni-channel logistics, the available warehousingliterature is sparse while other omni-channel retail and logistics literature is advancing. Anincreased focus on omni-channel warehousing is required and, as such, this paper presents aresearch agenda, which could be useful to guide scholars in the field and in their researchendeavors. The agenda can also guide practitioners when exploring warehousing optionsfor implementing omni-channel logistics.The purpose of this study is to identify themes related to the transition towardomni-channel logistics and to derive the implications for omni-channel warehousing. Withinwarehousing, there has been a series of general literature reviews developing researchagendas (see, e.g. De Kosteret al., 2007; Guet al., 2010; Davarzani and Norrman, 2015),however, without any orientation toward retailers’current challenges with new channelstrategies. Compared to Swaminathan and Tayur (2003) and Agatzet al.(2008), our study isperformed a decade later, and covers new literature with a focus on the current challengesand implications for omni-channel warehouses. Furthermore, Agatzet al.’s (2008) literaturereview focused on distribution network design and inventory management, with onlylimited attention to warehousing. Their observations regarding warehousing were mainlythat different transaction sizes between e-fulfillment and multi-channel orders create issuesfor the degree of automation, warehouse layout and return handling. Recently, Hübner,Holzapfel and Kuhn (2016) included a literature overview in their explorative interviewstudy on omni-channel distribution, but the main focus was not on specific warehousingissues but rather on network design, inventory management, last-mile fulfilment and returnprocesses. Similarly, Melaciniet al.(2018) do not focus on warehouse operations and designbut instead review literature and develop themes related to distribution network design,inventory and capacity management, and delivery planning and execution.We connect knowledge from various fields, such as logistics and supply chainmanagement, operations research, information technology, retailing and marketing, toidentify and categorize ten themes relevant to the transition toward omni-channel logistics.We build on these themes to discuss implications for warehouse operations and design, andpresent an extensive and structured set of research questions that address issues fordifferent warehouse operations and design aspects in relation to their interdependence withvalue propositions, channel management and physical distribution network design. Theprovided framework also contributes to practice as a checklist of important topics toconsider when deciding between design alternatives in omni-channel warehousing. Theinterdependencies between channels strategy, network design and warehouse operationscould be particularly worthwhile to consider because a decision in one of the areas mighthave long-term implications for the others. As more nodes (e.g. stores) in the omni-channelnetwork seem to get involved and partake in material-handling responsibilities fore-commerce orders (such as click-and-collect), there will be implications for where and howwarehousing theory should be applied. If a store turns into a node for picking, packing anddelivering e-commerce orders, these activities must be done in an effective and efficient way.There is a need for future research to apply a wide range of methods to developknowledge on the growing phenomenon of omni-channel warehousing: first, empirical casestudies could be used to better understand and analyze the pioneering practices alreadyimplemented,asretailerscertainlyaretestinganddevelopingnewsolutionsandtechnologies within their omni-channels. Such studies would also make it possible toobserve and better understand current issues and problems; second, explorative anddescriptive survey studies can also contribute to knowledge development in this early stage(see, e.g. Hübner, Holzapfel and Kuhn, 2016) by researching development trends. With agrowing number of companies transforming their multi-channels to omni-channels, thenumber of respondents will soon also be adequate for conducting, third, survey studies thatOmni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
test different hypotheses regarding, for example, the relationships between differentcontextual factors, warehouse operations, design alternatives, and performance; fourth,operations-research modeling and simulation has clearly dominated previous research, bothin general warehousing (see, e.g. Davarzani and Norrman, 2015), and in omni-channelstrategy and network design (Table I), but we found surprisingly limited use of suchresearch methods for omni-channel-warehousing-related issues. Hence, there is room formore omni-channel-dedicated models to address many of the content-related issuesdiscussed above. Our belief is that the requirements of the omni-channel strategy willchallenge many of the current warehousing practices and drive innovation, and hence turnwarehousing back into an important field of logistics research, in which scholars can learnand build theory from pioneering practice.References* indicates that article is part of the structured literature-review sample.*Agatz, N.A., Fleischmann, M. and Van Nunen, J.A. (2008),“E-fulfillment and multi-channeldistribution–a review”,European Journal of Operational Research, Vol. 187 No. 2, pp. 339-356.*Andel, T. (2014),“Urban outfitters taking hybrid DCs for a spin”,Material Handling and Logistics,January 10, pp. 14-17, available at: http://mhlnews.com/technology-amp-automation/urban-outfitters-taking-hybrid-dcs-spin (accessed January 26, 2017).Baker, P. and Canessa, M. (2009),“Warehouse design: a structured approach”,European Journal ofOperational Research, Vol. 193 No. 2, pp. 425-436.Baker, P. and Halim, Z. (2007),“An exploration of warehouse automation implementations: cost, serviceand flexibility issues”,Supply Chain Management: An International Journal, Vol. 12 No. 2,pp. 129-138.Bartholdi, J.J. III and Hackman, S.T. (2016),Warehouse and Distribution Science, Georgia Institute ofTechnology, Atlanta, GA.Beck, N. and Rygl, D. (2015),“Categorization of multiple channel retailing in multi-, cross-, and omni-channel retailing for retailers and retailing”,Journal of Retailing and Consumer Services, Vol. 27,pp. 170-178.*Bernon, M., Cullen, J. and Gorst, J. (2016),“Online retail returns management: integration within anomni-channel distribution context”,International Journal of Physical Distribution and LogisticsManagement, Vol. 46 Nos 6/7, pp. 584-605.*Bond, J. (2016a),“Building a better IT backbone”,Logistics Management, March 1, pp. 43-46, availableat:www.logisticsmgmt.com/article/2016_warehouse_and_dc_equipment_survey_building_a_better_it_backbone (accessed January 26, 2017).*Bond, J. (2016b),“Investing in information infrastructure”,Modern Materials Handling, April 1,pp.25-29,availableat:www.mmh.com/article/2016_warehouse_dc_equipment_survey_investing_in_information_infrastructure (accessed January 26, 2017).Bottani, E., Cecconi, M., Vignali, G. and Montanari, R. (2012),“Optimisation of storage allocation inorder picking operations through a genetic algorithm”,International Journal of LogisticsResearch and Applications, Vol. 15 No. 2, pp. 127-146.*Bretthauer, K.M., Mahar, S. and Venakataramanan, M.A. (2010),“Inventory and distributionstrategies for retail/e-tail organizations”,Computers and Industrial Engineering, Vol. 58 No. 1,pp. 119-132.Brynjolfsson, E., Hu, Y.J. and Rahman, M.S. (2013),“Competing in the age of omni-channel retailing”,MIT Sloan Management Review, Vol. 54 No. 4, pp. 1-7, available at: http://sloanreview.mit.edu/article/competing-in-the-age-of-omni-channel-retailing/ (accessed January 26, 2017).*Cai, G., Dai, Y. and Zhou, S.X. (2012),“Exclusive channels and revenue sharing in a complementarygoods market”,Marketing Science, Vol. 31 No. 1, pp. 172-187.IJPDLMDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)
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*Hobkirk, I. (2015),“Key distribution strategies of top omni-channel retailers”,Supply ChainManagement Review, available at: www.scmr.com/article/key_distribution_strategies _of_top_omni_channel_retailers (accessed January 26 2017).*Lu, Q. and Liu, N. (2015),“Effects of e-commerce channel entry in a two-echelon supply chain: acomparative analysis of single-and dual-channel distribution systems”,International Journal ofProduction Economics, Vol. 165, pp. 100-111.*Mahar, S., Salzarulo, P.A. and Wright, P.D. (2012),“Using online pickup site inclusion policies tomanage demand in retail/E-tail organizations”,Computers and Operations Research, Vol. 39No. 5, pp. 991-999.*Rabinovich, E. and Bailey, J.P. (2004),“Physical distribution service quality in internet retailing:service pricing, transaction attributes, and firm attributes”,Journal of Operations Management,Vol. 21 No. 6, pp. 651-672.*Xing, Y., Grant, D.B., McKinnon, A.C. and Fernie, J. (2010),“Physical distribution service quality inonline retailing”,International Journal of Physical Distribution & Logistics Management, Vol. 40No. 5, pp. 415-432.*Yao, D.Q., Yue, X., Mukhopadhyay, S.K. and Wang, Z. (2009),“Strategic inventory deployment forretail and e-tail stores”,Omega, Vol. 37 No. 3, pp. 646-658.*Zhang, X. (2009),“Retailers’multichannel and price advertising strategies”,Marketing Science, Vol. 28No. 6, pp. 1080-1094.Corresponding authorJoakim Hans Kembro can be contacted at: joakim.kembro@tlog.lth.seFor instructions on how to order reprints of this article, please visit our website:www.emeraldgrouppublishing.com/licensing/reprints.htmOr contact us for further details:permissions@emeraldinsight.comOmni-channellogisticsDownloaded by 83.249.96.37 At 05:22 29 August 2018 (PT)