The final month of the year brings the usual mix of looking back over the previous twelve months and anticipating the year ahead.
Our industry is no different, as we try to make sense of major events in 2015, while at the same time looking forward to the supply chain trends and predictions for 2016.
However, if you can’t push fast forward on your fulfillment technology, or adjust quickly enough to meet changing consumer behavior, you’ll soon find yourself in the midst of a most undesirable downward trend.
Supply Chain Trends for 2016
With the economic upswing expected to continue and ecommerce driving all kinds of changes in consumer behavior, 2016 has the potential to become a banner year for evolving supply chains.
Here are the ten supply chain trends we think you’ll want to watch and plan for as we enter the New Year:
1. Brands will review the size and location of their distribution centers
As more of their buyers move to city centers and the immediate suburbs and new generations expect rapid delivery, companies must be acutely aware of the capacity and delivery lead times of every DC they use. Many of the country’s biggest brands are moving to larger facilities on the outskirts of major metropolitan areas. The expectation of same-day or even one-hour delivery may not be mainstream, but customers in these areas will increasingly expect rapid and reliable fulfillment solutions on every order they place.
2. Amazon edges into third-party logistics
Speaking of major retailers driving supply chain trends, there’s much more at stake over at Amazon than the annual obsession with delivery drones and warehouse robots! The company’s infrastructure is now expansive, with 89 fulfillment centers in North America and more spread across Europe, Asia and India. It has the ability to offer fulfillment solutions to many online retailers and provides significant competition to established brands. For supply chain professionals, it will be important to closely watch Amazon’s ambitions in the 3PL space and gauge whether those moves will complement or compete with your business.
3. Accessible tech helps develop more integrated supply chains
More systems talking to each other will be a common feature of many prediction lists as the year closes out and supply chain trends will also embrace this phenomenon. A maturing ecosystem of mobile devices and information technology mean fulfillment professionals at all levels have access to advanced software. By expanding strategic partnerships with service providers in key areas, fulfillment solutions can drive efficiency, increase visibility and reduce costs.
4. Consumer-driven demand will catch up with more businesses
The days of companies defining when and where customers can pick up products are over. Now that there are multiple sales and fulfillment channels at work, a business overlooks any one of them at its peril. More companies will start to strategically expand the places they allow customers to purchase and try to find the sweet spot that offers multiple fulfillment options in a cost-effective way. To get ahead of this phenomenon, it will be crucial to know not just what your customers want now, but to anticipate how you can make the purchase and delivery experience for them easier in future.
5. Mobile commerce will add fuel to the ecommerce fire
The popularity of mobile devices comes as no surprise, but the number of consumers who use them as a primary shopping channel might be. At times on Black Friday 2015, more than half of the orders being placed online came from a smartphone or tablet. This trend holds great benefits not just for consumers on-the-go, but for retailers who can get ahead of the curve and meet them at the most likely point of purchase. Look for expanded use of in-store beacons and apps to drive awareness of special offers via mobile devices in 2016.
6. Precisely targeted supply chain improvements
Unless a company has been ignoring supply chain trends for years – which is why you’re reading this, to avoid such a situation! – seismic shifts in fulfillment strategies are rare. Most managers actively monitor our industry and make regular adjustments to existing strategies, or add new components as they are required — mobile app ordering in recent years, for example. With better access to tracking technology, increased connectivity, and competition in 2016, expect supply chain managers to zero in on underperforming or underdeveloped areas of their operation for improvement. As we explored recently, Kaizen-Gemba philosophy can help here.
7. New labor skills are important, but not in isolation
While the advance of ecommerce and the increased prominence of online delivery applications has inevitably raised the profile of software developers and data analysts, those skills alone will not fully serve fulfillment providers. Workers in our sector will need to fuse those skills with industry knowledge, or the ability to quickly learn how the business works.
“For complex industries like supply chain, ‘learn while you use it’ will not work. We will continue to need systems engineers, civil engineers and other highly skilled professionals just to get our platform right for our clients and their customers’ ever-changing needs.”
—Thom Campbell, Chief Strategy Officer at Capacity LLC
8. Sustainable supply chains as competitive advantage
We’ve all seen the scrutiny of supply chains at the highest level, whether it’s Apple’s demands from Foxconn or McDonald’s explaining where its ingredients come from. As consumers take more responsibility for their purchase decisions and factor in ethical supply chains, companies that satisfy this need will stand out from their competitors. This may be one of the more of a slow-burn supply chain trend, but socially responsible, environmentally friendly and legally compliant operations will continue to win market share.
9. Retailers face up to flatter and shifting seasonality
When Amazon tried to fire up enthusiasm for its Prime Day sales event over the summer, some consumers wondered if the sales ever truly end. That sentiment could be tested further still during 2016. While the holidays will continue to be a major focus for retailers simply because it’s when consumers are most willing to open up their wallets, off-peak sales events will be an attractive way to distribute demand. And because there are now so many ways to reach customers without a significant advertising investment, expect more businesses to ramp up these experimental sales events.
10. Fulfillment providers will be challenged to further enhance the customer experience
As brands strive to stand out from the competition, the pressure will be on to innovate and customize the consumer experience. This holds tangible physical implications. From enhancing the presentation of regular products and bespoke gifts to subscriptions and auto-replenishment, the difference these elements can make to customer loyalty and repeat business should not be overlooked. IT is also important here, as sites support increasing complexity like BOGO (buy one get one free) and other custom promotions.
All of these items have the potential to impact operations in 2016, but some will inevitably take longer to evolve than others. Even so, it makes sound business sense to understand the shifting sands of your supply chain and be prepared for what might come next.
If you have a question about preparing your fulfillment for the year ahead, we’re always ready to help.
Which supply chain trends do you expect to define 2016?
We look forward to hearing your predictions!