Already one month into 2015 and it’s clear it will be another disruptive year for the distribution industry. Manufacturers, supply chains and retailers are scrambling for ways to improve the efficiency of moving inventory – a challenge compounded by an ever-increasing number of product lines (aka SKU proliferation).
Questions are on the minds of industry professionals about whether to switch from a DSD (Direct Store Delivery) to centralized distribution model, or a combination of both.
In terms of industry trends for 2015, you’ll hear a lot this year about SKU (Stock-keeping Units) proliferation, an aging workforce and complying with HOS (Hours of Service) mandates. Let’s take a closer look at these three big trends.
1 – SKU Proliferation
The steady growth of online purchases (led by Amazon with almost $70b of sales in 2013 alone) is showing no signs of slowing down. Aside from worrying brick-and-mortar retailers and emptying malls, it’s also creating more awareness of the expansive array of products available to consumers.
The result is customers are demanding more variety and, for the distribution industry, this increases the number of SKUs managed, raising the potential for inefficiency and waste.
New SKUs will create extra work for traditional supply chains, draining productivity and adding unwanted administration costs.
More product SKUs combined with retailers looking to trim back inventory will put pressure on route planners to develop efficient systems for handling smaller stock runs, more deliveries, more stops and an increasingly decentralized distribution network.
Effective utilization of resources, more efficient routing and taking advantage of disruptive technology (Uber and Instacart are the current go-to case studies) will help alleviate the pain for distributors wrestling with SKU proliferation.
2 – Aging workforce putting pressure on route planners
It’s not just the long-haul sector that is having difficulty replacing a workforce that is beginning to age out – distribution in general is suffering from a lack of visibility for new job-seekers.
Thinner margins are also putting the squeeze on driver pay raises while pressure to contain cost-per-mile on deliveries and increased regulatory compliance (see trend No. 3 below) is creating a more stressful work environment.
It appears even something as simple as finding a secure place to park is creating headaches for drivers.
This rapidly changing environment is driving up turnover and doing little to attract new blood to the industry, a major cause of concern for the industry, particularly as ground transport cargo volumes increase.
Employers will be focused on improving working conditions for drivers to improve retention and help mobile workers to be more efficient, using technology to automate compliance, balance workloads and navigate with less stress.
3 – HOS Mandates
The DOT seems to modify the HOS (Hours of Service) rules for commercial drivers on a fairly consistent basis, creating both confusion and uncertainty for some carriers and their drivers.
These HOS mandates are even more onerous for short-haul delivery drivers, besieged by a frenetic workday (with an average of 14 stops a day) they generally have little time for keeping HOS logbooks up-to-date.
Add to this the new ELD rules coming into effect during 2015 and the high probability of more compliance changes to come, and it’s not surprising that 2015 will be the year that a lot of fleets will be eager to adopt automated solutions to make sure drivers (and route planners) stay HOS compliant.
Distribution fleets that do switch to an electronic HOS solution (telematics) will enjoy other benefits including driving alerts, less idling and fewer OOR (Out of Route) miles.
Distribution fleets using technology to fight back
There’s no doubt 2015 will see some significant changes in the distribution industry as emerging players, aggressive behemoths and new technology comes to the forefront to meet customer demands and tight budgets. Who wins will depend on how well businesses leverage available technology to succeed.
The trends for 2015 will put pressure on traditional business models that refuse to change.
But progressive fleets are staying nimble, aided by modern route planning solutions, real-time asset utilization systems and agile dispatch tools.
These nimble distribution businesses will be key players during a time of exciting change, using innovative tools and smart planning to meet the challenging trends of 2015.