No matter how sophisticated warehouse operations get, it will always be about moving boxes from here to there (as quickly as possible). The dwindling labor pool across the supply chain industry makes moving inventory a trickier task to shoulder, and it looks like that won’t be changing soon. At the time of publishing, the U.S. unemployment rate sits at 3.5 percent. In fact, unemployment dropped half a percent in 2019 and hit the lowest rates since 1969 at several points throughout the year. On top of this, there are actually more jobs available in the U.S. (seven million) than people looking for work (approximately six million).
While this is great for the overall economy, it trends toward continued struggles in finding warehouse workers. What’s the ripple effect? The ante goes up. Labor costs and overhead, including salary, wages, bonuses, benefits, and other incentives all need to be more competitive to attract talent. A popular solution, “throwing people” at the problem, used to work. But, that just doesn’t scale like it used to. And with reports of labor turnover around 33% (or higher depending on the industry), talent retention compounds the problem.
So, warehouse managers need to either cauterize warehouse labor turnover or find ways to do the same amount of work with fewer workers. Now that there are fewer job applications in the inbox, businesses need to find new ways to keep inventory moving with fewer workers. (And in many industries order volume has steadily increased thanks to eCommerce, creating extra need for warehouse labor.)
Human augmentation such as robotics never intended to be a replacement for workers. These solutions simply allows workers to do more. Generally, this means handing off repetitive, “simple” tasks to robots while working more efficiently thanks to wearables and data fed from a warehouse management system and other supporting systems.
Keeping Up with the Joneses of Logistics
Supply chain changed from a cost center to a strategic necessity and differentiator when Amazon started stealing share and printing money. Its lean supply chain enabled it to undercut the market on price, and now we see the company’s brown, smirking boxes everywhere. Amazon may have forced many businesses to board up their doors, but it opened just as many doors for new businesses—especially online retailers. But, it’s a tight race and timing is critical. Loyalty only goes so far. Too late to innovate, and your customer base may jump ship if the competition offers superior service at a lower price.
If there’s one thing you can say about the supply chain industry, it’s not boring. New technologies and businesses push operations in what seems to be a race with no finish line. The leaders, typically larger companies with the coffers to invest in bleeding-edge solutions and a tip-of-the-spear mindset set the pace. Smaller players follow close behind, waiting for proven ROI and best practices before making investments. In either case, timing is critical. A large outlay of Capex could put the company at risk. For nascent technology, the extra risk may put the “bleeding” in bleeding edge.
One the other hand, many supply chain systems, such as cloud-based software and robotics, wrap solutions in service-based Opex packages. In our Automation Survey Report, we found that the top barrier to implementing and investing in automation was budget approval. Service-based investments, however, are considered lower-risk investments and give smaller businesses a fighting chance at a five-figure operational expense as opposed to multi-million bank-breaking investment.
We can’t keep using our dad’s tools in the warehouse and expect to keep up. As we get into the solutions in this Human Augmentation Series, we’ll show the importance of keeping up with the Joneses, as well as how to think about technology acquisition when you’re ready to pull the trigger.
Rising Complexity of Supply Chain Networks
While other sections of this piece cover what’s going on inside the warehouse, factors from outside the four walls contribute to the need for human augmentation. We broke these factors into three categories:
Customer Expectations: A study by Brightpearl identifies that millennials show the lowest brand loyalty of any shopping demographic. In short, the bar continues to rise. People want materials faster than ever before, with full transparency. They also want more of, well, everything. This leads to SKU proliferation, which directly affects inventory management, warehouse design, and inventory replenishment among other things.
Globalization: Sourcing materials and serving customers is a borderless endeavor that can improve profitability and encourage growth. But, it’s tricky. You may find cheaper parts abroad, but supply sourcing potentially backfires if materials are poor quality or are made unethically. A Nielsen report, for example, shows that U.S. shoppers will spend $150 billion on sustainable goods by 2021. Serving an international customer base allows you to dip into new revenue pools, but customs, taxes, and delivery need to be solved.
Distribution Network: Large, central distribution centers still act as the cornerstone of many businesses. But, with same-day delivery quickly becoming a new norm, that changes how we think of distribution networks. Crucial to faster delivery, planning a network of smaller DCs and fulfillment houses sets the foundation for a strong supply chain. Adopting other strategies such as partnering with 3PLs, or turning brick-and-mortar stores into micro-DCs in an omnichannel model, make a huge impact on the overall performance of your supply chain.
The factors above highlight the need to think outside the box (or four walls) when building a warehouse operations strategy. And if you need inspiration, look to the analytics side of human augmentation. The data generated by your shoppers can be a strong ally—if you have the systems to unpack the information.
Modernizing, End-to-End Warehouse Management Systems Interconnectivity
Speaking of unpacking information … organizations that know more, perform better. It sounds obvious, but then why do so many organizations sit on mountains of raw operational data without making any changes?
Water all around, and not a drop to drink. But, it doesn’t have to be that way. Investing not only in the development of data, but turning it into actionable, customer-driven insights, puts businesses in growth positions. Understanding customer behavior, identifying trends in demand, better positioning inventory in the warehouse—these are all advantages that reduce cost and improve the customer experience.
This sounds good in theory, but data feels esoteric doesn’t it? It feels intangible, but we need to resist that mindset. Think about how data impacts our daily lives. Facebook, Google, Amazon’s Alexa—all these brands (and more) leverage data to offer their users a better (more profitable) product. The same concept applies to supply chain. Within our lifetime, it will be possible to predict a customer’s order and queue it up before the customer even thought about placing an order. It sounds crazy, but the knowledge is all there in that mountain of data, waiting to be discovered.
But, this sleeping dragon under your mountain of raw data won’t wake up on its own. Inter-connected supply chain systems, paired with artificial intelligence, need to make sense of the data. As we get into the solutions sections of this series, we’ll uncover how human augmentation delivers golden nuggets of AI-driven knowledge you can act upon.
Human Augmentation Supply Chain Systems
You can get a good feel for your operational effectiveness by looking at the data from spikes in demand. These periods put stress on warehouse operations. If there are hiccups in performance, that could be a strong indicator of systemic scalability issues. Were there bottlenecks? Did you miss some deliveries? Do you have the means to look at the data in a meaningful way? All these signs (among others) point to the need for innovation in your warehouse management.
Where one organization finds challenges, another finds opportunity. The challenges above set the table. Throughout the rest of this series, we’ll be covering the solutions and technologies blowing warehouse operations open. From moving boxes to crunching numbers, human augmentation represents the modern systems needed to keep up and forge ahead in your industry.
Over the course of this series, we’ll be covering:
- Robotics: Autonomous Mobile Robots, Automation, Exoskeletons
- Sensory-Based Solutions: Voice- and Vision-Enabled Work
- Machine Learning & AI
- Internet of Things (IoT)
Human augmentation sounds like something out of a science fiction movie. But, the solutions exist today and continue to transform the supply chain industry. The solutions are proven; procurement models and overall costs have never been friendlier. In short, we have the technology, and it’s time to use it.
