PUBLISHED NOVEMBER 8, 2022
Changing consumer behaviors and market trends are again underlining the need for scalable, agile supply chains. Between the second set of Prime Day discounts and headlines about big box stores overflowing with inventory, we can see an upcoming battle for market confidence ahead this holiday season. Consumers are prioritizing strategies for saving in the face of inflation, and many business leaders are also pulling back and taking await-and-see approach. But what if we used this market as a motivator for real change? Looking back at history, it is often moments of sudden shift—and the efforts of individuals that embrace them—that drive the adoption of innovative ideas. Could this be the perfect season to consider a supply chain rehaul?
Can Your Supply Chain Afford to Wait on Savings?
In a recent study of 153 executives, we heard the vast majority (96%) say that redesigning supply and delivery chains will be crucial to fulfilling their promise to customers and maintaining business profitability. Consider this: at present, we're paying a lot—both ecologically and monetarily—to ship air because a box must be bigger than the object inside to survive the journey from the warehouse to the sortation conveyor belt to the doorstep. Can we afford to continue with this practice? The system we currently use made sense when few people were shipping even fewer parcels, but the cost is too high today for both business profitability and the environment.
Leaders in modern commerce are embracing change and finding cost savings not just in the packaging itself but also in identifying similar areas of cost savings within their warehouse where they can introduce automation and harness data to improve processes and operate more profitably. For example, introducing an automated storage and retrieval system can often reduce some of the most significant variable warehouse costs, such as labor, lost time, and inefficient each-order picking.
Distributing Risk, Increasing Profit with Micro-fulfillment
We can't talk about holiday season demand and the supply chain without acknowledging the threat of shipping disruptions, port backlogs, and the environment of overall risk that has resulted from "just-in-time" inventory strategies. There is a massive rethinking and reconsideration about how companies can distribute their supply chains, especially on a global scale. Currently, our supply chains rely heavily on legacy, centralized distribution centers lacking the flexibility and data to adapt to market demands quickly. However, we are also seeing that with the help of ASRS’, more decentralized distribution models are gaining a hold.
These decentralized distribution models or micro-fulfillment centers can be strategically placed, leading to products existing closer to the end user — and each other — therefore offering a much more agile restocking, redistributing, and shipping process. In addition, their smaller distribution footprint allow for better data-driven decision-making instead of one centralized source. An IoT-enabled supply chain connected to a 5G network also helps deliver vital information in real-time, providing the potential for reduced carbon output from last-mile delivery and early access to data on changing trends.
An example is the micro-fulfillment solution developed by Accenture and Attabotics. It supports high SKU assortments in smaller warehouses, increases order accuracy, and reduces human labor by 75%. With all these factors combined, we see a lower total cost-per-unit within each decentralized location, helping the retailer manage costs and reduce their overall business risk. These MFCs can also be implemented quickly within existing space, reducing the need for costly site remediation and accelerating the time to value.
Pushing on The Pace of Change
Consumer trends continue to accelerate, and logistics leaders must prepare or risk being left behind. Micro-fulfillment will undoubtedly see an increase in traction to deliver higher-quality goods at lower costs, but this isn't a standalone solution; it needs to be part of a network to support it. Some retailers have made incremental improvements, but lasting change will require more focus on the many problems throughout the supply chain that need to be solved. Big picture: we need to think beyond this season and the close of the quarter towards a better future where our supply chain is more robust, agile, and resilient for our businesses and the greater good.