What’s Next for the Supply Chain?
By Mitch Hayes, Contributor
The COVID-19 pandemic continues to be a major disrupter the likes of which we have not seen in over a generation. In the last year, it has had a significant impact on the supply chain, driving disruptions and shortages that have pushed supply lines to their limit.
During this time, we have also seen an increase in warehouse automation as companies look to the technology to help them overcome some of the supply chain challenges they continue to face.
Firstly, the accelerated rise of ecommerce and changing consumer expectations is putting renewed focus on the last mile. Automation solutions, such as automated micro-fulfillment centers, help companies bring fulfillment closer to the customer.
Secondly, the complexity and volume of products being moved have increased as a result of consumers’ accelerated acceptance of ecommerce. This shift is forcing organizations to handle more individual units and the associated complexity and coordination is more cost effectively handled through automation.
Finally, the impacts of COVID-19 on worker availability is obvious. Less obvious is that with baby boomer workers retiring, there are fewer workers willing to work in warehouses and associated labor rates are increasing. This is making the return on investment for automation more compelling.
So, as we look ahead and (hopefully) begin to move beyond COVID-19, what can we expect for the supply chain? Two of the biggest drivers of change we are seeing when it comes to the supply chain’s embrace of automation are ongoing digital transformation and the growing need to bring fulfilment closer to the consumer.
Digitization Creates New Opportunities for Optimization
Digital transformation marks one of the most significant changes in business in recent years as organizations seek to harness digital technology and data to improve the customer experience and business performance. Through digital transformation, organizations are harnessing both historical and real-time (or near real-time) data to help evolve the supply chain.
It’s no longer enough to have access to data; it’s becoming imperative to be able to use that data to drive action. Collecting, analyzing and using data across the business, as well as from partners and markets, fuels the insight that enables the shift from responding reactively to changes in demand and markets to proactively anticipating those changes and using automation to respond.
Data is a powerful tool in supply chain management, but one that is only beginning to be utilized. The key to harnessing the power of warehouse data lies in warehouse management and execution software. As warehouse software has evolved, silos have been created, with warehouse management, warehouse execution and automation control systems all operating in a way that leaves data isolated, limiting its potential to improve operations. Not only is data siloed between production and the supply chain that supports it, but within the supply chain itself. The new generation of warehouse management software integrates these various warehouse functions into a single platform to unleash the power of the data.
This data is fuel for the artificial intelligence systems that will enable logistics systems to learn and evolve on their own. Through the power of data and artificial intelligence, supply chain systems can learn to recognize patterns, regularities and interdependencies from structured and unstructured data to anticipate demand and adapt, dynamically and independently, to new situations. Working with similarly intelligent productions systems, these self-learning supply chain systems will enable organizations to meet global customer requirements with greater speed, customization and efficiency.
Micro-Fulfillment Centers Bring Fulfillment Closer to Consumers
Over the last few years, as ecommerce sales have increased and customer expectations have shifted, there has been a steady race to move fulfillment closer to the consumer. Something once as innovative as two-day delivery has led to next-day delivery, which is quickly becoming obsolete as consumers demand same-day delivery. This trend has accelerated during the COVID-19 pandemic, especially as more consumers become comfortable with online ordering of perishable items and groceries.
Moving storage and fulfillment closer to consumers while maintaining the agility to quickly relocate those functions as market demand shifts or supply chain needs change will be an essential characteristic of the supply chain of the future.
Typically, one of the dominant components in a company’s supply chain was the large warehouse or distribution center that acted as a central hub from where products are shipped to retail outlets. These are now being joined by a network of fulfillment centers that focus on localized, direct-to-customer service. They are designed to primarily get online orders to customers quickly. These facilities have become a powerful tool in conquering the last mile and helping maintain a pleasant, seamless customer experience.
One relatively new type of fulfillment center that is gaining a lot of attention is the micro-fulfillment center. Micro-fulfillment centers are a simple and compact last-mile delivery solution that can be quickly deployed anywhere, especially where real estate space is limited or cost-prohibitive. While they are generally smaller in size than regional or metro-fulfilment centers, they can be virtually any size, providing the needed flexibility to meet customer needs and fit nicely into a wide range of supply chain strategies.
Micro-fulfillment centers can be built as a standalone facility, built inside or bolted onto an existing location to expand fulfillment capacity, especially within limited footprint. They are also well suited for automation technology, bringing it to the lowest supply chain level. Micro-fulfillment centers are quickly becoming an essential part of the supply chain. They hold much promise for helping reduce delivery costs and shorten the last-mile and the time to consumer.
The evolution that will create dramatic change in the supply chain has already begun, but more change is on the way. The challenge for supply chain managers is making decisions today that will maximize their ability to leverage future developments, including automation technology. Organizations that can adapt efficiently and cost-effectively to this evolution will be able to reduce costs and improve service through a more intelligent, integrated and connected supply chain. WMHS
Mitch Hayes has served in a variety of roles with increasing responsibility for Swisslog and currently leads the Americas E-Commerce/Retail business unit in Mason, OH. Prior to that he served as Global Key Account Manager for one of Swisslog’s largest and most important clients, and Vice President, Sales for E-Commerce/Retail (www.swisslog.com).
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