To weather the recession and succeed during the recovery, companies will have to adapt to 10 trends that will profoundly affect the U.S. warehousing industry.
Here we are in the middle of 2010, scrabbling our way out of the Great Recession and approaching the "Great Comeback." From an overall economic perspective, the Great Recession bottomed out in June 2009, and employment began to grow in March 2010.
However, the recession affected different industries in different ways. Food, beverage, pharmaceuticals, cosmetics, and medical products were less affected, while housing and automotive were hit hard. Likewise as the comeback progresses, results will continue to vary by sector. The overall recovery, however, will be strong. In fact, for companies that planned for the Great Comeback, the next four years will be good years.
One industry segment that will be profoundly affected by the economic recession and recovery is the U.S. warehousing industry. I believe that over the near term, warehousing in general will have to adapt to the following 10 major industry trends:
1. Overall inventory reduction. There have been huge reductions of inventory during the recession. These reductions were often accomplished by simply buying less, but now companies are managing inventory correctly. The high, prerecession inventory levels will not return. Meanwhile, inventory turns will remain at the recessionadjusted, elevated levels. As a result, warehouses will have excess storage capacity and will need to alter the density of their storage.
2. Greater pressure on employees. Even though warehouses are seeing increased volumes, they are still reluctant to hire. These hiring freezes put a lot of pressure on current employees to be more productive and to work longer hours. Eventually, as other industries begin to grow again, warehouses and distribution centers will hire again. Until then, some of the warehouse staff will buckle under the pressure and move on to less stressful jobs. This will have a negative impact on warehouses and further increase the pressure on existing employees. Management needs to understand these dynamics and proactively work to avoid their damaging effects.
3. Increased investment in material handling systems. For the last two years, companies have held off on replacing their old material handling equipment. This pent-up demand will result in many upgrades in the near future. During this period, the material handling space will see changes take place across the board—in everything from system design to vendor selection to implementation.
System design: Systems will have increased flexibility, modularity, and agility, and there will continue to be a larger number of smaller orders placed with vendors.
Vendor selection: Customers will base selection less and less on the brand of the equipment and more and more on the quality, reliability, and reporting capability of the control system. As most material handling equipment is now a commodity, purchases of material handling systems are more about controls than about the equipment itself.
Purchasing: Fewer systems will be bought from material handling equipment vendors themselves. Instead, buyers will turn to independent material handling integrators that have the ability to select the best brand of equipment for each application as opposed to the equipment firm's own "house brand."
Implementation: Companies will add capacity (in the form of equipment) when it is needed. Warehouses will no longer take five years to implement their requirements only to realize that they once again need greater capacity.
4. More cross-docking. We will see an increase in the percentage of goods that come into a warehouse but do not get placed into a storage location. These cross-docked goods will come into the distribution center ready to ship to the customer. Greater use of cross-docking will contribute to an increase in inventory turns and may require alterations or additions to material handling systems.
5. Wider use of logistics service providers. More companies will analyze their core competencies and their peak volumes and decide that some or all of their warehousing functions should be outsourced. At the same time, logistics service providers will begin to understand more about their own core competencies and will focus on opportunities in which their specific capabilities provide a value proposition for their clients.
6. Less predictability. The post-recession "new norm" is that there is no "new norm." The ability to forecast future levels of business will become so difficult that many organizations will simply give up trying. Instead of continuing to attempt to improve their forecasts, warehouses will need to become more agile and better able to respond to uncertainty.
7. Major changes to order profiles. Warehouses and distribution centers will see major shifts in order profiles (more lines per order, fewer units per line, and/or smaller, more frequent orders). These changes could result from new channels (e-business, wholesale, direct-to-store) or a shift in customers' buying patterns.
8. Increasing demand for value-added activities. When it comes to the type of value-added activities warehouses will be asked to perform, I see no end in sight. Some organizations seem to be doing more value-added functions in the warehouse than in their manufacturing operation. There is nothing wrong with a warehouse providing value-added services as long as the customer provides sufficient resources and compensation for these services. The warehouse needs to be open and honest about what it can provide as a "standard warehouse service" and what requires an additional charge. If the warehouse operator does not set some ground rules, requests for value-added services are likely to become more and more bizarre.
9. Growing recognition of warehousing's role in the supply chain. As the economic recovery picks up steam, warehousing will be viewed less as a process unto itself and more as a sub-process of the end-to-end supply chain. Because the end-toend supply chain of plan-buy-makemove- store-sell must focus on the customer, warehousing will need to define its role in this context. Succeeding in this business is no longer about having a great warehouse. It is about the warehouse doing all that it can to contribute to a great supply chain.
10. More mergers and acquisitions. There are a lot of strategic deals taking place these days. One of the synergies that companies are seeking from these deals is the integration of the supply chains involved and, thus, the integration of the warehousing functions. To integrate supply chains, companies often need to optimize their overall distribution networks and rationalize the number of warehouses. While that process is under way, the development of the newly merged organization must be documented and understood, and any problems must be addressed.
To successfully make it through the economic recovery and the Great Comeback, companies need to scrutinize and optimize the warehousing function as well as talent, while staying focused on strategy, cutting all unnecessary costs, and planning for the recovery.
As this roundup of trends makes clear, we certainly live in exciting times, and there is no single piece of advice that will work for every company in every circumstance. Nothing is off the table. Everything is in play. Best of luck.
Supply Chain Xchange Executive Editor Susan Lacefield moderates a panel discussion with Supply Chain Xchange's Outstanding Women in Supply Chain Award Winners (from left to right) Annette Danek-Akey, Sherry Harriman, Leslie O'Regan, and Ammie McAsey.
Supply Chain Xchange recognized four women who have made significant contributions to the supply chain management profession today with its second annual Outstanding Women in Supply Chain Award. The award winners include Annette Danek-Akey, Chief Supply Chain Officer at Barnes & Noble; Sherry Harriman, Senior Vice President of Logistics and Supply Chain for Academy Sports + Outdoors; Leslie O’Regan, Director of Product Management for DC Systems & 3PLs at American Eagle Outfitters; and Ammie McAsey, Senior Vice President of Customer Distribution Experience for McKesson’s U.S. Pharmaceutical division.
Throughout their careers, these four supply chain executive have demonstrated strategic thinking, innovative problem solving, and effective leadership as well as a commitment to giving back to the profession.
The awards were presented at the Council of Supply Chain Management Professionals (CSCMP) annual EDGE Conference in Nashville, Tenn. In addition to the awards presentation, the leaders discussed their leadership philosophies and career path during a panel discussion at the EDGE conference.
The surge of “nearshoring” supply chains from China to Mexico offers obvious benefits in cost, geography, and shipping time, as long as U.S. companies are realistic about smoothing out the challenges of the burgeoning trend, according to a panel today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
Those challenges span a list including: developing infrastructure, weak security, manual processes, and shifting regulations, speakers said in a session titled “Nearshoring: Transforming Surface Transportation in the U.S.”
For example, a recent Mexican government rail expansion added lines to tourist destinations in Cancun instead of freight capacity in the Southwest, said panelist Edward Habe, Vice President of Mexico Sales, for Averitt. Truckload cargo inspections may rely on a single person looking at paper filings on the border, instead of a 24/7 online system, said Bob McCloskey, Director for Logistics and Distribution at Clarios, LLC. And business partners inside Mexico often have undisclosed tier-two, tier-three, and tier-four relationships that are difficult to track from the U.S., said Beth Kussatz, Manager of Northern American Network Design & Implementation, Deere & Co.
Still, dedicated companies can work with Mexican authorities, regulators, and providers to overcome those bottlenecks with clever solutions, the panelists agreed. “Don’t be afraid,” Habe said. “It just makes sense in today’s world, the local regionalization of manufacturing. It’s in our interest that this works.”
A quick reaction in the first 24 hours is critical for keeping your business running after a cyberattack, according to Estes Express Lines, the less than truckload (LTL) carrier whose computer systems were struck by hackers in October, 2023.
Immediately after discovering the breach, the company cut off their internet, called in a third-party information technology (IT) support team, and then used their only remaining tools—employees’ personal email and phone contacts—to start reaching out to their shipper clients. The message on Day One: even though the company was reduced to running the business with paper and pencil instead of computers, they were still picking up loads on time with trucks.
“Customers never want to hear bad news, but they really don’t want to hear bad news from someone other than you,” the company’s president and COO, Webb Estes, said in a session today at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
After five or six painful days, Estes transitioned from paper back to computers. But they continued sending clients daily video updates from their president, and putting their chief information officer on conference calls to answer specific questions.
Although lawyers had advised them not to be so open, the strategy worked. It took 19 days to get all computer systems running again, but at the end of the first month they had returned to 85% of their original client list, and now have 99% back, Estes said in the session called “Hackers are Always Probing: Cybersecurity Recovery and Prevention Lessons Learned.”
The first full day of CSCMP’s EDGE 2024 conference ended with the telling of a great American story.
Author and entrepreneur Fawn Weaver explained how she stumbled across the little-known story of Nathan Green and, in deciding to tell that story, launched the fastest-growing and most award-winning whiskey brand of the past five years—and how she also became the first African American woman to lead a major spirits company.
Weaver is CEO of Uncle Nearest Premium Whiskey, a company she founded in 2016 and that is part of her larger private investment business, Grant Sidney, Inc. Weaver told the story of "Nearest" Green—as Nathan Green was known in his hometown of Lynchburg, Tenn.—to Agile Business Media & Events Chairman Mitch MacDonald, in a keynote interview Monday afternoon.
As it turns out, Green—who was born into slavery and freed after the Civil War—was the first master distiller for the Jack Daniel’s Whiskey brand. His story was well-known among the local descendants of both Daniel and Green, but a mystery in the larger world of bourbon and a missing piece of American history and culture. Through extensive research and interviews with descendants of the Daniel and Green families, Weaver discovered what she describes as a positive American story.
“I believed it was a story of love, honor, and respect,” she told MacDonald during the interview. “I believed it was a great American story.”
Weaver told the story in her best-selling book, Love & Whiskey: The Remarkable True Story of Jack Daniel, His Master Distiller Nearest Green, and the Improbable Rise of Uncle Nearest, and has channeled it into an even larger story with the founding of the brand. Today, Uncle Nearest Premium Whiskey is made at a 323-acre distillery in Shelbyville, Tenn.—the first distillery in U.S. history to commemorate an African American and the only major distillery in the world owned and operated by a Black person.
Weaver and MacDonald's wide-ranging discussion covered the barriers Weaver encountered in bringing the brand to life, her vision for where it’s headed, and her take on the supply chain—which she said she views as both a necessary cost of doing business and an opportunity.
“[It’s] an opportunity if you can move quickly,” she said, emphasizing a recent project to fast-track a new Uncle Nearest product in which collaborating with the company’s supply chain partners was vital.
Uncle Nearest Premium Whiskey has earned more than 600 awards, including “World’s Best” by Whisky Magazine two years in a row, the “Double Gold” by San Francisco World Spirits Competition, and Wine Enthusiast’s “Spirit Brand of the Year.”
CSCMP’s EDGE 2024 runs through Wednesday, October 2, at the Gaylord Opryland Hotel & Convention Center in Nashville.
This story was updated on October 1, 2024.
Keep ReadingShow less
Miquel Serracanta of CSCMP International, Mark Baxa of CSCMP, and Sebastian Jarzebowski of Kozminski University sign an agreement making Kozminski University the newest CSCMP Academic Enterprise Member.
The Council of Supply Chain Management Professionals (CSCMP) and Kozminski University, a business school based in Warsaw, Poland, inked a deal on Sunday night, making Kozminski CSCMP’s newest Academic Enterprise Member.
This three-year collaborative membership will involve Kozminski using CSCMP educational content in its undergraduate supply chain program. As a result, Kozminski’s graduates will leave the program not only with a bachelor’s degree from the school but also certified through CSCMP’s SCPro certification program.
“This partnership emphasizes the global reach of CSCMP’s certification program and its applicability worldwide,” said Mark Baxa, CSCMP’s president and CEO.
Kozminski University’s Academic Director of Logistics and Supply Chain Management Sebastian Jarzebowki was on hand to sign the agreement at the CSCMP EDGE Conference in Nashville, Tennessee. Jarzebowski said that his students will benefit not only from receiving a globally recognized certification but also from joining a network of supply chain professionals.
Kozminski University joins the EAE Business School in Barcelona and the Rome Business School in the CSCMP Academic Enterprise Program. Baxa sees the membership program as a growth platform for the industry association not only in Europe but also worldwide.