In recent years, the market and business models have undergone profound changes due to the growth of electronic commerce, the gradual optimization of storage and distribution costs, and greater efficiency in urban logistics. All this due in part to the application of new technologies to logistics, automated warehouses, semi-automatic handling systems and the modernization of metal racking systems.
The turnover of electronic commerce continues to show significant growth figures each year, which in 2013 once again exceeded 15% on average in Europe, even in countries strongly affected by the economic crisis, and with even higher growth rates worldwide in countries with emerging economies.
The possibility of reaching customers from all over the world is transforming business models, and especially B2C (Business-to-Consumer) markets, which can no longer be limited to classic models, where efforts were made for a reduced number of products to obtain the greatest possible popularity and, with it, a greater number of sales. Now, in the modern times of the Internet, online stores, social networks and consumer recommendations, the sale of many different minority products is showing an economic potential that, in certain sectors, can surpass the classic mass market model. And this phenomenon is what is known as the “Long Tail”.
The term “Long Tail” (long tail or long wake) is a term that in statistics refers to the part of a distribution that moves away from the area with greater frequencies. But it became popular in the field of logistics and business models in 2004, based on an article by Chris Anderson for Wired Magazine, which would later lead to his book “The Long Tail: Why the Future of Business is Selling Less of More”.
If we look at the figure, where the different references available in the store are represented on the horizontal axis, and the sales of each of these references on the vertical axis, we can see that a small number of references represent the best-selling products ( blue part), considered individually, and in general will also be associated with a higher level of turnover in the warehouse.
On the other hand, the orange part represents the rest of the references that, individually, have a much lower number of sales, and possibly a lower turnover level in the warehouse. It is this part that represents the “Long Tail”, and which owes its name precisely to the shape of the curve.
The important thing is that, if we take into account that the area of the curve represents the total sales, a “Long Tail” can have an area that exceeds the head (blue part). And this sums up what is revolutionizing the markets.
Implications of the ``Long Tail`` in the warehouse
It is evident that the “Long Tail” business models are only viable as the costs of storage and logistics distribution are more affordable to get minority products to the consumer. This imposes much higher demands when it comes to optimizing the warehouses and the metal racking systems that are installed.
Managing a greater diversity of references and, with it, highly varied product characteristics, requires the installation of top-quality metal racks, which ensure that they serve the present and future needs of the warehouse.
A greater number of references implies having to optimize the warehouse space to the maximum, with mezzanines or mezzanines, elevated aisles or high-density storage systems, such as clad-rack warehouses and automated warehouses with stacker cranes.
Serving e-commerce sales also requires maximizing the productivity of warehouses in handling tasks, both with automated warehouses for palletized warehouses, as well as with miniload for light loads and semi-automatic systems that streamline picking tasks.
Combining the storage of few SKUs with high demand, and a large variety of SKUs with little individual demand, also implies efficiently combining different metal racking systems in the same warehouse, and designed to optimize space based on the level of product turnover. LIFO pallet racking systems, such as compact pallet racking (also called drive-in pallet racking or accumulation pallet racking) and push-back pallet racking, save the need for aisles between pallets for those SKUs with less turnover.
On the other hand, conventional pallet racking ensures direct access to each SKU, while FIFO pallet racking, with systems such as live pallet racking, makes it possible to eliminate aisles without giving up high levels of turnover.
ATOX Storage Systems, leader in the manufacture of high-quality metal racks and with extensive experience, designs and manufactures industrial racks and storage systems tailored to the needs of each client. Aware of the evolution of the markets and business models, ATOX is committed to R+D+i to provide new automatic and semi-automatic storage systems that allow warehouses to successfully address the challenges that new times present.