Surveyed SC Execs Reveal Plans to Expand DC Networks
During its work with a range of mobility customers, Motorola Solutions noticed changes occurring in supply chain practices. To quantify those changes the company commissioned a survey, says Wheeler. “For this study, we went out and talked to literally hundreds of supply chain executives, both operational and IT,” he says. The survey sample cut across industries and included manufacturers, wholesalers, retailers and 3PL providers. “We found that our initial impression was right – there is a lot of change going on,” he says.
One of the clearest trends focuses on how companies view warehousing, he says. “We specifically asked respondents whether they considered warehousing a cost center – sort of a necessary evil – or whether they viewed it as a market differentiator, something that could really drive competitive advantage,” he says. “The latter view definitely is on the rise.”
Not surprisingly, 3PLs led the “competitive differentiator” camp, says Wheeler. “But we were surprised that retailers came in at number two. More than 25 percent of retailers see warehousing as something that can help drive growth. I think this is important because it is indicative of what retailers are going through right now. They are facing a lot of new pressure with the growth of omnichannel retailing; there also are a lot of new opportunities, but those will require excellence in supply chain execution and new supply chain practices.”
There are two factors driving this change, says Wheeler. One is advancing technology that enables real-time connectivity and visibility. “That has been a reality for a few years, but business processes and applications are only now catching up with that technical capability and leveraging it in new and creative ways,” Wheeler says. The second factor concerns changing consumer expectations. Consumers today expect retailers to provide visibility to inventory, flexibility in terms of channel, options for home delivery or store pickup, and easy returns at the store or via mail, he says. “This is a trend we are seeing throughout the supply chain, not just in retail,” Wheeler notes. “We all expect more from people we are doing business with – that is just a reality.”
In line with their changing view of warehousing, 36 percent of respondents plan to either grow the size of existing warehouses or expand the number of warehouses in their network over the coming year. “We dug into that a little bit and found, again, that the primary driver is the expectation from customers of shorter delivery times,” says Wheeler. At the same time, respondents expect the number of SKUs will continue to grow and anticipate that inventory turns will increase. “These are somewhat conflicting projections and achieving both will require some innovative practices,” he says.
Other trends indicated by the survey include a greater use of RFID for item-level tracking in stores, says Wheeler. This trend ties back to multiple channels and the desire by retailers to have all inventory available to fulfill all demand. “It is an execution challenge because it means you need a high level of accuracy in terms of inventory in the back room and even on the store floor. You might even need an associate who can go on the floor and grab an item to verify that it is available before committing a delivery time to the consumer.”
All of those are changes that need to happen at the store level and part of that will be RFID, says Wheeler. “RFID at the item level not only provides better inventory accuracy for someone walking in the door, it also can help facilitate omnichannel fulfillment.”