Every year, there’s a degree of evolution in retail and e-commerce inventory management and the logistics and warehousing that support it, but 2020 has seen more change than most years. Pundits and business schools will spend years analyzing its (often painful) lessons, but several fundamental trends are already clear. We’ve selected seven that we think will affect your decision-making into 2021 and beyond.
1. An Emphasis on Resilience in the Supply Chain
The entire e-commerce ecosystem is built around products coming into your inventory and orders, leaving your inventory in a timely fashion. That requires a smoothly functioning supply chain, one of the first casualties of the COVID-19 crisis.
This is why resilience has become one of the year’s dominant themes. Retailers and e-commerce vendors have been forced to examine the weak links in their supply chains, locating new suppliers to compensate for unforeseeable production bottlenecks, virus-related shutdowns, and demand surges for warehousing and shipping capacity.
This trend has broad implications (it touches on a few others), but in short, retailers and e-commerce players will continue seeking out ways to give their supply chains more flexibility and redundancy.
2. Inventory Levels Will Be Higher
A shift to leaner inventories and just-in-time ordering had been a significant management emphasis of recent decades. The disruptions of 2020 have shown that to be a fair-weather policy — one that leaves you dangerously exposed in the face of adversity. After years of trying hard not to stock inventory if it was avoidable, maintaining at least a modest surplus has become a best practice for many sellers once again.
The Council of Supply Chain Management Professionals expects this trend to continue into 2021, increasing inventory levels throughout the supply chain as a buffer against disruption. Lean is “over” as a virtue in e-commerce inventory management, at least for now.
3. Warehousing Capacity Will Be at a Premium
These trends toward redundancy in the supply chain and increased stock inventory levels will increase pressure on warehousing capacity. That could be problematic for many players in the retail and e-commerce industries because demand for warehousing space was already high and inventory low before the pandemic.
Building new warehouse capacity is the apparent long-term answer for the limited number of companies with the resources. Still, even for them, it’s not a magic bullet. The timescale required to build out meaningful capacity is significant, and so is the investment. Also, once built, that capacity represents an additional cost in maintenance and staffing.
For most sellers, a more practical alternative is to partner with third parties who can marshal warehouse space on-demand as part of a larger logistics and services package.
4. Tech Will Continue to Improve Inventory Intelligence
Technology has been a factor in inventory management since the earliest days of barcodes. Today, Internet of Things (IoT) devices, low-power Bluetooth connectivity, and similar technologies are advancing inventory intelligence further, picking up where barcodes and RFID tagging left off. These tech solutions give more precise control and oversight over the inventory within your system. That improved level of business intelligence is especially timely in 2021 and beyond — a period with the potential for erratic demand and disrupted shipping schedules — providing retailers and e-commerce vendors with the insights needed to read and react to changes as they occur.
Of course, those advantages only accrue to sellers who have the technology to take advantage of them or who partner with third-party logistics providers (3PLs) that have made investments in that technology.
5. Automation and AI Continue to Show Their Value
Those improvements in product-tracking technology run hand in glove with improvements in warehouse and fulfillment technology. Robotics and robot-assisted picking and transporting products in the warehouse use the same technologies to bring about substantial new efficiencies.
In times of crisis, like those we saw in 2020, players who have invested heavily in automation (like Taylored Services) were able to meet the pandemic-driven surge in e-commerce demand handily, despite the need for physical distancing and the industry-wide labor shortage.
In the longer term, the data generated by these new technologies may be even more valuable than the initial physical efficiencies they create. With time and repetition, these newer, “smarter” warehouse systems generate millions of data points about how products move through the warehouse (and the supply chain as a whole). Machine learning can be applied to those oceans of data, giving inventory managers new analytic tools that can be used to refine warehouse design and fulfillment strategies.
Again, these benefits will be felt mostly by companies with the resources to invest in the technology internally and by those who partner with 3PLs that have made the corresponding investment in technology.
6. Agility Is Becoming a Core Competency
Along with resilience, agility may be one of the most meaningful keywords we remember from 2020. The ability to respond quickly and effectively to change and disruption is no longer an aspirational goal to tout during company retreats and rah-rah sessions: It’s increasingly a core competency for any seller.
There is no single change you can make, no simple switch you can flip and say, “There, we’re agile now!” Transitioning to a more flexible business model will require careful analysis to identify areas of friction and bottlenecks that must be resolved as part of your ongoing reinvention. Outsourcing those to specialized partners, where applicable, can help significantly.
A more-agile stance isn’t just a short-term response to a transient crisis, like retailers changing on the fly to e-commerce and curbside pickup: It’s an opportunity to strengthen your whole business model. For example, you might find it worthwhile to create entirely separate supply chains for lines of business that change rapidly, are time-sensitive (cellular accessories, swimsuits), or require special handling or expedited returns.
7. Third-Party Partnerships Will Increase
If there’s one lesson 2020 has driven home especially hard, it’s that focusing tightly on your core business activities is a survival skill. Outsourcing non-core business activities to specialized partners are one way to do this, and it’s handy if those partners bring capabilities to the table that align with these industry trends.
That’s why analysts anticipate that partnerships with 3PLs will be increasingly important to retailers and e-commerce vendors into 2021 and beyond. By outsourcing the complexities of logistics, compliance, and warehouse capacity management and the costs of state-of-the-art technology to partners, retailers are free to focus on selling. The net result is to bring Supply Chain as a Service (SCaaS) one step closer.
If you haven’t yet partnered with a 3PL, or if your current 3PL lacks the capabilities to help you navigate the troubled waters of the current business environment, contact us today to learn how Taylored Services can help your business.
References:
Material Handling and Logistics: State of Logistics 2020 — Managing the Supply Chain in a Changed World,
Logistics Management: The Future of Inventory Management,
https://www.logisticsmgmt.com/article/the_future_of_inventory_management
Finances Online: 14 Supply Chain Trends for 2020/2021: New Predictions to Watch Out For,