Top 9 Predictions for Warehouse Operations in 2019

Posted on: January 9, 2019

Before we review our predictions for 2019, let’s recap our predictions for 2018 and see how we did.

1. The Datafication of the Warehouse will accelerate.

The explosion of data sources continues. Did it accelerate? That is debatable. It definitely increased but it is hard to say that it accelerated, so we will call this one a draw.

2. Robotics and automation will enter the chasm.

There is still a lot of buzz about robotics, but we are still in the early adopter and testing phase. They have not gone mainstream yet, so I think we can say we called this accurately.

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

Both B2B and B2C e-Commerce continue to grow much faster than general sales. Labor costs in distribution have gone through the roof, and labor costs throughout the entire supply chain are increasing. We called this one correctly.

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

This one is hard to prove, but anecdotally we have seen a strong uptick in interest in pay for performance and the desire to pay more to attract better talent. I think this prediction was correct.

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

We definitely called this one correctly. Staffing firms are charging very high markups and are experiencing above normal gross margins.

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

We called this one correctly. Companies are going through a very big upgrade cycle and many are choosing to do so on the cloud.

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

Companies are stepping up their investments in new technologies to respond to Amazon’s competition. I think we definitely called this one correctly.

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

AWS continues to be the 1200lb gorilla, but the growth rates of Azure and Google are faster than Amazon’s. However, those growth rates are from a much smaller base, so statistically this more of a draw.

9. Cost to serve will become a necessity.

There was certainly an increase in awareness that this sort of information is important, but whether or not it has become a necessity is hard to say. This is a draw or even a slight miss.

10. Amazon will stumble.

This is a tough one to evaluate. Amazon’s stock tumbled towards the end of the year, but you really can’t blame Amazon for that. Their core businesses continue to grow nicely, and they continue to disrupt, so I think we can say we missed this one.

So overall I think we called 2018 pretty well – 7/10 with a couple possible draws. Now onto 2019 and our predictions.

2019 Predictions

1. e-Commerce growth will continue to outpace the general economy.

It looks like the overall US economy is slowing a bit from its torrid pace of 2018, but this should not impact the higher growth rate of e-Commerce (15%) relative to the overall economy (3%).

E-commerce Distribution
2. e-Commerce and omni channel demands will force major system upgrades.

The logistics industry is going through a major upgrade cycle in WMS, TMS, and LMS due to the requirements of omni channel delivery. We see no slowdown in this cycle. Omni channel shipment capabilities continue to be a must-have.

3. The 3PL industry will continue to experience strong demand.

Many manufacturers, retailers, and distributors have been caught flat-footed with omni channel delivery demands. These requirements will only continue to grow with e-Commerce growth. Companies not able to upgrade systemically will continue to outsource and drive the 3PL industry growth.

4. Cloud computing and hybrid clouds will compete with enterprise.

Most enterprise upgrades will involve some sort of cloud offering, whether it is a hybrid cloud or full cloud enterprise. Companies will continue to outsource their infrastructure at a rapid pace to cloud service providers.

5. The growth of the general economy will slow but the logistics industry will continue to see good growth.

Even though it looks like the US economy is slowing down a bit, omni channel delivery requirements will continue to increase the labor intensiveness of logistics. Automation and robotics may help reduce demand a bit, but the overall shift occurring will drive growth in logistics that is greater than the overall economic growth.

6. The logistics labor market will continue to be very tight.

Unfortunately, the very tight labor market in logistics does not look to resolve itself anytime soon. Restrictions on immigration, re-onshoring of manufacturing, and the overall health of the US economy will make finding and retaining good warehouse talent a challenge.

7. Amazon will struggle against the law of big numbers.

Amazon will continue to be the 1200lb gorilla, but it will be challenged by scale. We are already seeing this with their struggles in integrating Whole Foods culturally. Amazon will still be an amazing company, but the fear of them taking over the world will greatly abate as realities of scale set in.

8. Robotics will begin to emerge from the chasm in late 2019 as early adopters validate their value proposition.

The tight labor market has forced a lot of early adoption testing of robotics in the warehouse. We believe by years end the value proposition of such systems will be validated, and their use will begin to become more mainstream. They will not replace warehouse workers but instead augment their capabilities.

9. Prescriptive and predictive analytics will be in big demand.

Machine learning and AI advances have created cost-effective IT resources for companies to better forecast and predict. Companies will demand analytics capabilities that go far beyond the traditional descriptive analytics model.

We wish for everyone a very successful and prosperous 2019!

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