More direct to consumer…means more warehouses. Or does it.

There was a recent article talking about the surge in demand for warehouse space in North America in large part due to the explosion in eCommerce. According to the article there will be an additional 1 billion square feet of storage needs by 2025. Impressive numbers. With eCommerce number predictions ranging between 18% to 26% of overall retail over the next 5 years, many are pointing to this upwards curve as the leading indicator of the need for more warehouse space. Where else will you hold all that inventory needed to fulfill the orders?

But not so fast. Yes, there will be a greater need for the warehousing space. However what some we are missing is that not only is online commerce driving the linear flow of inventory, but the way we fulfill orders is itself changing and adapting. With that, where inventory flows is also changing.

More warehousing!

• More warehousing…no doubt. There will absolutely be a need for added warehousing space. Not only will we need an influx of warehouse space, but how that space is being utilized will also have to adapt. From assembly, kitting, customization and intaking returns, the warehouse of tomorrow is no longer a simple rest stop for inventory on its way to a customer. So yes, we will have to continue to ramp up the available warehouse space, but how that space is utilized will also have to evolve.
• Stores become more flexible inventory dispersers. Dark stores are all the rage these days and the pandemic has only accelerated a trend that has long been baked into the fulfillment cake. Moving forward, it will be more than dark stores that become an integral part of how we fulfill customer orders. Look for stores to become integral to micro-fulfillment clusters. Rather than relying on mammoth distribution centers to service large swaths of real estate, image networked clusters of localized stores (both dark and normal stores as well as smaller DCs) being able to service demand on a block by block, or street level geography.
• Drop shipping becomes a growing method of fulfillment. Want that product tomorrow? Maybe we need to ship it to you right from the factory. I worked with a large sneaker manufacturer that was manufacturing customized sneakers on the same manufacturing line as their traditional make to stock production. It was interesting that they could manufacture both in the same plant. But then it was fulfilled via traditional methods. What if you dispatch those made to order items directly to the end consumer? Drop ship the custom pair of sneakers? You might incur shipping costs with this strategy, but as you get a better handle on that aspect, being able to fulfill directly from the manufacturer could eliminate some of the strain on other parts of your fulfillment channels.
• Circular economy leads to more fulfillment from the returns. I mentioned above that one aspect warehouses will have to contend with, his how to handle ever growing deluge of inventory coming back. Returns is an ever growing aspect of the supply chain that is a cost center, but should be seen as an opportunity. According to market research firm IHL, global returns are approaching $1 Trillion. 50% of all online apparel is put back into the channel via returns. Why put this inventory back into the stores or distribution channels, why not send them directly to consumers? Think of a eBay coming to the returns channel. You purchased a new Xbox, but you realize that the PS4 is a better route, so you initiate a return. As that return is being processed, another customer orders and Xbox. Rather than you shipping the Xbox to a return facility, imaging being able to ship it directly to that other customer. Retailers and brands could initiate some simple ways to “check” the product – upload pictures of the product, guarantee certain functions still work and the retailer/brand could keep track and financial incentivize the parties. This would reduce the added costs associated with all the touch points needed for returns.

So will we need more warehouse space? Absolutely. But the way retail and the manners in which we fulfill customer needs, are evolving. Evolving in such a manner that we need to think of multiple ways, not simply more warehousing, to satisfy those demands.

Happy New Year 2016! Looking forward to a sweet 16 year for Supply Chains

Happy New Year to all, I hope that your 2016 is already off to a great start. Looking forward to this year there are some exiting changes as well and continued progress in other areas. Here are some trends we are focusing on for 2016:

• Retailers will continue to seek new solutions and services to empower their stores: in 2015 we started seeing greater efforts and emphasis on the role of brick and mortar stores. Written off as irrelevant, even a burden a few years ago, retailers’ views of their real estate assets has taken a turn. Brick and mortar stores’ role in the retail supply chain will continue to grow in importance. This momentum is due to the evolution of how stores are being leveraged by retailers. Embracing show rooming, leveraging stores as distribution centers, creating contextual experiences within the store to drive traffic to name a few trends, are all making stores matter again. Most significantly the redefinition of the store’s role allows traditional retail to tackle the pure eCommerce players. 2016 will continue to see this evolution of the store. Gaining improved inventory visibility, empowering store associates with greater information, enhanced operational data to allow more business processes to be tested and adopted are all areas where retailers will be seeking appropriate solutions. Look for retailers to lean on their solution and service providers to bring them the necessary technology and business processes that can allow retailers to continue to transform their physical assets. Solution and service providers must work with their retail clients to not only provide technology or business process solutions, but to also offer strategic insights and ideas. Technology is not the panacea but the enabler for new ideas and processes.
• Logistics continues to feel the strain: Your supply chain is only as strong as your ability to minimize the friction associated with moving inventory and products throughout your supply chain. This burden falls on logistics – rail, ocean, air, trucks even bicycles and donkeys are all part of our logistical network. This past holiday season witnessed another situation where the strain on the logistics network can rear its ugly head. eCommerce retailer Jet.com had to apologize to some of their clients for falling short on being able to deliver products in time for Christmas. Logistic giants FedEx and UPS had to jump through some hoops to meet the delivery crush. Coincidentally, over the holidays,  eCommerce giant Amazon announced it is exploring adding an air cargo arm to their distribution assets. While eCommerce is growing at a steady 1o-15% year over year since 2012, the strain it is placing on logistics is disproportionate – due in large part to seasonal aspect of certain package delivery. The strain is also starting to pop up in places such as college campus mail rooms where they are being overwhelmed by services such as Amazon Prime. This trend is not going to disappear once the calendar flips to 2016. Transportation and warehousing will continue to feel the strain of keeping up with the accelerated evolution of supply chain in 2016. Look for continued efforts from service and solution providers to work with their customers to continue to find innovate manners to handle the crush of logistics.
• Explosion of disruptive technologies continue to grow: Whether it is IoT (internet of things), robotics, drones, 3d printing or virtual reality to name a few, these disruptive technologies will continue to grow in importance within supply chains. IoT is already well entrenched within manufacturing and logistics, in 2016 look for this technology to grow in importance with regards to the retail supply chain. Robotics are also well know within manufacturing, but look for this technology to play a greater role in places such as customer service and inventory management in retail. Drones are getting much attention, somewhat negative, post holidays as those who unwrapped them as gifts are wondering if they need to register with the FAA, there was even a near disaster during a World Cup skiing race when a drone literally fell from the sky, click here for video. Reality is drones have a role to play in our supply chains – the genie is out of the bottle and properly leveraged they can reduce friction from our supply chains. As technology giants Amazon and Google continue to push on how to leverage these machines to address last mile delivery. Additive manufacturing will continue to play a role in the manufacturing process, but will also create new business models. Companies such as Lowes are already experimenting with 3D printers in their stores, allowing customers to have custom products manufactured on site.  3D printing is already playing a significant role with manufacturers such as Airbus and Boeing, but we are only at the cusp of how this disruptive technology will play in our supply chains. Finally virtual reality will continue to play a role in places such as retail – allowing customers to experience product as well as in supply chain design and CAD software. As mentioned above, we see warehousing and other logistics being strained as more companies look to add more of these assets, leveraging virtual reality allows for better testing and understanding of how these capex projects will turn out. Imagine being able to test and try out a full scaled model of a plant or warehouse via virtual reality. Look for these technologies and others continue to grow in importance within our supply chains.

Every year at this time it is always interesting to look back and see what the prior year held for us and more fun to look forward to the coming year. As I have become more of an optimist as I have grown older (is that normal?) I am looking forward to 2016 and some of continued evolution of these technologies and trends.

Happy New Year to you and your loved ones!

New iPhone reminds us of the rise of mobility in supply chain

Later tonight we will be reminded about the power of Apple and consumers’ apparent insatiable desire for new devices (consumers can pre-order the new iPhone). But this is not a post about the iPhone 6 and whether or not I should get the 6 or the 6 phablet…instead this is a reminder about the rise of mobility within supply chains.

Not too long ago, when Apple introduced the iPad it was viewed, rightfully, as a revolutionary consumer device. A device that would threaten the laptop market. Which it has. An unintended consequence was the iPad becoming a device that found its way onto the manufacturing floor, truck fleets, warehouses and other parts of the supply chain. Tablets gave workers on the floor a simple, mobile and connected interface with the necessary systems to allow the factory to run effectively and efficiently. Companies like GE’s Energy Storage have been leveraging tablets on their factory floor to reduce the alerting time when outages occur. Rather than having floor managers monitor everything from a central control center, they now have that computation power and communications in a portable device. Truck fleets have adopted the usage of tablets to bring more intelligence and connectivity to their vehicles. Of course none of this is a bad thing for the likes of Apple, Google, Samsung or other players in the mobile device ecosystem.

Tablets have also become a vital cog when it comes to how supply chain solution providers such as Llamasoft and JDA, offer their customers access to their offerings. Allowing for greater access to their software solutions – anywhere and anytime.

But is the world of mobility limited to tablets and smart phones? Absolutely not. On the contrary, the rise of wearables is the next wave of mobility in the supply chain.  I remember walking the floor a few years ago at CSCMP’s annual event and seeing a number of companies displaying their devices – gloves, headware and other wearables – that would bring more efficiencies to supply chains. Many of these had to do with ensuring factory workers or those who pick and pack in the warehouse were as efficient as they could be. The problem is many of these devices were bulky and quite unwieldy. But similar to the adoption of consumer based tablets by companies, look for consumer wearbles to find their way onto the factory floor, warehouse and other environments. Let’s face it, consumer focused companies tend to make more aesthetically pleasing mobile devices, both in form and function.

For supply chain practitioners, do not hesitate to look to consumer device providers for your mobile needs. While there will be industry specific providers of devices, you might be able to find what you need from the likes of Apple or Samsung. Device manufacturers could consider these potential other uses, but in truth they should just focus on their primary targets – the consumer. Technology players must take into consideration what this growth in mobility for the supply chain means for them. Not only might they be asked to created apps for the devices, but how else can they take advantage of the increase in mobile and connected computing power?

New sleek gadgets like smart watches, clothing with senors, smarter tablets and phones are not only exploding in the consumer space but also for your supply chain. Interesting times we live in. Now I have to get back in line for my new iPhone.