I was listening to the radio the other day and a song came on with the refrain that said what doesn’t kill you makes you stronger. That reminds me of the state of the supply chain and, more specifically, warehouse industry today.
It has become harder to keep up with changing consumption behaviors. Companies have had to become better and faster in every facet of their supply chain to stay ahead of global competition. However, in the end, companies are innovating new ways to improve, making them stronger, more flexible, and nimbler.
But there are two types of innovation: one is proactive innovation to lead an industry forward and the other is necessitated innovation spawned by something outside of an organization’s control. Looking at the latest trends in the supply chain sector, both kinds of innovation are front and center.
Technology takes the lead
If the supply chain was a world tour, then technology would be headlining and taking center stage. At the same time, the latest and greatest technology might not deliver exactly what you think.
Faster throughput is obvious. Ever since Amazon set the bar with its two-day shipping, consumers’ expectations have changed. They order something today and get it in a couple of days, faster than they ever have before. This change affects everyone. If you are fulfilling for Amazon, you must get that shipment out faster than ever before. Having an optimized warehouse is no longer an option; it’s a necessity.
In response, companies are innovating so that they aren’t missing revenue opportunities. A main trend in logistics and warehouse management is expanding the role of automatization and automated devices. In the warehouse, order picking accounts for 55% of the warehouse’s total operating costs, so an obvious opportunity is to optimize human labor with automation.
Artificial intelligence (AI) is another key tech trend in warehouse management and is an example of proactive innovation that has endless potential. By using exhaustive data collection combined with complex analysis, insights and correlations are being discovered that were invisible to even the most experienced warehouse manager. With AI, supply chain executives who have been with a specific business for decades are seeing certain dots connected for the first time.
We were recently working with a discount retail organization that buys seconds and last year’s styles then sells them for great discounts. They were adamant that their inventory was completely random, the 80/20 rule did not apply to them and ran their warehouse based on that assumption. After running their operations through our optimizer, we noticed that 80% of their sales were made by females with shoe sizes seven to nine and they sold three times more black than any other color. With this knowledge, they could optimize their warehouse by nearly 40%. The same type of patters and potential savings can be found whether you selling shoes or cell phones.
Whatever you are selling, the warehouse of today must be optimized to move inventory with fewer footsteps and redundancies. Margins can be eaten alive through inefficient warehouse design that causes workers to spend an unnecessary amount of time pulling product. Simply restructuring the warehouse based on pulling and shipping insights – not intuition – can turn loss centers (like newly launched ecommerce for manufacturers) into profit generators.