Supply Chains in Recovery Mode: Forcing C-Level Focus on Digitally Transforming Their Supply Chains for 2022 and Beyond
Focus on warehouse automation has come full circle since the last big automation movement of the ‘90s, but today with a significantly better set of tools and technological improvements enabling more robust digital transformation and warehouse automation.
Brief highlights of logistics investments over the last three decades
Those logistics professionals who went through the ‘90s remember the period that warehouse automation was trending at the forefront of capital investment in supply chains. Forward thinking logistics operations across North America invested in PLC (programmable logic controller) driven conveyors, automated storage and retrieval systems (ASRS), advancing bar code technology, high speed label printing systems capable of applying labels to cartons moving on high-speed conveyors, and applying RF (radio frequency) scanning technologies.
By the end of the ‘90s, more companies focused on ERP (enterprise resource planning) upgrades, mainly driven by challenges from first generation code that did not support Y2K. Coming out of Y2K, more logistics operations focused on improving labor management, transportation management and green initiatives such as advancements in lighting technology, safety features with automated dock ramps with trailer locks and more. Post Y2K, investments were focused on energy, efficiency, and safety features.
Next, emerging technology brought voice systems to the forefront of warehouse investments. Followed by focus on big data analytics where companies began leveraging BI (business intelligence) tools for data-driven decision making.
These three decades between 1990 and 2020 were influenced primarily by several key factors. At the forefront were: politics, the economy and technological advances. And as we move through remainder of this decade and into the next, the list of influencers on our global supply chains has expanded to include added challenges, such as: infrastructure, labor pressures and pandemics.
Each of these areas has impacted business in ways that are both good and bad. Logistics operations have faced unprecedented problems over the past two years, putting most companies in “uncharted water” forcing top leaders at companies of all sizes to commit investments in these areas.
Globally, logistics professionals are navigating their companies through the challenges.
At a macro-level, these factors are driving change at the micro-level
- This time has created a booming opportunity for e-commerce businesses, while others have struggled. As we adhered to shelter-in-place orders from the CDC (Centers for Disease Control), each of us were purchasing more products and services online at a faster adoption rate than ever before.
- Impact: Companies that were operating on home-grown or basic Tier 2 & Tier 3 logistics warehouse and transportation systems are finding themselves hindered and unable to scale, thus hindering their real potential growth.
- Buyers and consumers are now fighting the worst inflation our economy has seen since the ‘70s, making products unattractive or even unavailable.
- Impact: This is resulting in procurement teams scrambling to find new supply sources, while engineers are looking for substitutions alternatives, and other company leaders are figuring out how to bring more in-house for a vertical integrated approach.
- Transport costs are soaring to ridiculous levels, especially for those shippers that did not have an organized procurement strategy for freight movement. Several shippers in recent months have cited they were now paying as much as $15,000-$20,000 per 40 high cube containers from APAC, that previously had an average cost between $1,000-1,500.
- Impact: Transportation leaders are looking to expand private fleets and control more of their supply lanes for cost containment and sustainability, while distribution leaders are more open to carrying higher levels of inventory and more. Investments in Transportation solutions is imperative.
- Foreign trade policies are weakening. Border policies erode the effectiveness of homeland security.
- Impact: Company operations leaders are now making and executing plans to transition manufacturing capacity away from low-cost countries in Asia and back to locations in the US and EMEA to offset the rapid transport cost and lack of sustainability.
- The onset of the Pandemic and ensuing Political actions, resulted in mass-layoffs while workers were incentivized to remain unemployed. In many cases the aging baby-boomer population workforce was forced into early retirement, further exasperating the problem.
- Impact: A new wave of investment in warehouse automation is generating, like that of the ‘90s.
- The insurgence of demand for e-commerce business is resulting in an increased demand for warehousing real estate space.
- Impact: This is forcing pressures on cost per square foot and pressures on lease renewals for existing space. Also driving up demand for new construction while in a market where building supplies are in short supply. Resulting costs are higher and lead times are longer putting more emphasis on network optimization. Businesses need rapid deployments and agile solutions that will provide value more quickly.
The age of digital transformation and automation is back — with a twist
Looking ahead, supply chains will be focused on ways to combat today’s current macro-view of our landscape. Strategies will support a more comprehensive supply chain approach that reinforces key pillars of a good supply chain strategy. Among the key objectives will be capitalizing on opportunistic growth when others fail to adapt, and their weaknesses exposed. Financial analysts are predicting a period of heavy mergers and acquisitions ahead, while commercial real estate executives are seeing some of the highest demand for warehousing real estate in decades. Change is imminent, “ready or not.”
Challenges top C-level leaders are asking their supply chains to address today
- What can be done to help scale my business better amidst today’s volatility?
- How is my supply chain going to keep up with today’s velocity of change?
- What can I do to leverage global information and external factors that affect my supply chain?
- How can I best utilize limited resources to meet customer needs with success, especially respective of e-commerce?
Progressive organizations will thrive by doing this:
- Implementing Tier 1 warehouse and transportation systems to avoid costly mods and enhancements necessary to simply survive, as many shippers are experiencing with immature Tier 2 & Tier 3 systems. Tier 2 & 3 systems may seem less costly in the beginning, but over time, the investment is much higher and the limitations more significant. Supply chain executives commonly state they are unable to scale with inferior technology and they must invest in their supply chain platform to succeed and grow. Tier 1 systems help reduce labor costs, manage limited resources better, support task-management in warehouses, leverage AI, and support automation helping companies be more agile and scalable.
- Leveraging AI/ML and IoT to capture relevant data to help aid supply chain visibility, operational feedback, managing metrics. These technologies will be applied dynamically to improve visibility of global inventories throughout the entire supply network from the raw materials to the end consumer, inventories in transit, monitoring carrier network velocity to predict events and provide necessary changes to offset supply impacts.
- Investing in warehouse automation to offset the current and increasing labor shortages. Warehouses will be leveraging robotics in material handling, systematic automation of processes, wider uses of automated storage and retrieval systems, and tasking logic that not only directs people but also directs warehouse bots.
- Transitioning big data analytics from rear-looking historical information intended to predict the future, to an age where those results are converted into actionable tasks with defined outcomes. In addition, we will see a greater use of AI/ML leveraging data outside of one’s business, to give real-time predictive inputs of current and future events that are highly likely to impact one’s supply chain along with suggested actions of mitigation.
These and other areas are being addressed and built into 3–5-year logistics strategies around the globe.
Who is driving this change?
Our logistics profession has moved from the old days, when the function was viewed as a back office meaningless service, to today where it is an integral and necessary part of companies’ overall success.
Leadership in supply chain has shifted from supervisors and first level managers, to directors, VPs and SVPs. These leaders are making supply chains stronger and more resilient than ever. Leaders impacting supply chain are now among companies’ C-level ranks as part of core business leadership teams in major corporations.
For example, in the last five years we have witnessed new roles emerge at a higher rate such as:
- Chief Supply Officer
- Chief Procurement Officer
- Chief Logistics Officer
- Chief Strategy Officer
Similarly, the IT organization shifting from CIO (Chief Information Officer) to added roles such as:
- Chief Technical Officer
- Chief Data Science Officer
- Chief Digital Transformation Officer
Summary & closing remarks
Following the aftermath of this pandemic and during the remaining eight years of the 2020s, we will see a greater focus on digital transformations and warehouse automation. Like the warehouse automation decade of the ‘90s, but this time with better technology. This technology ranges from cloud-based servers that can handle big data, increased inputs and outputs from AI/ML enabled devices, to major advances in material handling robotics, to SaaS (software as a service) platforms and integrated solutions that will run businesses more seamlessly.
Looking ahead, winning supply chain leaders will be leveraging each of these pillars in their supply chain strategy to combat the macro-environment and build a more resilient supply chain
- Digital transformation: making real investment in technology for a seamless and connected supply chain.
- Agility: building a network with theability to adapt and react with speed winning sprints to a much shorter and faster race.
- Analytics: leveraging AI/ML for visibility, preemptive decision making and cost optimization.
- Resource optimization: optimizing everything from labor, facilities, equipment, and inventory to win. Especially true for e-commerce business that is “on-fire with unpredictable growth” accelerated by the COVID pandemic.
Good supply chains help you resolve problems. Great supply chains help you avoid them.
Is your supply chain ready? Find out more at blueyonder.com