5 Key Logistics Trends That Will Shape Supply Chain and Warehousing in 2022
2022-01-07
The logistics trends of 2022 are influenced by the two waves of COVID-19 pandemic in 2021, as well as by the new challenges shaping global and local supply chains.
The year 2021 was again marked by the global coronavirus pandemic. New ‘pandemic standard’ policies have been implemented by companies, and these have driven many changes. The industry adapts quickly, but the pandemic is not the only barrier to domestic and foreign supply chains - crisis management in many companies was triggered by the blockage of the Suez Canal as well as by the increasing consequences of extreme weather events.
These were some of the events with the most significant impact on global supply chains in 2021:
- the temporary closure of major manufacturing plants in Vietnam following a spike of COVID-19 cases,
- Hurricane Ida,
- unusual snowstorms and freezing weather that paralyzed the petrochemical industry in Texas,
- COVID-19 and cyclone-related slowdowns at the major container port of Shenzhen, Yantian, China,
- the two-week shutdown of the world's third-largest port, the Ningbo-Zhoushan terminal,
The turbulence of 2021 can be taken as a predictor for the types of problems the industry will face in 2022. Businesses will continue to prepare for:
- logistical blockades,
- material shortages,
- transport bottlenecks,
- market volatility,
- growing customer service demands and preferences,
- and a lack of skilled labor in a diverse combination of global and local factors.
According to a survey, up to half of large companies suffered a supply chain interruption in 2021, with one in eight companies experiencing a major impact. 2022 is likely to include a similar amount of upheaval. However, companies can mitigate the negative impact of crisis events by
- deploying new technologies,
- through continuous innovation,
- and by transforming into data-driven and flexible operating models.
The following 5 trends will significantly affect logistics and supply chain in 2022.
MAINSTREAMIZATION OF OMNICHANNEL LOGISTICS
“To Improve Delivery Speed, Agility, and Visibility for B2B and B2C Customers, 35% of Manufacturers Will Invest in Order Management Software by 2024, Resulting in a 25% Improvement in OTIF Fulfillment“
Lockdown measures affected the habits of consumers and their shopping behavior as early as 2020, when the closure of brick-and-mortar stores triggered a massive move to online spaces. The year 2020 broke records in online shopping, and this trend continued in 2021. In 2020, e-retail sales accounted for 18 percent of all retail sales worldwide. This figure is expected to reach 21.8 percent in 2024.
In-person operations remain part of most sales channels, but as consumers increasingly move to the digital sphere, retailers also need to adapt their sales strategies. In particular, extending their online shopping platform or capitalizing on the new trend of selling on social networks, so-called social commerce. The combination of sales capabilities in both virtual and physical spaces, along with other alternative sales channels, push omnichannel sales to the level of the new standard.
However, when expanding sales channels, vendors must also consider whether their current logistics and supply processes are the right ones for their new sales avenues and adjust them accordingly. Therefore, warehouse, distribution center, and fulfillment logistics management must necessarily be adapted to multi-channel and omnichannel logistics procedures, which present more complex challenges when compared to linear picking in single-channel conventional sales.
The expansion of sales channels will lead to innovations in warehousing and picking procedures in distribution centers and their configuration to omnichannel logistics standards. This will mainly concern the automation of inventory, warehouse, and order management. The scaling of automation across individual sales channels and the transition to process management in real time will follow as the innovations are fully implemented.
In addition, the expansion of system management is related to the expected exponential growth of online purchases, which will also be reflected in the supplier-customer environment (B2B). Digital partnerships will be given priority in B2B partnerships, and the "digital-first" approach is likely to become the business standard soon.
A well-designed omnichannel strategy depends on individual companies and their individual goals, but digital transformation and process automation will be universally essential for efficient operation going forward. At the same time, digitization and automation apply to supply and logistics operations even more than they do to sales.
Regardless of whether retailers plan to transition their physical sales to digital channels, e-commerce companies plan to enter the physical space (pop-up stalls, in-person sales), or companies plan to diversify and combine different segments in B2B and B2C, they should all focus on the revision of picking processes and current inventory management.
In addition, physical operations, e-commerce, and distribution centers have specific requirements for the management of the flow of goods. For example, when servicing e-commerce orders, the shortest possible processes of picking items, completing orders, and shipping them is expected by the consumer, but the main concerns for the distribution center are the costs of handling and moving bulk orders. It is similar with transport units - in the distribution center there are cartons and pallets, while in the e-commerce warehouses it is mainly measured by goods units, or individual items.
Both speed vs. cost, and bulk pallets vs. individual units should be taken into account when configuring supply processes and setting up a sustainable operating model. Modern WMS / WES systems can already manage parallel picking strategies by simultaneously serving different sales channels and, not only speed up the delivery of accurate orders, but also ensure flawless reverse flows. In addition, WES systems are ready to manage expanding customer preferences and broader customer service support.
REVERSE LOGISTICS AND RETURNs MANAGEMENT AS A COMPETITIVE ADVANTAGE
Rising online sales have also led to a growing number of returns and complaints. The accelerating e-commerce sector and expanding multi-channel strategies also require additional optimization and configuration of reverse flows. Complaints can no longer be completely avoided and the conditions for returning goods have a direct impact on consumer behavior. Approximately 19% of consumers buy several similar goods to try and keep only the one that suits them best.
Complaints, returns, and reverse flow management present other operating costs, in particular labor costs (receipt for storage and re-storage), costs related to the damaged goods, as well as additional expenses incurred for the resale of the returned goods. However, complaints and returns are becoming advantageous operations in an environment with growing competition. Free shipping on returns has become the gold standard.
Reverse flow optimization includes:
- improving the visibility of complaints,
- tracking and evaluating what items customers return and to which locations (directly to the distribution center, store, supplier, or retailer)
- setting a proactive return receipt strategy,
- express processing and evaluation of complaints,
- quality control,
- reintroduction of faultless goods back into the sales process.
Reverse flows are also gradually becoming the key to launching successful recycling initiatives, where used goods can be returned for purchase or reprocessing. For example, the company can buy used appliances and, after a thorough refurbishment, return them to sale and thus extend the utility cycle. Businesses can also buy used goods as part of the recycling and reprocessing of raw materials. The position of reverse flows will continue to increase with the gradual transition to a circular economy.
ECO-FRIENDLY supply chain
„70% of Supply Chain Leaders Plan to Invest in the Circular Economy“
The circular economy is also linked to further societal change in the adoption and setting of environmental initiatives, such as sustainable strategies and practices. These were the subject of the Glasgow Climate Summit, COP26, which set out a number of commitments, notably on decarbonization and reducing greenhouse gas and methane production. These measures also have a direct impact on supply chains and logistics.
In this regard, we can expect the setting of new standards for the sustainable operation of supply chains. All demographics of consumers are already more interested in what steps businesses are taking to preserve the environment.
The survey showed that up to 81% of respondents across countries think that companies should behave responsibly towards nature. At the same time, the survey shows that customers also adjust their shopping behavior due to concerns about pollution or waste production. This view is shared by all generations - from generation Z (80%) to generation 65+ (65%).
In the coming period, technological trends will also move in an eco-friendly direction, which will be reflected in green warehousing. The most common measures in the transformation of the warehouse into ecological operation include the transition to LED lights, the use of electrical transport and handling equipment, and the installation of solar panels.
Other eco-friendly initiatives in the warehouse, including
- the digitization of the paper agenda (expenditure, returns, acceptance, and delivery protocols),
- the reuse of material handling equipment (bins, crates, trays),
- and the setting of reverse flows for the collection of packaging
are used to reduce waste generation.
In addition to digitizing paper documents and accelerating the flow of information, WMS / WES systems contribute to the transition to sustainable operation by optimizing inventory management as well as managing internal and external reverse flows for the reuse of packaging material and transport or handling units. All these measures are part of ecological strategies.
RISE OF ROBO-MOBILITY
The rapidly expanding international company Dedoles has announced that it will become part of the Fourth Industrial Revolution with its new distribution center that is bound to become the most unique distribution center in Central Europe. The key difference compared to other automated warehouses and internal logistics will be their deployment of AMR (autonomous mobile robots) instead of more traditional equipment such as conveyor belts.
The advent of robots heralds the transformation of material flow, warehousing, and supply transportation-handling technologies. Acceleration of the robotization of picking and warehousing processes also results from new requirements for flexibility and more efficient use of space in warehouses and distribution centers. The robots can dynamically adapt to changes in the warehouse layout as well as the constantly changing needs of the operation.
Enhanced mobility compared to more conventional transport technologies also leaves room for increasing process efficiency. Robots can use optimization algorithms not only for production and supply, but also for their own maintenance. Autonomous mobile robots are associated with an increased rate of cobots´ deployment for handling goods and materials, picking, and packing orders.
Robotization is also largely driven by the growing shortage of labor, which will only deepen in the coming period.
DATA-DRIVEN WAREHOUSE AND SUPPLY CHAIN
With the evolving digital transformation, companies will gain increasing access to relevant data and use it to optimize their operational performance and logistics process efficiency. This will enable the transformation of supply chains into demand-driven logistics and demand-driven warehousing and supply chain. Real-time data exchange and processing will accelerate information flows in the supply chain, which is a basic prerequisite for accelerating material flows.
Operations that already base their decision-making processes on up-to-date data will focus on increasing the added value by managing the material flow in real time or by implementing additional optimization solutions that lead to an increase in the performance and capacity of the warehouse or its shipping potential. The data will enable the company to develop dynamic operating strategies, which are already becoming the standard for modern WMS / WES and MES systems.
The types of goods and their warehouse positions are constantly changing over time, sometimes even during one work shift depending on demand. Real-time data processing enables the currently most requested goods to be stored closest to the assembly or dispatching point. This type of warehousing, where stocks do not have fixed positions, is referred to as chaotic warehousing. Similarly, order picking can be maximized by deploying cluster or wave order picking, which can better respond to incoming large volumes of orders with a low number of items.
Data-driven warehousing and supply chain also allows the efficient use of enterprise resources. Monitoring the technical condition of handling and transport equipment prevents technical failures, unexpected outages, or damage due to overlooked maintenance. In this way, the costs of maintenance, repairs, or complete replacement of transport equipment can be minimized.
The transition to a data-driven operational strategy allows you to manage processes with respect to real-time events and
- optimizes storage capacity,
- and reducing the time required to process the order.
At the same time, this change in strategy contributes to a more organic coordination of other consecutive operations such as goods receipt, warehousing, order completion, and dispatch.
Data analysis can detect any changes in the market or changing patterns of customer behavior in a timely manner, allowing the company to adjust its operating strategies accordingly. Change forecasting gives companies a competitive advantage while giving processes the flexibility they need to respond in a timely and appropriate manner to changes in markets. The flexibility gained from data analysis allows the company to achieve elasticity in adapting to external and internal factors by implementing new trends and fine-tuning operational processes.
