Click the image for details In 2016, some cities across the country implemented the unified warehousing and distribution model, with some affiliated with wholesale markets, some formed by alliances of multiple distributors, and some individual companies transforming into third-party logistics to achieve unified warehousing and distribution. In February, the author visited multiple clients of the above three types in different provinces with sales over 200 million. The scale of unified warehousing was relatively large: warehouse areas over 10,000 square meters, all using high-level racks, with products basically filling the storage locations, and electric forklifts for access. The hardware conditions were quite good. However, in 2016, none of them made money, and they struggled to survive. Despite sales seemingly over 200 million, profits were less than one million, a very surprising input-output ratio. Is this an isolated phenomenon, or does unified warehousing and distribution simply not make money? The author summarized the problems in their operations for reference by companies currently doing unified warehousing and distribution, to avoid detours:

  1. Different businesses used different software systems: one WMS system for high-level racks; one ERP system for sales, procurement, and finance; and an independently developed internet ordering platform. That is, within the company, three sets of software from different suppliers were in operation. This scenario is what the manufacturing industry went through 10 years ago, and the final result is data delays or even inaccuracies. For example, when a new product is added, the file information cannot be immediately synchronized with the other two software systems; it requires external keys to trigger synchronization of product information in the other two software systems. If forced to add, it may cause deadlocks or operational anomalies in other databases. Also, when a user orders a set of products on the online ordering platform, the platform's inventory cannot be updated in time to the WMS and inventory/financial software, causing inventory inconsistency. Conversely, increases or decreases in WMS inventory cannot be updated in the other two systems in time. The most serious issue is cost: both the WMS and the inventory/financial systems involve product flow and cost. Which one is authoritative? How to synchronize costs? If costs are inaccurate, how can the company analyze precise profit points? Additionally, during the entire operation, how can risk control nodes be managed in a timely manner? Since these efficient operational data are distributed across different systems, in which system should risk control nodes be implemented? The final result is that manual adjustments are constantly needed to correct data in the three software systems; when data is inaccurate, tracing the cause is extremely labor-intensive, and sometimes errors are left as they are. This situation is very frightening because unified warehousing and distribution relies on big data, requiring real-time efficiency and precise analysis. With data distributed across three different software systems, how can efficiency and precision be achieved?
  2. Logistics and distribution were too rough: dozens of logistics vehicles had only one performance appraisal system, without a scientific operation monitoring system. Only the amount of goods delivered was assessed for pay, but not whether delivery services met standards, whether drivers unloaded according to standards, or whether driver service attitudes were satisfactory. That is, logistics was operated in a free-range manner, only assessing delivery volume. Over time, service quality became uncontrolled, and customer evaluations of logistics and distribution declined.
  3. Store customer service was unprofessional: a group of professional ground promotion staff was hired at high salaries, but they did not know how to sell products or how to communicate deeply with customers. They only promoted products through low-price policies. Over time, stores only stocked up during promotions, and without promotions, products did not sell, resulting in poor sell-through. For unified warehousing and distribution, hardware investments like building warehouses and buying racks are generally achievable with money. The difficulty is how to make other distributors trust you and be willing to store goods in your warehouse. Even harder is, after the warehouse is full, how to achieve "efficient operation" and "small profits but quick turnover." In summary, the following three points will prevent companies from making money: 1) Lack of professional system administrators: Unprofessional software selection leads to passive and inefficient later operations. 2) Neglect of logistics services: Unified warehousing and distribution is a long-term business. Only by strictly operating scientific logistics scheduling, reasonable loading, delivery rules, unloading standards, and on-site services can logistics professionalism be demonstrated, leading to a good reputation later. This is the foundation of professional logistics. 3) Unprofessional sales personnel: Having salespeople master all products in the warehouse and then sell to stores may seem to save labor costs and improve efficiency, but asking one salesperson to sell different categories of products cannot achieve professional service. The result is that salespeople only sell bestsellers. Having said so much, is unified warehousing and distribution a trap? Actually, it is not. Unified warehousing and distribution is about the concentration of goods, data, and resources. "Large" and "many" are its characteristics, which must be supported by high efficiency and low cost to win. How to break the deadlock? Join Zhao Bo's research meeting in Chengdu on March 22 for solutions! Author: Xu Yonggang, CEO of Youshang Software -END-