Retailers can alleviate supply chain pressure with “pop-up” distribution centers (DCs).
Chain Store Age recently sat down with Nishith Rastogi, CEO of global supply chain platform Locus, to discuss the emerging concept of pop-up DCs. Having been used by major retailers such as Walmart and Amazon, pop-up DCs operate similarly to pop-up shops, enabling retailers to quickly and cost-effectively respond to localized demand surges in their supply chains.
How would you define the 'pop-up DC' concept?
Pop-up distribution centers are smaller-scale centers with multiple locations. These centers make distribution a more geographically accessible task compared to larger but scarcely located centers. This pop-up center trend was sparked by the demand that e-commerce and retail have put on the supply chain, as well as by consumers adapting to same-day and two-day delivery expectations. The more pop-up centers there are, the faster the distribution can be carried out.
When does it make sense for a retailer to use pop-up DCs?
It makes sense for retailers to invest in pop-up up distribution centers when their existing processes are unable to keep up with demand. If companies have larger centers positioned where their buyers are located, there’s less of a need for pop-up centers, but businesses that rely on only a handful of large centers can benefit from adopting the pop-up trend. Shipping products from isolated warehouses to the consumer’s door can take a long stretch of time, so having more localized distribution centers cuts down that time and allows for consumers to receive their orders sooner.
Have pop-up DCs become more useful in the wake of COVID-19?
COVID-19 increased the number of consumers relying on online retailers which added more pressure to the supply chain. Over the last year, the supply chain has seen high demand spikes as well as supply side shortages. Pop-up distribution centers allowed retailers to have more control over their processes, from packaging to delivery. An increased number of distribution centers located within closer proximity to customers has allowed retailers to speed up the delivery process, despite unpreventable delays in the supply chain.
What type of evolution do you think pop-up DCs will undergo in the next 12 months?
Retailers are tapping their stores for DCs not just to be closer to the consumer but also to decrease the impact on the environment. What may have been accelerated as a trend during the pandemic will only continue to see more takers. Companies now also realize that investing in pop-up centers will allow more control over their supply chain processes while also improving the customer experience. This would mean new operating models, and more focus on route optimization, dynamic network design, and data analytics to continuously monitor and improve processes/SLA adherence.