We’ve heard repeatedly over the past two years about how quickly the supply chain landscape has changed, and is changing, in response to shifting consumer buying habits and recent economic forces. And the evidence keeps pouring in.
Technology is the most-cited example of the change, as retailers, brands, third-party logistics service providers (3PLs), and carriers have sought ways to keep up with accelerating e-commerce activity and increased delivery demands. Tech solutions that can help companies better manage the onslaught of orders, automate warehouse and distribution center (DC) functions, and optimize delivery routes are in high demand these days. A report published this spring by industry association MHI underlined those trends, finding that adoption of supply chain technologies is set to explode over the next five years. MHI’s Annual Industry Report, presented during the Modex 2022 show in Atlanta this past March, showed that companies are investing in and adopting new technologies at a much faster clip compared to the more measured pace seen in the years leading up to 2020, when the coronavirus pandemic hit. The report surveyed more than 1,000 supply chain professionals in late 2021 about emerging technologies, innovations, and trends in supply chain, and found that nearly 80% said the pandemic had accelerated supply chain transformation, a key driver of technology adoption and investment. According to the report, the industry will see the following technology adoption rate increases over the next five years:
- Cloud computing and storage will grow to 86% from 40%;
- Automatic identification technology will grow to 84% from 31%;
- Inventory and network optimization tools will grow to 87% from 28%;
- And robotics and automation will grow to 79% from 28%.
Investment levels will rise sharply as well. Two-thirds of respondents said they expect to spend more than $1 million on supply chain technology over the next two years alone.
Other recent research underscores the growing demand for supply chain technologies that can help manage change. Two of the biggest areas are fulfillment and delivery. An April report from London-based Interact Analysis estimates that the installment of microfulfillment centers (MFCs), for example, will grow to more than 7,000 by 2030 from less than 100 at the end of 2021, driven primarily by the grocery market. MFCs are small automated fulfillment centers located in close proximity to customers; Interact defines them as standalone facilities of less than 50,000 square feet or those that are installed in the back of a store.
Improving the customer’s delivery experience is also at the heart of the tech trend. A recent report from supply chain technology company FarEye explains how shifting consumer habits have changed supply chain and last-mile logistics strategies for good; the report emphasizes the need for retailers and brands to improve the delivery experience if they want to grow their business. Nearly 40% of the 1,000 consumers FarEye surveyed for the report said they would not give retailers another chance following a bad delivery, and 37% said they had changed their opinion of a brand after a poor delivery experience. Technologies that can provide real-time tracking and order notifications can go a long way toward improving that experience, as just one example.
Managing these trends will become even more important in the years ahead. The FarEye research showed that although pandemic-related restrictions have largely ended, consumers don’t plan to alter their newfound buying habits anytime soon. Although 30% of survey respondents said they expect to do most of their shopping in-person post-pandemic, a considerable number said they expect to continue doing more from home. Thirty-two percent of respondents said they are doing more online shopping since the spring of 2020, and 65% of online shoppers reported preferring home delivery over in-store pickup, for example.
The MHI research describes the change occurring in supply chain tech as a tipping point, in which the industry is moving from evolutionary levels of technology adoption and investment to revolutionary levels. It seems an apt description of an industry dealing with unprecedented change.
Gartner, Inc.
