We sat down with Cloud Warehouse Management System expert, Jim Laverty, to see what was in his crystal ball as he looked at major supply chain and warehousing trends for the coming year.
“We expect 2016 to be a very good year in the business sector,” notes Laverty. “A couple of developments we’ve observed will continue to be important themes in the year ahead. One, outsourcing will continue to increase to meet supply chain and distribution demands for resources across the chain. Despite the conversation about re-shoring or nearshoring, we expect more organizations to use manufacturers overseas or outside the United States. Two, transportation will remain stressed—really pushed to its limits—in 2016.”
From a technology perspective, Laverty sees mobility and the Internet of Things (IoT) as principal drivers of development in the sector. “We see everything going in the direction of the Internet of Things,” he says. “From ERP to WMS and TMS, the way we work and the way we communicate is rapidly transitioning to a network of connected devices. These tools are delivering immediate access to performance data, as the theoretical promises of real-time visibility, transparency, and pervasive connectivity are becoming not only reality but necessities to compete in today’s marketplace.”
From this broad economic and technological perspective, Laverty posits 10 specific supply chain and warehousing trends we should see in 2016:
1) Omnichannel strategies proliferate
More organizations want to support an omnichannel environment with real-time demand fulfillment and provide a single, unified customer experience across all channels. “Expect to see the trend of more items purchased outside of brick and mortar stores propelled by a strong online showing in Q4,” says Laverty. As omnichannel becomes the de facto approach to market, inventory optimization will take on greater importance, as product availability and timely fulfillment become essential across all channels.
2) Big data analytics improve demand planning and inventory optimization
Big data analytics will drastically improve planning and replenishment, creating lean and balanced supply chains with sophisticated inventory systems. These tools will maximize workflow, increase efficiencies, and directly impact revenue by optimizing warehouse inventory and floor space utilization. “Demand planning and forecasting is an area where many organizations lack tools and process expertise,” comments Laverty. Forecasts are based on snapshots of past requirements, and then people guesstimate how much is needed for the coming year. “More and better data analytics are changing the landscape,” says Laverty. “We see people trying new methods and tools as they seek smarter solutions to get the right data to create better forecasts. They will look for additional resources and systems of information.”
3) Mobile continues to dominate
Warehouse management continues to move away from traditional tools to tablets and smartphones. Mobile requirements from solution providers, partners, vendors, and clients are increasing as the expectation that all work functions can and should be completed from smartphones and other mobile-connected devices. “Within a warehouse, whatever the function and whatever the role, we have to put money into supporting a total mobile experience for the workers,” says Laverty. This includes individual performance metrics and the ability to see roadblocks or interruptions in real-time to solve them in real-time.
4) Labor looms as a challenge and cost-cutting target
“In 2016, we see all organizations looking at labor as the primary area where they can reduce costs,” says Laverty. “Labor costs will be an even bigger challenge as the minimum wage increases through new regulations.” A primary concern will be a shortage of warehouse and transportation labor. Shortages will continue as the labor market tightens, something else likely to drive up hourly wages. “Being able to track productivity and forecast where labor is going to be needed and how it is going to perform is going to be a critical need,” predicts Laverty. “Programs that tie compensation to labor production will be a solution that more companies will look to implement.” Labor retention will also be a major concern; in states where minimum wage increases are mandated, expect to see advances and investment in warehouse automation. Material handling systems will be prominent in this development.
5) Demands for traceability will be on the rise
Requirements for traceability continue to be important as FDA and government regulations on food and medicine increase and as stronger pharmaceutical requirements will be enforced in 2016 and beyond. “We see a growing trend of requirements for tracking chain of custody that flows with the product, rather than just what is in your facility,” notes Laverty. Traceability will be essential not only where the product is in real-time as it moves, but also relating to its pedigree: where it came from, how did it get here, how long has it been in route, was it modified along the way. All that information needs to be passed downstream.
6) Data security requirements become more rigorous
Organizations will become more demanding of top-of-the-line data security and will begin creating more strategic plans about destroying data and monitoring what they are capturing, since the more they capture, the more liable they are. “It will become very important to be able to offer the highest level of data security and encryption possible,” says Laverty. “People want to know what contingency plans are in place for data security and how they are administered.” Those storing data within a multi-tenancy community want assurances that their data is never mixed with another client’s data.
7) The cloud transition continues
In 2016, costs will prove to be a huge driver to the cloud for those organizations that are still running legacy applications. The challenge of infrastructure, maintenance, and labor costs will necessitate their transition to the cloud. Four out of five new buyers are looking to the cloud simply because they don’t want to deal with the infrastructure, labor, and additional layers of responsibility and risk. “A big trend we see right now is that many organizations are transitioning to the cloud due to an aging workforce,” adds Laverty. “A lot of really talented technology professionals are leaving and in most cases these people are irreplaceable. How do you compensate for losing people that you can’t replace? You put in a system that doesn’t ever need to be replaced.”
8) Collaboration is king
Organizations now expect things to work together and collaborate; full integration of all systems is the goal and there will be lower tolerance for cost and time in realizing this need. This “collaborative orientation” will drive more people toward Platform as a Service (PaaS) offerings, where they have pieces of a platform rather than dealing with systems as separate entities. This shift will require an additional understanding of how they all work together.
9) Coping with complexity will be vital
Perhaps one of the biggest trends of the year will be complexity. The supply chain and warehousing industries are adding more levels of complexity. Taking complex issues, making them easily understandable, and then breaking down that information into packets that are easily consumable will become a major need and driver for creative thinking within the sector. One practical example: instead of making you dig down through a 350-page guidebook, irms|360 now offers videos, tutorials, audio podcasts, and quick guides in order to break down the complexity of each subject and make it easily understandable for everyone.
10) EDI persists
Electronic Data Interchange will continue to be an important trend, with more people subscribing. Companies that haven’t used a formal process in the past are going to find it harder to exist without using EDI. “In the 3PL and wholesale distribution world, it’s obviously a huge trend,” says Laverty. “Organizations must adopt EDI to stay compliant with their vendors. We see more partnerships occurring to embed EDI in applications. We also believe that the adoption of AS2 as a communication platform will only increase because it’s free.”