We’ve had a busy final quarter of 2018 here at Logistics Bureau, so it was somewhat later in the year than usual when I got to thinking about what’s been going on in the supply chain world at large, and which developments are likely to keep the industry on its toes in the coming year.
However, this year hasn’t quite closed out yet (at the time of writing), so in the true spirit of just-in-time delivery, here’s a quick appraisal of three current trends that I believe will come on stronger, and perhaps become some of the most important to supply chain operators in 2019.
Trend #1: Warehouses are Getting Smarter
Statistic: A mere 10% of distribution centres exclusively handle pallets, while 66% handle a mixture of pallets, cases, split cases, and pieces. ” (Source: Logistics Management 2018 Distribution Center Survey.)
Omnichannel fulfilment, escalating labour costs, and increased access to process automation solutions are changing the way enterprises run their distribution and fulfilment centres.
On the one hand, warehouse operations are growing more complex as customer orders become smaller, more numerous, and more varied in their composition. On the other, throughput has to be faster, costs need to be lower, and service quality must be of the highest standards to meet rising customer expectations.
As has been proven over the last couple of decades, information technology is the key to managing the disparate and sometimes conflicting demands placed upon the 21stcentury warehouse operator.
For many though, a warehouse management system (WMS)—once the only technological solution necessary for even the biggest operations—is no longer an adequate tool. For example, a WMS is no longer ideal where pockets of automation exist in larger facilities that also retain a dependency on manual processes.
These mixed environments may be better managed by a combination of WMS and warehouse control systems (WCS), and perhaps even a warehouse execution system (WES). Adoption of the latter two solutions is gaining momentum as logistics operators seek to make warehouses work smarter rather than harder.
What is WCS?
WCS solutions typically link a WMS to warehouse hardware, which increasingly includes one or more automated systems such as pick-by-voice, conveyors, goods-to-person picking systems, inline scanners, scales, and printers, and perhaps even automated vehicles or warehouse robots. They equip operators with greater capabilities to plan and execute integrated processes and make those processes more visible by providing a central human-machine interface (HMI) as well as comprehensive business intelligence and reporting.
What is WES?
WES systems are a little harder to define than WCS, mainly because they are developing so quickly. Originally, a WES would sit between a WMS and WCS to enable faster, more responsive automated and manual process execution.
However, the WES is rapidly evolving as the solutions acquire more complex functionality and in some cases, even replace WMS altogether.
The fast growth of WES is a direct result of the need for higher-velocity distribution arising from the omnichannel environment, which has in turn driven requirements for companies to increase order-processing logic without lengthy and costly upgrades to incumbent WMS platforms.
As WCS and WES software becomes faster to deploy and integrate with legacy systems, and more logistics operators invest in automation, I believe we will see many more distribution centres utilising these systems to speed up operations in 2019.
Trend #2: distribution nodes moving closer to customers
We’re seeing more supply chain nodes spread across the country. They are smaller in size but greater in number.” — Aaron Ahlburn, Managing Director of Industrial and Logistics Research, JLL Property Services.
Of all the factors currently shaping trends in supply chain and logistics, e-commerce continues to be one of the most influential. As well as forcing retailers and 3PLs alike to implement processes and systems that are more responsive, the e-commerce machine is also shifting the dynamics of distribution networks.
The need for fast, low-cost shipping is driving the placement of inventories, meaning more, but smaller fulfilment centres are necessary. Meanwhile, the requirement to avoid excessive inventory is as critical as it always was.
This trend could be good news for 3PLs, as retailers serving customers from single, central distribution facilities find this network model no longer helps them compete in the e-commerce space.
Rather than try to distribute inventory and hence incur the cost of more fulfilment assets, many such retailers could decide to outsource, either by collaborating with a single large provider or by entering multiple partnerships with 3PLs in different regions.
New Networks, New Tools, New Strategies
Of course, the distributed inventory model will present challenges for retailers and 3PLs alike, especially when it comes to demand forecasting and knowing where to place inventory. Again, technology will play an important role here.
Optimisation tools such as distributed inventory flow forecasting (DIFF) systems are beginning to capture attention among companies wishing to locate products close to customers without accumulating excessive local buffer inventories.
I believe we will also see greater adoption of the demand-driven supply chain model in 2019, as operators look to become less reliant on forecasting, which is only becoming harder to practice with any degree of accuracy, due to the volatility inherent in consumer e-commerce.
Trend #3: the blockchain slow-burn continues
You have to think of the blockchain as a new utility. It is a new utility network for moving value, moving assets.” — William Mougayar, Author of The Business Blockchain
If you haven’t heard the hype about how blockchain technology will revolutionize supply chain management, you must not have been paying attention. However, like many other potentially disruptive technologies, the progress of blockchain as a practical solution for… well, anything really, is slower than many protagonists would like to admit.
However, the other technologies in question, like autonomous trucks and drones, are progressing slowly because of their potential impacts on the safety and security of the public, whereas blockchain is just a digital tool with the potential to help supply chain operators improve security and achieve unprecedented levels of visibility…
So What’s the Holdup with Blockchain Progress?…
I think the answer is quite simple, because, on the one hand, blockchain experts are confident that distributed ledgers have a lot to offer the supply chain and logistics industries—and there is plenty of evidence to suggest that indeed, the industry seems to be leading the way in the adoption and use of blockchain.
On the other hand, companies are struggling to discern the practical uses and benefits of blockchain systems amid all the noise and hype.
Added to this is the fact that for any individual supply chain organisation, there is little use in implementing blockchain solutions unilaterally. It will typically be a decision that multiple supply chain partners must agree on, and then collaborate closely to design and implement.
That said, blockchain does hold much promise for our industry and is gaining ground, as evident from well-publicised implementations and trials underway with some of retail and logistics’ most notable players, which include:
- Tyson Foods
As the industry media continues to report on progress within these companies’ projects, awareness of blockchain and its potential supply chain applications will spread, perhaps making 2019 the year that will see a tipping point, with many more enterprises exploring blockchain use cases.
2019: Another Big Year for Supply Chain Technology
Smarter warehouses, distribution network transformation, and blockchain technology are just three of the trends to track in 2019, but as always in the supply chain world, there are plenty of others to keep your eye on.
What is certain though, is that technological innovation will play a large part in launching and maintaining these trends. As supply chains grow longer, faster, more complex, and more adaptable, companies that embrace digitisation and move early on emerging solutions will be the ones best placed to compete in our ever-more-challenging industry.