Over the past decade, the pace of innovation in logistics has continued to increase. Starting with the launch of their Prime service in 2005, Amazon has been a major disruptor of established logistic operations and customer expectations for timely fulfillment. As consumers have come to expect two-day or faster shipping, the entire supply chain has had to change to accommodate this new standard. This has led to changes in warehousing and inventory management, as well as new technological developments like predictive analytics and improved inventory tracking. Many analysts expect even more significant evolutions in the next decade.
These recent changes have upended some traditional inventory warehousing practices while causing others to evolve. Here are three of the most significant shifts:
Regional Warehousing Brings Several Changes
Consumer demand for fast, low-cost shipping options have pushed fulfillment centers closer to where consumers live. The result is growth in regional warehouses, often located inside or just outside urban areas. While large distribution centers are still important to the supply chain, their central role may be further reduced in the years to come. Regional warehouses can get products to consumers the next day (or even the same day), all for lower costs. Amazon even delivers many of its products directly to consumers using its own trucks and contractors.
In order to make regional warehouses work, inventory and logistics practices must change. Since urban real estate is typically more expensive, these warehouses have a much smaller footprint than the rural distribution centers. Accordingly, inventory must be managed more precisely to ensure sufficient supply, but also ensure that warehouses don’t run out of space. This is a complex process that requires sophisticated warehouse management software to be effective.
Regional warehousing also provides new opportunities for last-mile delivery. In the near future, it’s possible that drones and autonomous electric vehicles will be used to transport goods to consumers. Some lower-tech alternative options have already begun to grow. In addition to Amazon delivering packages themselves, UPS and FedEx often outsource last-mile delivery to the US Postal Service. Another delivery option is placing items in public pickup locations. Amazon uses this extensively with their automated Locker system, and both UPS and FedEx offer pickup at many of their retail locations.
Inventory Management Becomes More Efficient
The scale of Amazon as well as customer expectations has caused them to be a leader innovator in inventory warehousing practices. However, walking around an Amazon warehouse can be a surprising experience. One might expect that everything is precisely organized by type, but in fact it’s almost the opposite. Amazon uses a chaos-inspired inventory system that seeks to boost efficiency and speed order fulfillment. These results are accomplished using advanced warehouse inventory management software, which is the backbone of their warehouse operations and a way of getting order out of “chaos.”
Amazon’s inventory system relies on barcode scanning to log exactly where each item is placed as well as the quantity of that item in each space. Innovations in Internet of Things (IoT) technology underpins much of this. This location data is used by the warehouse software to determine the most efficient route for pickers, preventing wasteful repeat trips to the same area. In large warehouses, this can save a great deal of time.
This system has been gaining steam in recent years based on Amazon’s ability to leverage it to increase speed and efficiency. These benefits come from the greater flexibility and better use of available space that chaotic storage allows. The ability to place inventory wherever space is available also saves time. Items no longer need to be placed in precise locations in the warehouse. Furthermore, by placing diverse items together, it can lead to more efficient storage. At Amazon, they are able to store significantly more goods this way than with the traditionally organized storage of the past. Putting different items next to each other (like a tennis racket and video game) helps to avoid picking mistakes that may occur when similar items are next to each (like two different tennis racket brands with similar cases).
Faster Information Flow and New Warehouse Inventory Processes
In addition to changes in warehouse management, the link between warehouses and retailers has evolved with customer demands and new technologies. Increasingly, these aspects of the supply chain must be interdependent. A good example of this is Jet.com, recently acquired by Wal-Mart. This business alter the prices they charge customers based on inventory levels and the particular mix of items customer buy. This is not just simple a matter of supply and demand. Real-time information flow between warehouses and the retail environment enable quick responses. For example, if a particular product is running low, it could prioritize an alternative product, so that consumers are directed there first. A fast link between retail and logistics also allows inventory to be managed more effectively. A surge of orders of a particular product can be met with a quick re-order in the warehouse.
These shifts allow inventory to be better dispersed to regional warehouses. The amount of inventory in stock can remain lower because any depletion will be recognized and trigger re-orders. The ultimate evolution here is a seamless and never-ending movement of goods from ports or factories to distribution centers to regional warehouses to consumer doors. Since this process would be run in part by software and advanced analytic tools, the line between logistics and technology services will continue to blur. In many cases, smaller or even mid-size businesses may turn to third-party logistic solutions that allow them access to the latest technology.
These changes represent a paradigm shift in logistics and inventory warehousing. To keep up with the requirements of eCommerce, businesses must integrate all aspects of their supply chain to enable real-time coordination and even automation of some processes. Effective warehouse management software is an important part of this. From there, businesses can take advantage of other paradigm-shifting innovations like regional warehousing and chaotic inventory.
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