Top 10 Predictions for Warehouse Operations in 2018

Posted on: January 4, 2018

1. The Datafication of the Warehouse will accelerate.

The current trend of datafying the warehouse will continue and accelerate. More companies will utilize equipment telematics and begin testing wearables. The challenge will not be in creating the data but in sorting through the ever increasing volume of data and making sense of it. New big data tools will be developed to help companies with this challenge.

2. Robotics and automation will enter the chasm

2017 headlines professed the obsolescence of the American worker due to artificial intelligence and robotics. Many early adopter companies have invested heavily in robotics and automation. This investments may eventually pay off, but the industry is still in the early adopter phase of innovation and will enter Clayton Christenson’s chasm of technological innovation as they work through the challenges of incorporating these new technologies. The chasm will be crossed, but it will not be in 2018.

3. Continued growth in e-Commerce will drive increase labor costs and drive distribution innovation.

B2C e-commerce continues to grow at over 15% annually and B2B at over 40% (although from a much smaller baseline). High service requirements and higher labor costs for e-commerce will force warehouse operations to invest heavily in new technology and process changes in order to meet the demands of e-commerce shipping.

4. Record low unemployment will increase the number of companies offering pay for performance to attract top talent.

2018 will force tremendous upward pressure on labor wage rates, however the highly competitive nature of the supply chain will make it difficult for companies to pass on those higher labor costs to their customers. Companies will adopt pay for performance to attract better talent, pay higher wages, but yet still drive down labor costs through increased productivity.

5. The tight labor market will enable staffing firms to charge higher staffing margins.

Contingent staffing continues to become a substantial portion of the workforce in warehouse operations. The tight labor market will give the staffing firms the leverage to increase margins due to supply demand challenges and higher recruiting costs. 2018 peak will be a major staffing challenge for all.

6. Migration away from enterprise to the cloud will increase.

The ROI on cloud services has proven itself with lower cost of ownership and service. Companies will continue to accelerate their migration of enterprise software to the cloud as they go through their upgrade cycles. Companies well entrenched in enterprise will adopt hybrid cloud technologies to integrate their enterprise with the cloud.

7. The Amazon Effect will force the industry to respond with innovation and improved service quality.

Amazon was the top mentioned topic on corporate earnings calls in 2017. The industry will respond with new innovations and service quality and cost improvements to compete with Amazon. Amazon will continue to take market share, but that growth will decelerate.

8. In logistics, the move to the cloud will grow faster with Azure and Google than with Amazon.

Cloud service migration will continue to accelerate, but migration in logistics will grow faster with competitive cloud service providers to Amazon AWS. Large companies will refuse to work with AWS, and potentially service providers that use AWS, in order to blunt the competitive threat of Amazon.

9. Cost to serve will become a necessity.

Knowing your cost to serve will become an absolute requirement to compete effectively. Industrial engineers will begin incorporating CTS analysis into their process standard models.

10. Amazon will stumble.

Amazon will run headfirst into the law of big numbers and government push back. Amazon added 225,000 employees in 2017. The world has awoken to their competitive threat. Governments may threaten anti trust actions, competition will step up, and the tight labor market will make it harder to maintain such a torrid growth rate. Amazon will continue to thrive, but its threat of world dominance will prove to be more hype than reality.

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