Key Takeaways: How should warehouse planning adapt to the logistics needs of different business models and distribution channels?

The business environment is constantly evolving, and the warehousing needs driven by different business models and distribution channels are likewise changing.

“Warehousing provides services to various business models and channels, including distributors, retail stores, end-use sites, third-party customers, and direct‑to‑consumer e‑commerce clients.” When planning for different types of warehousing, one inevitably faces the challenge of evolving future business models and channel demands, as well as the shifting configurations that arise from combinations across various formats and channels. This paper outlines key considerations in warehouse planning to serve as a reference.

01 Supply chain environments and business models across different industries /Channels and Orders

From the perspective of a company’s logistics network, different business formats or distribution channels have distinct logistics requirements. When these requirements are translated into warehouse operations, the functional needs vary as well, leading to differences in the design of functional zones within each warehouse and, consequently, significant variations in warehousing workflows and equipment selection. Moreover, the business environment is constantly evolving, driving changes in the warehousing needs associated with different business models and distribution channels. Typically, warehouse planning—from land acquisition to warehouse construction—requires consideration of the future. Over a 3–5-year development horizon, warehouse planning must be underpinned by a rigorous logical framework that analyzes the gap between the current warehousing environment and future‑oriented objectives. Accordingly, we systematically analyze how changes in various business models and distribution channels across industries impact warehouse planning.

We begin by defining the demand side. As we can see in the figure, In the “Business Model/Channel” column, the categories listed include distributors, retail stores, user sites, third-party customers, and self-operated e‑commerce customers. These categories are defined in this document to prevent misunderstandings.

Dealer (Warehouse): An entity that holds exclusive rights to sales or services within a specific region and market segment, owns the merchandise, and receives deliveries from upstream warehouses directly to its own warehouse.

Store: A retail outlet where products are sold, such as convenience stores, supermarkets, or pharmacies, with deliveries made from upstream warehouses to the store’s location.

Usage Site: The location where the product is used, such as pharmaceuticals delivered to a hospital or telecommunications equipment delivered to a base station.

Third-party customers: As a third-party logistics provider, we offer comprehensive warehousing solutions to major clients, encompassing storage, order picking, and last-mile delivery.

• E-commerce orders: Orders placed through e-commerce platforms, from warehouse fulfillment to delivery to the end consumer (no further segmentation of e-commerce orders is provided here).

From a supply chain perspective, in the logistics network structure shown in the figure, from the standpoint of warehouse planning, the most critical factor is… “Central warehouse” and “regional warehouse” are the key points that need to be clarified in this article. From a warehousing‑location perspective, a “central warehouse” has a larger storage capacity and handles larger batch shipments than a “regional warehouse.” However, in practice, from an economic standpoint, some central warehouses may also perform certain functions typically associated with regional warehouses. In the business format From the perspectives of channels and orders, the order structures and delivery requirements vary across different business formats and channels, including distributors, retail stores, end-user sites, third-party customers, and e‑commerce clients. Overall, from the perspectives of order volume and batch size, “distributors” typically place large‑volume, low‑frequency orders; “retail stores” place small‑volume, high‑frequency orders; “end‑user sites” also tend to have small volumes but high frequency (with significant variation across industries); “third‑party customers” exhibit highly customized demand, depending on specific requirements; and “e‑commerce customers” generally place small‑volume, high‑frequency orders, often in a fragmented manner. Furthermore, order line characteristics and time‑sensitivity requirements vary considerably as well. Based on this analysis, let’s now examine the situation in different industries in greater detail. Example 1: A food manufacturing company—providing warehousing services primarily for the “distributor” channel.

As shown in the figure, this is the logistics network structure of a food manufacturing company, built primarily around a distributor‑centric channel. Looking ahead, the company faces the following challenges in its supply chain: 1) As distributor volumes grow, warehousing capacity becomes insufficient and logistics cost rates rise; 2) With the increasing share of short‑shelf‑life food products handled by distributors, tighter delivery‑lead‑time requirements place pressure on supply‑chain efficiency. These two factors, in turn, drive changes in the internal planning of the logistics network and its warehousing nodes. First, rising distributor volumes necessitate larger batch sizes for storage and distribution; second, the expansion of short‑shelf‑life product lines increases both inventory turnover and the frequency of delivery batches. The configuration depicted in the figure reflects the company’s naturally evolved warehousing network, characterized by a sales‑oriented warehouse management model. Due to the lack of sophisticated warehouse management, both operational efficiency and cost optimization remain suboptimal, making it difficult to meet the higher standards required for managing warehousing operations as business grows in the future.

The diagram above illustrates an ideal post‑optimization state, in which the functional roles of each warehouse are more clearly defined, thereby facilitating a swift supply‑chain and logistics response and effective cost control as product mixes evolve, business expands, and formats or distribution channels shift.

Therefore, as illustrated, in terms of internal business process management, facility layout, and information technology, each warehouse requires re‑positioning and optimization. As shown in the figure, the core central warehouse must undergo a comprehensive assessment and optimization to enhance operational accuracy, resource utilization, safety, and efficiency. Example 2: A large supermarket and convenience‑store chain—providing warehousing services primarily centered on individual stores.

Let’s examine a company whose primary business model revolves around convenience‑store outlets. As shown in the figure, this illustrates the logistics network for one of its provinces. The network comprises over 2,000 stores distributed across various urban areas within the province, with more than 100 suppliers handling inbound shipments to the warehouses. The province is served by multiple distribution centers: one designated as the “central warehouse,” with the remaining facilities functioning as “regional warehouses.” The central warehouse also undertakes regional deliveries and replenishes inventory at the regional warehouses. Each warehouse fulfills scheduled deliveries to the stores under its jurisdiction, with delivery frequencies typically categorized as weekly, tri‑daily, or daily. In terms of business channels and order dynamics, the company relies predominantly on brick‑and‑mortar stores, while its online operations are still evolving and growing at a relatively modest pace. Promotional campaigns drive revenue but place significant demands on warehouse sorting, outbound processing, and last‑mile delivery. Consequently, warehouse capacity must be flexible enough to accommodate variations in product assortment, order volumes, and delivery requirements arising from different promotional strategies.

As shown in the figure, a provincial‑level convenience‑store distribution center has been established. Over the next 3–5 years, business volume is expected to grow at an annual rate of 30%. The key challenges are: 1) In light of the company’s future business expansion, how can existing warehouse assets be leveraged to enhance their profitability? and 2) How should the warehouse layout be optimized to support the stores’ promotional strategies? Within this single business format or channel, demand is also evolving. First, as business volume grows, the resulting increase in storage requirements and delivery demands necessitates careful consideration of the efficient utilization of group‑wide assets. Second, changes in sales models across different business formats accelerate the frequency of warehouse operation batches, requiring planners to prioritize more effective resource‑utilization efficiency. Example 3: A pharmaceutical logistics company—warehouse services across multiple business formats.

Large pharmaceutical conglomerates typically establish dozens of logistics centers nationwide to serve all regional markets, with each center catering to distinct business‑type combinations. Broadly speaking, these include distributors, retail pharmacies, hospitals, and major third‑party accounts. However, varying competitive landscapes and business models across regions give rise to differing warehouse‑planning requirements. Moreover, in multi‑channel environments, different pharmaceutical products demand specific temperature‑control conditions—such as freezer rooms, refrigerated storage, and ambient‑temperature facilities. Overall, the future development of such operations poses the following challenges for warehouse‑center design: 1) In highly competitive regional settings where business models differ, how should each logistics center be laid out and equipped with appropriate warehousing infrastructure? 2) As new and existing logistics parks proliferate nationwide, how can warehouse construction and optimization be refined to enhance the efficiency and quality of planning and decision‑making in response to diverse product‑category and channel‑mix needs? Multi‑format business combinations place higher demands on storage, sorting, and order fulfillment. For example, when storing inventory, large customers may be assigned dedicated warehouse‑and‑distribution solutions, often requiring a separate storage area. In such cases, that area must be planned independently, while also maximizing overall warehouse utilization. For orders from different business models, the number of line items can vary significantly during sorting and outbound processing. Therefore, it’s essential to consolidate as many items as possible into a single picking operation before grouping them by order, and to structure work batches in a way that balances both efficiency and throughput.

02 Warehouse Planning and Business Formats / The relationship between channels
Business format /For warehousing, channels constitute the external environment of the supply chain; their evolution determines both the functional positioning of warehousing and its internal planning. We will continue to illustrate this using the aforementioned business models or channels. As the internal and external business environment evolves and changes, new business formats have emerged. /Channels, which in turn give rise to distinct orders. Ultimately, logistics ensures that the goods specified in these orders are delivered to customers accurately and on time. For logistics, the most critical information in an order includes the product code, order quantity, customer address, order placement time, and the promised delivery date (which may not always be explicitly stated in the order). These details encapsulate the fundamental requirements and objectives needed for planning—essentially translating into specific operational demands, such as the items to be picked, the quantities to be picked, time‑sensitive handling deadlines, and transportation routes. Thus, for different requirements, the values of each field in the order vary significantly, sometimes even diverging substantially. For example, in the retail sector—ranging from convenience stores and large supermarkets to online shopping—the demand patterns differ across these formats. In the first two, orders are typically placed by individual stores, with large order quantities per batch, relatively few customers, and longer promised delivery times. By contrast, online shopping features smaller order sizes per batch, a much larger customer base, and shorter delivery lead times. In practical planning, the first two formats warrant further analysis: compared with large supermarkets, convenience stores have a denser network of locations, smaller order volumes, and shorter delivery windows. Given the distinct demand characteristics of each format, detailed analysis is essential in warehouse and distribution‑center design. For instance, for a given product, when should operations be consolidated, and when should they be tailored to the specific needs of each channel? After all, centralized operations offer greater economies of scale and more efficient utilization of logistics resources, while decentralized, demand‑driven approaches can enhance accuracy. Therefore, a well‑balanced, rationalized plan is required.

Specifically, as mentioned earlier, different business formats or channels have varying requirements for batch sizes and lot‑to‑lot sequencing in warehouse operations. Meanwhile, under a multi‑format mix, the warehouse planning process becomes even more complex. In the figure above, during storage area planning, the key information is: “Inventory levels,” “facility environment,” “logistics units,” “aisles,” and “storage methods” are key factors to consider when planning a sorting and consolidation area. In contrast, the critical variables for such planning include “logistics volume,” “logistics units,” “aisles,” and “storage methods.” In the diagram below, we link these essential parameters to the planning “variables”—such as batch and lot sizes, storage container dimensions, aisle widths, and the number of rows or tiers—enabling quantitative analysis.

Thus, as mentioned above, we will “Warehouse planning” and “business format/channel” are determined based on key information in the order. Model relationships have been established. The computations among these variables have also been implemented in our toolkit, allowing users to input parameters and directly generate the corresponding results. In subsequent articles, we will conduct a more in-depth analysis of this planning problem.