“Times They Are A Changin” for Meeting Needs of the New Customer


20% Rise in End to End Fulfillment This Year Is Possible, Even With Lower Fuel Costs

To quote Bob Dylan, the “times they are a’changin.”

While many have moved on from a pallet-based store delivery supply chain and have brick and mortar stores doing fulfillment, and may even be implementing better inventory management: the underlying cost structure has started to rapidly change.

Compounding this change is an Omni-channel customer with a phone app to instantly look up pricing, discounts, and available inventory. This customer trend has compressed the buying cycle and made it less feasible to pass along costs.  Let’s look at some of the changes coming and what you might want to consider.

Disruptions to the Supply Chain That You Should Monitor and Operationalize

Labor Cost and Availability

Low wage and low skill labor across industries and countries has become tougher to hire and can be set to rise in cost.  This has created hard to fill openings for store and DC labor.  New projects should anticipate that wages could rise by 10 to 30% for some positions.  This may make creative automation designs more feasible.

Customer Changes

Omni-channel and the supporting just-in-time processes needed have put some unusual handling complexity on today’s back store, manufacturing, and warehouse managers—many of whom are struggling to match schedules with small shipping windows.   Customer requirements are growing each season as Amazon and others push ahead. To effectively work with these changes, flexible but lean processes with technology support must be put in place to be cost effective.

Wringing Cost From Distribution Center and Manufacturing Operations

A global rise in labor costs for semi-skilled labor will impact operations. What’s the solution? Hybrid automation solutions can deliver significant labor savings and have become commodities that are more budget affordable than ever.  As an example we have utilized AS/RS cranes to do shipping not just storage in certain designs.  Consider a 10 to 30% labor cost in automation decisions.

Better Back of Store Operations

Picking from aisle, packing, wrapping, boxing, labeling, weighing and manifesting in a cramped packing area is much harder than in an ergonomic DC pack station.  However, as we all know, making your inventory closer to the customer offers a great service opportunity.  The key is to link the DC and Suppliers with the Store to ensure supply and then to put in place an effective lean process with space and equipment.   Can you see shipping 100 orders a day from your current store process? How about 1,000?

Parcel Shipping Costs

If you have a small drop ship program or are a significant parcel business the change to dimensional pricing programs by the parcel carries is happening.  Dimensional size converted to a weight value is compared to the actual weight and cost of greater of the two variables.   For certain shippers the cost increase without changing technology, process, and all important packaging is ranging from 2 to 20%.

T/L and LTL Shipping Costs

Driver shortages aside, a 50-percent plunge in the price of crude oil and cheaper fuel at the pump will make these routes more cost effective.   At least in the short term this could make certain delivery routes and zone skips feasible.  How can you take advantage of this windfall?

Ocean Shipping Costs

A global over-capacity and reduction in fuel cost will continue to keep costs in line or lower. The key improvements will come in potential time savings and visibility.

Currencies and Interest Rate Fluctuations

Global currency exchanges and interest rates are rising and falling at a moment’s notice. As much as you can, keep an eye on these trends as they are taking swings with global uncertainty, potentially changing the desired Supply Network and cost structure.

Overwhelmed by the all the potential disruptions to your supply chain? We can help!

SupplyChainGroupSupplyChainGroup’s consulting focus is directly on end-to-end supply chain improvement.  Our staff works with clients performing Supply Chain Strategy, Operations & Technology Assessments, Sourcing, M & A, IT Strategy, Analysis, Design and Implementation support.  In our focus areas we bring benchmarks, best practice tools, proven methods, and deep staff experience for your projects.   We deliver great client work at very competitive rates. Contact us today!

Posted in: Supply Chain Best Practices

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