Call it a cop-out if you like, but seriously, predicting which logistics and supply chain trends will make a difference to businesses in any given year has become notoriously difficult, given the speed at which technology in particular can suddenly disrupt the way things are done.
At the same time, technological advances such as the Internet of Things, automated transportation and similar futuristic innovations, have been offering the promise of disruption for the last few years without really delivering, although there is little doubt that they will, maybe in 2017, or maybe later.
The absence of predictions in this post is quite deliberate therefore, but if you want to know the most important supply chain and logistics trends to keep your eye on in 2017, you’ll find them outlined below.
End-of-year Update: How Did The Trends Progress?
As this article proved extremely popular, I thought it worth adding a few updates to follow progress on these six trends. The additional update-sections below have been added in early December 2017.
Interestingly enough, most of the trends have continued to strengthen over the course of the year, with the exception perhaps of #6, although it could be that virtual logistics teams are on the rise, and that the growth has simply failed to receive much industry-media attention.
6 Supply Chain Trends You Can’t Afford to Ignore
Key Logistics Trend #1: Warehouse Robotics in the Supply Chain
Automation is already well-established in many distribution centres around the world, but for most, it is limited to workflow automation managed by increasingly advanced warehouse management systems.
While system-guided manual processes can make a considerable difference to warehouse efficiencies though, the value of full automation—perhaps the holy grail of distribution centre operation—is typically the preserve of corporate giants able to build purpose-designed automated warehouses, or to adapt older real estate for “lights-out” operation.
The situation is changing however, as more and more MHE manufacturers bring warehouse robotics to market. Robotic solutions offer the ability to introduce automation into DC operations without the need for major structural alterations.
If you read my post from last year about one company’s experience with automated guided vehicles (AGVs), you’ll be aware that robotic forklift trucks have been around for a number of years, and the trend in their adoption is still gaining ground.
However, the real tipping point in the warehouse robotics trend will arrive when technology vendors master the art of true robotic picking, where robots are able to pick orders from conventional racking.
Right now, trends in robotic picking are related to systems which bring goods to the picker, requiring a considerable amount of specialised racking and conveyance equipment.
When robots can pick conventionally from shelves or floor-locations, warehouse operators will be quick to seize the opportunity to switch from manual to (largely) automated distribution centres. It’s hard to say if that moment will arrive in 2017, but for any business carrying the costs of warehouse labour, robotics developments warrant close attention in the year ahead.
End-of-year Update: Warehouse Robotics
Warehouse robotics developments turned out to be quite prolific during 2017. Here are a few highlights:
Climbing Robots in France: A French robotics company has developed a warehouse robot that can actually climb warehouse racks to pick from any level, then transition to surface transportation to carry orders to human workers. Capable of picking up to 400 orders in an hour, the robots are already in operation with one French online retailer.
Alibaba Increases Robotic Population, Reduces Human Labour: Alibaba, the world’s largest retailer, ramped up robotic labour in one of its warehouses this year, reducing the human workforce in the facility by 70%.
Swarming Robots in England: Ecommerce grocery chain Ocado brought a new automated warehouse into full service this year. The warehouse has no aisles and every centimetre of floor-space is filled to just below ceiling height with inventory. A swarm of hundreds of robots works above the stacks of inventory, digging down to grab boxes and carry them to the minimal human workforce, which then packs the groceries for home delivery.
DHL Challenges Robotics Visionaries: Logistics giant DHL launched a challenge program to encourage development of piece-picking warehouse robots. Prototypes will be judged this month (December 2017) and their inventors will also be involved in a proof-of-concept with DHL and Dell EMC.
Key Logistics Trend #2: Autonomous Road Transportation
As mentioned in the introduction to this post, autonomous truck development has been a trend that’s grown over the last couple of years, but it still looks like it will be some time before autonomous goods vehicles are used in earnest on Australian highways, or those of any other country for that matter.
Still, that’s no excuse for ignoring the progress being made on a transport solution with the potential to drive greater economic efficiency than any other supply chain technology so far imagined.
The first driverless car trials in Australia took place in Adelaide last year and automated trucks have already been a reality in Western Australia’s mining industry for some years. In the United States meanwhile, Anheiser Busch recently hauled a full load of finished goods point-to-point without a hitch, and almost without a driver (he was in the cab of the truck, but not in the driver’s seat).
Driverless vehicles have already proven themselves as a realistic way to slash the cost of transport, once all the legal, safety, and social acceptance issues are overcome. Of course that will take some time, but it’s likely that 2017 will only see autonomous vehicle development strengthen as a progressive logistics trend.
End-of-year Update: Autonomous Goods Vehicles
The trend in autonomous goods transportation hasn’t moved as quickly as warehouse automation this year, but that’s probably understandable given the very different environment involved (public highways).
However, Volvo recently unveiled a new prototype autonomous truck in Beijing, China, and in the United States, a company called Embark Trucks is testing driverless technology while hauling refrigerators on a 650-mile route along low-volume highways between Texas and California.
It does seem then, that the trend quietly continues, although as Volvo Group CEO, Martin Lundstedt himself stated while commenting on the Chinese tests (and I also suggested when penning this post nearly a year ago), the technology is probably still a long way from becoming a serious operational reality.
Key Logistics Trend #3: The Blurred Line Between Logistics and Technology Services
2017 will surely see logistics companies become increasingly hard to distinguish from technology providers, as 3PLs and 4PLs continue to leverage IT platforms as major service-selling points.
To some extent, this blurring of the line is spinning off from a similar phenomenon in the consumer markets, where sometimes it’s hard to know if you’re dealing with a business entity or a software platform. For example, when you book accommodation on AirBnB, do you think of yourself as:
a) Making a purchase from a travel-oriented service provider?
b) Connecting with an independent seller through a sales-oriented social media platform?
When you book an Uber driver to take you downtown, are you using an app to find you a private “taxi” or are you making an online purchase from a transport provider?
This apparent blending of technology and service provision into a “singularity” is beginning to pervade B2B marketplaces, especially those related to logistics services. For instance:
- American companies needing short-term warehouse space can log into FLEXE and get connected to other companies with floor or rack space to spare
- S. Shippers can easily find space for their goods on a truck using “Convoy”, a form of crowd-sourced freight service
- The concept of the logistics “control tower” is increasingly becoming synonymous with both supply chain management software solutions and outsourced logistics service providers
The same melding of software and service can be found in solutions used for warehouse management, procurement/purchasing, and other operational applications in the supply chain, as on-premises software gives way to cloud solutions with integrated technical support services and self-help capabilities which obviate the need for in-house IT resources.
What does this trend mean for your company? In itself the blurry line creates little issue, apart from some semantic frustrations. What it does mean however, is that you will need to be increasingly cautious about what kind of organisation you are dealing with when procuring services and solutions.
I say this because undoubtedly, as technology and supply chain expertise continue to consolidate within logistics applications, upstart providers will have more strength in terms of technology than supply chain knowledge, or vice versa.
This will be an important consideration when taking advantage of such solutions, since selection criteria will need to take into account your own business’ strengths and weaknesses and how those of a given vendor/service provider will complement them.
Other factors to evaluate may include:
- How might use of transport solutions affect your place in the chain of responsibility?
- Will use of a particular service/platform improve or hamper flexibility in your supply chain?
- Can you ensure/maintain your company’s customer service promise when using third-party platforms?
As new integrated supply chain platforms come online, which they surely will in 2017, it will be tempting to jump onboard, especially given their accessibility (just sign up and go), but it’s important to keep an eye on the wider implications which in many cases, will not have been tested greatly in the use of new service models.
End-of-year Update: Logistics Technology as a Service</h3>
This service/technology integration trend has continued apace over the last 10 months or so, perhaps most interestingly in the field of transportation where “the Uberisation of logistics” has become a popular catchphrase. While speculation is polarised as to whether the concept can really succeed, app-based “instant freight” services continue to spring up, not only around the world, but also across transport modes.
At Sea – the Uberisation of oil transportation: OSVFinder is a French company currently providing a service to match energy companies with owners of offshore support vessels, but with big plans to expand into an “Uber” for oil and gas shipping.
The concept is simple: vessel owners and oil shippers register on the app. Vessel owners post their available capacities and shippers post their needs. The app will then search for the most efficient solutions and enable transactions to be brokered—without the broker.
On the Road – Digital Freight Matching: Hundreds of millions of dollars are finding their way into the Uberisation of road freight, with Uber itself and the mighty Amazon both developing freight matching solutions. Other companies entering the market include Cargomatic, CargoX, and FourKites, all of which offer cargo matching in the long-distance road transport sector, while a number of startups have also emerged recently to compete in last-mile matching.
Key Logistics Trend #4: The Appeal of Supply Chain Social Responsibility
Sustainability, carbon footprint reduction, and supply chain transparency have, over the last two or three years, merged and morphed into what we now like to call corporate social responsibility.
The term itself offers a clue into the conceptual origins of CSR and the socially responsible supply chain. Most organisations, if they are honest, will admit that CSR efforts largely began in response to the pressures of legislation and public opinion.
Of late though, CSR is being regarded less as a compliance-related necessity, and more as an approach to increase revenue, secure customer and employee retention, and generate brand appeal.
Enlightenment comes courtesy of early CSR adopters, which having discovered benefits above and beyond the obvious advantages of compliance, have been happy to share the good news. In short, corporate social responsibility is no longer just a trend—it’s actually trendy.
Driven by positive motivational factors and aided by a growing base of specialist service providers, many more supply chain and logistics organisations will integrate CSR into their strategies over the course of 2017. If yours isn’t one of them, your stakeholders might well venture to ask why.
More to the point though, you may want to ask yourself what benefits are being left on the table, and whether less reticent competitors are already exploiting those benefits to their advantage.
End-of-year Update: The Socially Responsible Supply Chain
Social responsibility continues to gain momentum in supply chain organisations as 2017 draws toward the end of its final quarter. Some companies that have been lauded by the likes of Gartner for supply chain social responsibility initiatives this year include:
- Walmart: Launched Project Gigaton, a greenhouse gas reduction program involving suppliers
- Dell: Launched a wide-ranging CSR initiative called 2020 Legacy of Good, which among other things, seeks to achieve global supply chain responsibility
- Pepsico: Ramped up sustainability initiatives in the supply chain, including water and carbon reduction
Key Logistics Trend #5: The Race for the Last Mile
It’s the most cost-intensive part of the supply chain; the final delivery of goods from distribution centre to retail store or consumer’s front door. Moreover, the explosion in omni-channel retail has increased both the demand for last-mile resources and in many cases, the costs of operating them.
As retailers become smarter at managing online and omni-channel fulfilment processes, so they will graduate from just getting the goods where they need go, to innovating for efficiency in the last mile.
As a result, we can expect 2017 to herald a rise in the emergence of crowd-sourcing and specialised last-mile fulfilment service providers, as innovative shippers seek alternatives to parcel carrier services or in-house distribution fleet ownership.
If ever there was a supply chain scenario in which crowd-sourced logistics solutions could be beneficial, it’s in the last-mile arena, hence 2017 might be the year in which Uber-style last-mile freight services actually take off.
Crowd-sourced transportation could be especially useful for small deliveries of goods portable enough to be transported on two or more wheels (I know that sounds suspiciously like a prediction, but really it’s just a suggestion as to what might happen).
Last-mile innovation is not and will not be restricted to the types of carriers used by shippers though. After all, today’s consumers want total flexibility in terms of how orders are received.
We may for example, see growth in solutions such as locally situated public “smart lockers” into which deliveries can be made for later collection by consumers, and which may also help to streamline the process of returns, which continue to grow in volume as a result of changes in shopping habits.
Meanwhile, it’s possible that click-and-collect services will continue to expand, perhaps even leading larger retail chains to convert shopping space into warehouse storage, in order to better service consumers preferring to shop online and collect their purchases from local facilities.
End-of-year Update: Last-mile Delivery
The Uberisation of last-mile distribution has already been mentioned in a previous section of this update. However there have been other developments in this area.
Perhaps most notable of these are the apparent moves among national postal services to “reinvent” themselves as last-mile parcel carriers. Examples include USPS in the United States, and the New Zealand Post, which in a rather novel take on diversification, has been piloting home deliveries of Kentucky Fried Chicken to improve asset utilisation.
Unconventional or not, the fact remains that as postal services continue to suffer from the decline in snail-mail, the use of logistics assets to break into new last-mile markets makes a lot of sense.
This is especially true when it comes to parcel deliveries, since in many cases, the postal service will already be visiting many of the delivery points, whereas for a carrier like FedEx or DHL, each parcel generates the need for a new delivery.
Key Logistics Trend #6: The Rise of the Virtual Logistics Team
The concept of remote working and virtual teams has become pervasive across many commercial sectors, enabling companies to access talent globally rather than locally and to cut down on travel expenses and real-estate needs.
As supply chain IT continues its transition to the cloud, 2017 might be the year in which supply chain and logistics organisations begin to look closely at the benefits of remote working for administrative and support staff.
Let’s take route and dispatch planning as an example…
Many larger companies which once had planners located in each distribution centre have made the shift to centralised planning. This clearly demonstrates that in the age of information, local resources are no longer necessary to schedule and plan thousands of deliveries each day.
The next step is to recognise that with online access to planning software and real-time communication, route planners really don’t need to be sitting in a central office, but could realistically perform all necessary activities from their homes.
With the ability to send load and route plans directly to WMS applications and truck drivers’ hand-held devices (or even to printers located at the DC), a home-based route planners’ role could be perfectly viable in many organisations.
The same is true of many other roles traditionally based in centralised logistics centres or regional/local DCs. Purchasing, general administration, and even certain management positions could all be realistically held by employees based wholly or partially at home, reducing labour costs and enabling real-estate investment to target storage rather than office space.
End-of-year Update: Virtual Logistics Teams
This appears to be the one trend that hasn’t visibly gathered momentum in the way I might have expected. Perhaps this is due in part to the relative immaturity of enterprise mobility solutions for supply chain and logistics management.
However I still foresee home-working, the use of virtual assistants and distributed teams as a potential snowball in the supply chain arena, but perhaps technology is not yet where it needs to be.
This will change as cloud computing and improvements in enterprise apps take hold over the next few years. In fact, the use of apps is one of the important trends I believe to be gathering momentum already, and which I plan to include in a forthcoming article on important supply chain trends for 2018.
Be Ready For Disruption in Supply Chain and Logistics
Trends come and go. Some stick around longer than others. Some fade into obscurity and others crystallise into breakthroughs which disrupt entire industries. As I see it, any of the six trends outlined in this post has the potential to substantially impact your company’s supply chain and logistics operations.
End-of-Year Update: As it transpired, most of these trends indeed continued to gather pace throughout 2017. While all or none of them might take further leaps in 2018, I feel certain they will reshape the supply chain world at some point in the near future.
As always here at Logistics Bureau, we’ll continue to monitor developments closely. Indeed, I’ll shortly be publishing an article exploring the most promising trends for 2018.
Of course, I won’t be so bold as to make predictions, but will simply focus on areas of innovation worth keeping an eye on. In the meantime, if you have any views on what will be big over the next year, we’d love you to air them in the comments section below.