– Supply Chain Insight –
The Future of Macro-Fulfillment
Before we get into the future of macro-fulfillment, let’s first discuss micro-fulfillment.
Even before the pandemic was in full swing, wreaking havoc on even the most efficient and agile distribution environments, micro-fulfillment (the concept of utilizing small, typically highly automated distribution facilities situated relatively close to the end consumer) was at the top of everyone’s minds and on every supply chain executive’s radar.
24 months later, as we all recover from one of the most globally disruptive events in recent history, if you didn’t have some sort of e-commerce strategy, you do now.
In fact, although e-commerce (an order profile that would usually fall under the micro-fulfillment umbrella) spending is expected to stabilize in 2022, it’s estimated that online sales grew 50% since the beginning of the pandemic in Q1 of 2020.
Of course, e-commerce has been growing steadily year-over-year since Amazon popularized the business model back in 1995, but the pandemic advanced this growth by at least half a decade, pushing micro-fulfillment from a strategy reserved for the best-in-class to a must-have strategy employed by any company looking to stay in business.
Let’s take a step back, though.
While micro-fulfillment highlights the future of distribution, macro-fulfillment (in reference to larger, more conventional-style distribution centers that you see lining the roads of every industrial park in North America) is not going away. The reality is that while the attention is mostly now drawn to fully automated micro-fulfillment solutions such as Hive from Ocado, macro-fulfillment is the lifeblood of your distribution network and will remain so for years to come. They will continue to be responsible for consolidating, holding, and distributing goods to both end consumers and micro-fulfillment operations.
I can’t speak for every operator, executive or industry but I am going to give you my story and my option, from a supply chain executive with 25 years of leadership experience spanning multiple industries and business sectors.
I’m going to explain not only what I believe the future of macro-fulfillment to be, but also the current state of macro-fulfillment done right. All of the strategies and technology that I discuss in this article are fully available, but they do require the right skill set and they do require motivation to look outside of the status quo, something that’s a lot harder to do than it sounds, especially when nothing seems to be going wrong.
When I think of the future of macro-fulfillment, one of the things I think about is the storied history of manufacturing. It may sound odd to say, but the history of manufacturing can teach us all a lot about where we are today in macro-fulfillment and in what direction we should be headed.
For the historians out there, you can look back to the Ford assembly line, which was still highly manual but ground-breaking for its time. If you want a more recent example, you can look at the introduction of the Toyota Production System in the mid 1970’s. We’re not just talking about robotics and automating manual – repetitious – processes, we’re talking about the beginning of the continuous improvement revolution.
If you look back on where production lines were nearly half a century ago when mechanization and automation was rampant, it’s fair to say that continuous improvement and the rise in technology advancement has been inherently tied together in the manufacturing sector. It all starts with standardization. It continues with mechanization and, ultimately, it ends with automation.
With automation being adopted at a very high pace in many leading distribution operations across North America and the world, it might be easy to dismiss the importance of the same continuous improvement principles that preceded the technology adoption in most production plants years ago.
With continuous improvement in mind, if I were to sum up the future of macro-fulfillment, at least in my distribution operations, I’d consolidate them into these four points:
1. Data-driven decision-making
For me, all decisions begin and end with data. And they should for you too. Whether I’m putting together multiple concepts for a new distribution center in the pipeline, in the process of activating said facility or even maintaining a high-productivity level in operations that have been live for years, I don’t consider assumptions, and I don’t just rely on experience – although it would be easy to do just that.
Utilizing data doesn’t replace experience, it enhances it. Would you say you’re fully utilizing all your WMS and LMS data today? Probably not. I know I wasn’t.
Don’t get me wrong, I’m not talking about the manual analysis of spreadsheet exports. I’m talking about utilizing an optimization system on top of your existing management systems. Optimization systems take the data that your operation is generating each and every day and they turn it into clear actionable insights and recommendations that inform near every important decision that is made within the 4 walls of my distribution operations – whether it’s informing my IC team on day-to-day slotting decisions or allowing me to look into what my material handling requirements would be if my company hits all of its growth targets for the next 3 years.
If this data was readily available, would you use it to inform and back up your decisions? I thought so.
2. Technology Adoption
Whether it’s the optimization systems I just referenced, automated pick modules, or storage and retrieval cranes, being a relatively early adopter of technology will help you stay ahead of the pack. You don’t always need to trailblaze – and in many cases, you won’t need to – but if you fall behind the technology curve, it’s hard to make it up. With that said, make sure you’re prepared and not investing blindly. Not all operations are candidates for robotics and automated modules. My rule of thumb has always been to maximize what I have before investing in new technology but always moving forward to that goal. If you become complacent or too comfortable in the status quo, it will hurt you eventually.
3. Effective change management
Whether you’re following a data-driven approach, or implementing new processes / technology, you’re going to need an effective change management strategy. If you have data that no one knows how to read or technology that no one knows how to use, you’re not going to be any better off. On top of that, if there is any resistance to change or your method of continuous improvement – or lack of ownership / accountability – you will not be able to maximize your return, or your initiatives may fail completely.
As a leader, it’s important to understand that, in the face of operational change, the roles and responsibilities for those you manage/lead will more than likely change. Some of your managers / supervisors will be called upon to be subject matter experts, and your associates will be relied upon to be focus on the detection and prevention of ineffective practices and processes. Your personnel will be asked to rely less on experience and gut-feeling and become more analytical, focusing more on value-added processes and tasks as opposed to the more manual and monotonous ones.
For those who run larger networks, standardization will also become key, whether it’s in reference to practices and processes or the performance metrics by which your personnel is held accountable.
4. Advanced Performance Tracking
That brings me to my final point. Again, my list is far from exhaustive. It should be thought of as an introduction if anything.
When it comes to performance tracking, it’s not enough to standardize your reports and metrics. You have to really place emphasis on your most important leading indicators of success. For me, I always make sure my cost-per-case and my overtime % is front and center each and every day. Restricted by your weekly payroll process? Improvise. Educated estimates and assumptions are not the same thing, especially if they’re built on real data. Also, don’t just rely on data to help you be reactive. Use it so that you can be reactive. Instead of just scheduling your personnel once per week, plan your shifts daily. I don’t know about you, but my resource requirements shift daily, sometimes by quite a bit. Weekly shift scheduling is a thing of the past.
So, if you’re reading this now and wondering what your next steps should be in preparing for the future of macro-fulfillment, consider the following:
1. Figure out what is within your reach
Like I mentioned, automation is a great way to increase efficiency, but it’s not the only way. Maximize what you have first but also don’t become too comfortable in your status quo. As the popular saying goes, if you’re not growing, you’re dying.
Leverage data and analytics, grow each and every day through small but sustained gains and you’ll find that it pays off in the end.
2. Ensure change is managed properly
As you change your operation, the roles and responsibilities of those you manage will change as well. Ensure that you’re empowering the right personnel and providing adequate training (and perhaps incentives) to the rest. The status quo must be challenged each and every day, at all levels.
3. Stay ahead of the curve
Embrace technology but don’t go in over your head. You don’t need to be a trailblazer to strive, but you do need to improve continuously. When you fall behind in your adoption of common technology, it’s hard to recover. Small improvements are much easier to sustain than bigger leaps. Also, whether it’s technology or a newly implemented process, be proactive when it comes to training. Always make sure your team has a fully stocked toolbox and always make sure they are utilizing every bit of it.
4. Track & document your success
When you’re chasing improvement at all levels of your operation, it’s important to track your success. Bring the most important metrics front and center. Don’t settle for lagging reports that just put you further behind. Be transparent. Make sure your people know what you want and what you definition of success is. You set the direction and they carry it out. It requires teamwork. You should expect success and you should always reward it.
If you’re serious about taking those next steps to becoming best-in-class, and preparing yourself for the future of macro-fulfillment I’d recommend looking at a Strategic Opportunity Assessment from Syncontext, as it will point you in the right direction not just in terms of where you opportunity for improvement is, but what to do about it.
Thanks for reading!