Recently, inventory management has been through a lot of changes. The inventory software market has been booming, with more companies switching to an inventory application instead of continuing with traditional and unreliable tools like spreadsheets. Credit for this largely goes to the increasing demand for products and the growth in the e-commerce industry, which is expected to reach $4 trillion by the end of 2020. Companies are investing in modern techniques for inventory management—not only to tap into this growth, but also to make the process more efficient and maximize their returns on investment.
However, this trend of modernization is just the start. According to research done by Globalnewswire, the inventory software market is expected to grow beyond $3 billion by the year 2024, with cloud-based software expected to have a market share of 35%.
Along with investing in inventory software, companies are constantly looking for ways to streamline and improve their warehousing operations. Some methods they're using include:
Getting help from AMRs (Autonomous Mobile Robots)
Using 3PL and distributed inventory management to reach wider geographical areas
Implementing AI, IoT, and blockchain technology to create an intelligent and cohesive information structure
Let's analyze this and better understand the major trends to watch for in the supply chain industry for 2020.
Using AGVs and AMRs in warehouses
More and more, customers expect to receive their deliveries in the shortest amount of time possible. In response, companies are looking for ways to automate the order fulfillment process and reduce picking and delivery time. One of the most pioneering techniques for modernizing warehouse operations is using Automated Guided Vehicles (AGVs) and Automated Mobile Robots (AMRs). AGVs have been used for some time and have helped organizations with big warehouses collect items from pallets and decks. AMRs are a more advanced version of AGVs and don't rely on a fixed route to navigate across the warehouse. They have sensors and cameras, so once the warehouse map is fed into their system, they can navigate on their own without being dependent on a human operator.
The main purpose of these robots is to reduce the time it takes to look for warehouse items. Staff can be delegated to other tasks, and orders can be fulfilled much faster. As icing on a cake, using robots like AMRs has become relatively easy for companies because it requires no additional investment on infrastructure. There's no need to set up magnets or wires to guide the robot's movement because the sensors take care of it. It's expected that more than 50,000 warehouses will install close to 4 million robots by 2025.
Distributed inventory management
After years of running business with a centralized inventory process, sellers have realized that distributing products across multiple warehouses expedites delivery and is better suited for today's high-demand e-commerce market. Customer satisfaction is highly dependent on accurate and fast delivery times. With 63% of online shoppers expecting a three-day delivery as a standard, companies are pressured to find new ways to reach their customers quickly. Distributed inventory not only works wonders for this, but it also helps sellers reduce transportation costs as goods are dispatched from the warehouse that is closest to the customer.
With the distributed inventory technique, the logistics manager can locate the areas where most of orders get channelled from and set up distribution centers in those areas. A Sacremento-based start-up that previously spent $10 to send an order to Philadelphia can greatly reduce shipping costs if they fulfill the same order from a warehouse near Philadelphia.
ArtificiaI Intelligence (AI) and the Internet of Things (IoT)
AI and IoT have been trending in the technological realm for a long time now. Many industries have already started implementing AI technologies in their daily processes. According to a 2017 retail vision study done by Zebra Technologies, it's expected that 70% of retail stores will be integrated with IoT and AI by 2021.
AI and IoT together are a great combination to synchronize data generated by different systems, analyze it, and extract significant insights. In regards to inventory management, AI and IoT is used specifically in warehouses.
With the help of IoT, data generated by AMRs, handheld devices, scanners, and even employee smartwatches can be collected in a common database. Managers can then get access to the combined data easily without having to look at multiple applications. Rack scanners will give them real-time updates about item locations, package sensors send information about a product's status even while it's in transit, smartwatches will alert managers in case of a mishap or health scare, and the activity of AMRs can be tracked on a daily basis.
After this data is collected, AI steps in by churning the data and giving valuable insights on what can be improved and how. Continuing our previous example, AI can identify trends in how many orders are received during the holiday season to give strong estimates on what to expect in the next year.
Blockchain to the rescue
When discussing future technological advancements and trends, the list would be incomplete without blockchain. Since its conception, many companies and industries have implemented blockchain technology, and many more are willing to follow suit. The supply chain industry is expected to witness a huge infusion of blockchain technology soon.
What is blockchain exactly? In simple words, it's blocks of information chained together in a public database. This technology creates a distributed public ledger of information that can be accessed by parties who are connected based on a common protocol. The idea is to give permission directly to the peers who need access to each other's data without requiring a third party to audit the information. This is beneficial for the supply chain industry.
The inventory management process is very long, and it involves many users and intermediaries, especially for manufacturers and enterprises. These companies have multiple suppliers, shippers, subsidiaries, partners, 3PL integrations, etc. As such, it's challenging for them to get access to data produced by different parties so they can understand what to expect in the near future. This causes planning to fall behind and production to suffer. With blockchain, manufacturers and intermediaries can be connected and access each other's data.
If a cement manufacturer wants to procure a large consignment of raw materials, they can access the distributed ledger that contains distributor sales trends. This will give them a good idea about how much to buy so they aren't holding too much or too little inventory. This reduces carrying costs, which typically range from 20 to 30% of total inventory costs.
The expected rise in 3PL integrations
We've already discussed the growth of distributed inventory. Third Party Logistics, or 3PL, is similar. In this case, the warehousing and distribution activity is outsourced to a third party. The company can choose whether to only outsource storage operations or to have a third party handle the entire logistical process, including packaging and shipping. 3PL allows small and medium-sized companies to reach a larger set of customers without incurring the costs of infrastructure development.
In 2020, the 3PL market is forecasted to grow as high as 15%. With the development of modern technologies like IoT and AI, businesses can stay connected even if they're situated apart. All of this is also supported by the massive expansion opportunities of emerging markets across the globe. This will push entrepreneurs to look for 3PL providers and widen the reach of their business.
Businesses have drastically changed the way they manage their inventory today. Using an application is just the start. Companies are now constantly looking for more ways to increase connectivity, transparency, and predictability in their business. Modern technologies like AI, IoT, and blockchain will bring subsidiaries and agents together in a cohesive virtual environment, cutting costs and ensuring better customer service.
The rise of distributed inventory practices and easy 3PL integrations has further safeguarded companies from the increasing cost of carrying inventory in their warehouses and storage units. Small and medium-sized companies who previously couldn't afford to build warehouses in multiple locations are flocking to these solutions so they reach international customers.
With so much going on in the inventory management and supply chain industry as a whole, there is one thing that is undeniably true: 2020 will be a major milestone in this transformational journey.