DISRUPTIVE INNOVATIONS AND THE ART OF WAREHOUSING

In the not too distant future, we could see major changes not just in retailing and transportation, but also manufacturing and real estate. Through disruptive innovations around moving goods and allowing customers to buy stuff more conveniently, we are altering the very structure of communities in ways we’ve not yet identified.

Ken Ackerman
President, The Ackerman Company, Section 1

When I got into warehousing several decades ago, the business pretty much involved just moving finished goods. Academics dubbed our industry “physical distribution.” From there, we added the movement of raw materials, and the name of the industry changed to “logistics,” which was originally a military term.

Around the turn of the 21st century, academics invented another new term, “supply chain management.” This was something of an improvement. If I went to a cocktail party and told people I work in logistics, they’d probably ask what that means. But the minute you say, “supply chain,” everybody nods their head. Eventually, they might ask, “Aren’t you just talking about moving stuff?” And that’s exactly right. But the term “moving stuff” is not sophisticated enough.

They might ask, “Aren’t you just talking about moving stuff?”

The name of the industry isn’t the only thing that’s changed. Decades ago, a warehouse worker just needed a strong back and plenty of muscle to do his job. Life was pretty simple. Today, that same worker needs to know how to use a handheld scanner and is probably carrying an iPad.

Disruptive innovations are altering the art of warehousing in a big way. Specifically, there are seven areas where disruption is changing, or will change, the industry forever.

1. Additive manufacturing (aka 3-D printing)
For some time, businesses have had the ability to create reproductions of existing items. But more recently, innovators are experimenting with the newest technology as a substitution for the procurement of conventional parts. Logistics service providers may eventually house physical production within a distribution center.

Full implementation of additive manufacturing could drastically change the warehousing sector. Imagine a distribution center for automobile parts, containing 20,000 different part numbers. By producing even a fraction of those parts on a 3-D printer, warehouse operators could dramatically reduce the size of their inventory and shorten the distribution cycle by weeks or even months. Buyers could custom-order small batches of products that would arrive just in time for their needs.

Decades ago, a warehouse worker just needed a strong back and plenty of muscle to do his job. Life was pretty simple.

2. Crowdsourcing
This trend is more established elsewhere. Anybody that has a spare room in their house can get into the hotel business, and taxi services were disrupted years ago by Uber, Lyft, and others. Now we’re seeing crowdsourcing efforts in cargo delivery and warehouse leasing. Like 3-D printing, this disruptive innovation is still unfolding. But it’s entirely possible that we will someday soon see a significant share of delivery services handled by independent contractors.

3. Internet of Things (IoT)
The IoT is a growing network of physical objects or “things,” embedded with electronics that enable these things to exchange data. Where that ultimately leads us is still emerging, but one of the early benefits has been precise tracking of shipments and enormous gains in inventory control and visibility. All of that means much more efficient supply chain management and big cost savings.

4. Mergermania
The logistic service industry is fragmented, with a large percentage of firms still family-owned and family-managed. A wave of consolidation has begun and is almost certain to continue. This could have a number of consequences, but two of those should be greater efficiency and cost savings.

5. New ways of teaching and training
Logistics providers face a serious shortage of talent. Much of the focus has been aimed at truck drivers, but other occupations face similar shortages. The continuous learning required of an hourly warehouse worker is much greater than in many other businesses.

Today, they need broader skill sets and more intensive training—much of which is still being designed. For the industry to reach the full scope of efficiency and cost savings that the current wave of disruption offers, it will need to develop standardized, repeatable training models for the tens of thousands of new jobs it needs to fill.

A wave of consolidation has begun and is almost certain to continue. This could have a number of consequences, but two of those should be greater efficiency and cost savings.

6. Robotics
Many people think this might be the biggest game changer of them all. We’ll have to see, but big changes are definitely coming. Once considered exotic and expensive, robotics is now becoming common and cheap.

Most of what people call robots today are just very fancy automatic-guided vehicles. They work mostly horizontally, getting from A to B, and they’ve been around in some form for decades. It began years ago with cables in the floor pulling carts around, which gradually evolved into programmable, laser-guided machines. Today, wireless, mobile robots move about the warehouse floor, guided by a variety of navigation systems. They also pack boxes at shipping docks and help pickers fulfill orders at distribution centers. So far, we haven’t seen a huge breakthrough application, but we are starting to see this disruptive innovation replace people in order picking, receiving, and other warehouse jobs.

7. Self-driving vehicles
Automated vehicles are no longer hypothetical. They began with off-the-road applications like farm equipment and robotic lift trucks. Today several manufacturers are selling first-generation auto-piloted trucks. The benefits are clear and potentially large: reduced accidents and reduced labor costs, and the potential to ease the driver shortage. Some providers are developing a “platooning” system, where one or more driverless trucks follows close behind a lead semi with a driver.

Automated vehicles are no longer hypothetical.

The changes and disruption we see today in the supply chain industry are certainly impressive and it will be fun to watch as they continue to unfold. In the not-too-distant future, we could see major changes not just in retailing and transportation, but also manufacturing and real estate. By
inventing new ways of moving stuff to people and allowing them to buy stuff more conveniently, we are potentially altering the very structure of communities in ways we’ve not yet identified. I’ve seen a lot of changes during my career, and I’m watching the latest ones with great interest.