A business management professor at Alabama’s Auburn University has identified seven supply chain trends that manufacturers need to be aware of during the next several years.
The supply chain is in a period of great change and only those companies that can adjust to the shifting landscape will be able to increase their chances of survival, according to Brian Gibson, the Auburn’s Wilson Family Professor of Supply Chain Management.
In a recent interview, Gibson identified the seven most critical changes for retailers, suppliers, manufacturers and others in the supply chain:
1. Inventory — Today’s consumers are spoiled. They demand “buy from anywhere” flexibility and a seemingly boundless supply of products. Yet most retailers don’t have the resources or the space to stock an unlimited amount of inventory. Key challenges for retailers will include integrating the activities of their distribution network as well as system-wide visibility, in-store accuracy, and maintaining upgraded technology.
2. Labor — As the average pay rate increases and workers demand more costly benefits, many retailers are weighing the benefits of automation against the costs. While this typically requires substantial up-front investment, when balanced against the long-term return on investment, automation often makes more sense.
3. Time — Customers are less patient when it comes to the delivery of the products they want. They also are less willing to pay for delivery, thanks to the “free delivery” options offered by Amazon, eBay, and many other next-generation retailers. So the rest of the supply chain will need to match capacity and capabilities to volume and service requirements. Those that can find ways to reduce delivery costs while providing “same day” delivery will have the advantage.
4. Not Enough Room — To respond to increased customer demand for a diversity of products, retailers and others in the supply chain will need to make maximum use of their existing space — or risk financial resources to build out warehouse space in anticipation of continued demand.
5. Transportation — With the number of carriers shrinking due to consolidation, there are fewer options for manufacturers, retailers and distributors. This is forcing those in the supply chain to develop strategic relationships with individual carriers, which could limit innovation options down the line. Also, delays and other aftershocks from this year’s West Coast port disruptions are still being felt, months after an agreement was reached between owners and unions representing port workers.
6. Costs — The new dimensional weight pricing (DIM) adopted by FedEx, UPS and other carriers has increased transportation costs. While some of these cost increases can be passed on to consumers in the form of higher prices, retailers are seeking new ways to respond to this sea change in transportation costs. Among the challenges are the volume of split shipments, training store workers, and developing innovative packaging options within stores themselves.
7. Minimizing Mistakes — In today’s media environment, even the smallest fulfillment misstep can make national headlines. This kind of bad publicity can reduce profits and erode consumer confidence. Retailers and others in the supply chain need to minimize errors and streamline their supply chain delivery while working through issues like fulfillment, costs, and maintaining customer loyalty.