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As warehousing, logistics networks and supply chains as a whole take on new meaning in the broader business environment, companies are looking for ways to strategically align capabilities; recruit the necessary warehousing and distribution talent for both associate and managerial roles; and adopt technology tools that support continuous improvement goals.
In Logistics 2030: Navigating a Disruptive Decade, Auburn University’s Raymond J. Harbert College of Business highlights the current warehousing and distribution challenges that companies are dealing with and maps out these organizations’ current and future priorities.
Much of the information in the Auburn report directly impacts procurement professionals that rely heavily on their suppliers’ logistics and transportation networks to get product from point A to point B in a timely, secure and affordable manner.
Dealing with the Amazon Effect
Auburn says the legendary “Amazon effect” has had the greatest influence on W&D operations over the last few years. Prime, continuous network expansion and higher hourly wages are just some of the Amazon-induced stressors that companies are facing.
“Companies must juggle rising customer expectations for faster fulfillment and greater inventory variety with the need to cost control,” the university points out in its report. “Achieving success requires retention of strong W&D managers and hourly associates, which has proven to be another significant challenge, even during COVID-19.”
These particular challenges will not vanish. Nearly a quarter of Auburn’s survey respondents believe that the single most important W&D challenge over the next decade will be rising customer expectations, followed by operating cost volatility and technology deployment costs.
“Mix in their anticipation of a perpetual labor shortage and W&D leaders will continue to face a considerable operational task,” it adds.
Finding Labor isn’t Going to Get Any Easier
Succeeding under the current supply chain and logistics conditions requires investment in technology enhancement, talent retention and operational transformation, according to Auburn’s report. “Despite some spending growth, there have been shortfalls in each of these key areas,” it explains, noting that survey respondents cited lack of capital investment as one of their biggest issues right now.
“It’s really surprising that companies have not planned financially to move into automation or make basic improvements in their operations,” one executive told the university, which found that nearly 80% of respondents want greater spending on software and automation over the next decade.
“There’s almost no choice but to invest in automation to reduce the reliance on labor,” another respondent stated, “because finding labor isn’t going to get any easier.”
Warehousing Priorities
Asked to share their top warehousing and distribution challenges right now, respondents to the Auburn survey said their biggest issues are:
- Rising customer expectations - 51%
- Managerial talent retention - 50%
- Technology deployment cost - 45%
- Hourly associate retention - 42%
- Qualified labor availability - 41%
- Automation deployment - 39%
- Small order processing cost - 37%
By 2030, these companies expect their single most important challenge to be:
- Rising customer expectations - 23%
- Operating cost volatility - 16%
- Technology deployment cost - 11%
- Qualified labor availability - 9%
- Automation deployment - 6%
“The growing complexity of fulfillment processes have been amplified by the explosion of online commerce and the global COVID-19 pandemic,” the university points out. “These disruptive forces also underscore the essential role W&D plays in sustaining vital product flows to businesses, public institutions, and consumers.”
Ready, Set, Go
Looking ahead, survey respondents see customer requirements further ramping up. Nearly 80% believe that same-day and next-day fulfillment will be the dominant customer requirement from distribution centers (DCs) over the next decade. A majority also agree that customers will place more case- and unit-level orders with DCs in the future, causing average shipment sizes to drop.
To respond effectively, W&D will need to fundamentally change over the next decade, according to 88% of survey respondents. They largely agree that these changes will come in the forms of greater reliance on automation and robotics; smaller DCs serving narrower geographic regions; and the deployment of temporary, on-demand capacity.
In its report, Auburn also offered W&D organizations a laundry list of action steps to take now to begin addressing some or all of their present challenges. It suggests enhancing rapid fulfillment capabilities (whereby inventory can flow faster, thus reducing the time needed to serve customers); upgrades to current distribution strategies; and a willingness to “harness the forces of change.”
