For decades, the business of warehousing was a relatively simple one. Companies simply put massive amounts of inventory under one roof and shipped products out over somewhat long periods of time on an as-needed basis. However, the advent of modern technologies including warehouse management systems, the rise of e-commerce and changing consumer demands for shipping have all come together to create new needs within the field.
For some time now, the ratio of inventory to sales has been on the decline, with government data indicating it either fell or stayed flat from one month to the next since last September, according to Logistics Management. This is largely due to logistics companies shipping more today than they ever have before. Therefore, they will likely continue to see inventory-to-sales ratios decline as time goes on.
"Looking ahead, the most recent positive sign for truck tonnage is the large drop in the inventory-to-sales ratio," American Trucking Associations chief economist Bob Costello told the site. "These decreases put inventories throughout the supply chain, relative to sales, to the lowest level in two years. There's no doubt that the inventory glut was a drag on truck freight volumes last year."
However, because of this trend, the majority of companies in the field also say they now think they have more inventory than they need on hand. A Logistics Management poll found nearly 4 in 5 of those businesses believe that their inventory issues have been around for at least a year. Only 6.8 percent said they've been dealing with oversized inventories for less than six months.
Keeping this in mind, more companies are starting to invest in WMS and other technologies that give them greater power to examine their inventory throughout the supply chain, Capgemini VP and leader of supply chain technology practice Cyndi Fulk Lago said in an interview with Logistics Management. This trend is useful because it potentially helps companies identify weaknesses in their supply chains that pile up over time and create greater ongoing issues. In addition, proper planning can also aid firms in anticipating surges in demand for certain products, and address those needs accordingly ahead of time.
Why investment is important now
With so many companies now devoting significant resources toward obtaining the latest warehouse management technology and putting it into practice, any logistics firm that dawdles over such a decision is likely to fall behind. According to Statistics Market Research Consulting, global investment into connected logistics is expected to hit $54.8 billion by 2022. Last year, that number was just $9.72 billion. That means an average annual growth rate for such investments of more than 33 percent, coming across a number of categories such as individual sensors (including RFID tags), IoT devices, mobile technology and so on.
Logistics executives must carefully assess what their needs are now, and potentially will be in the future, so that they can put their best foot forward when it comes time to invest. This prudence can provide a greater return on their investment and help them keep pace with a rapidly evolving industry.