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I recently had a conversation with the head of supply chain for
a large consumer products-related company, during which we discussed
an interesting topic – is warehousing a growth market?
It’s a great question, because it wasn’t too long ago
that there was some talk that warehouses were becoming anachronisms,
a sign of poor supply chain design, unenlightened inventory practices,
and other foibles that would be swept away in a new high velocity
logistics era.
This perspective is actually part of a continuum that started with
the concept of “warehouse” morphing into “distribution
center” – the basic principle being that goods at rest
detract from value, while goods in motion add to it. In the late
1990s, we then heard some talk about DCs being dramatically reduced
in number and size, as make-to-order supply chain models, high velocity
merge-in-transit and cross dock processes, and other techniques
would substantially reduce the need for inventory storage.
While no one really believed that warehouses would go away, there
were certainly some predictions in the trade press and conference
circuit that some dramatic changes were in store.
It doesn’t seem to be working out that way. My anecdotal evidence
does suggest that the number of warehouses companies are running
does tend to be shrinking a bit, with many building fewer, larger
facilities. This is driven by improvements in transportation lead
times, the hoped for ability to reduce inventories by having safety
stock in fewer places, and general efforts to reduce complexity
by decreasing the number of shipping points.
But as the supply chain executive pointed out, there is a counterforce
– offshoring. The significant growth of imports from China
and elsewhere has created much longer supply chains. For many, this
has resulted in increased inventory levels to compensate for increased
uncertainty – several studies have found evidence that the
move to offshoring has reduced average inventory turns across most
industries. Companies are turning from being manufacturing entities
to being design and distribution focused ones.
But now to add to the overall offshoring trend the problems with
port congestion. What does the planned response of most companies
seem to be? Bring in more goods earlier in the season to assure
service levels.
So, my executive friend’s conclusion: forget the earlier predictions
- his company’s view is that (unfortunately), warehousing
is going to be a growth area for some time.
The reality is that a couple of decades into “supply chain
management,” despite many notable successes, we have as much
inventory as we’ve ever had, and new trends are taking that
number further north. For now at least, warehouse construction companies
don’t have any need to fear their market is going away.
Is warehousing a growth market? What happened to the predictions
that warehouses would become almost unnecessary in the future?
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us know your thoughts. |
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| SUPPLY CHAIN TRIVIA |
Q. What is the percentage
split between bulk and general freight movement by tonnage in the
U.S. in 2004?
A. Click
here for the answer
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| THE EXECUTIVE VIEW |
By SCDigest Contributing Editor,
Gene Tyndall
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| Selling
Supply Chain Solutions, Not Just Products or Services
While supply chain management focuses on the processes of buying,
creating and moving the right amounts of products and services,
companies miss powerful opportunities for value creation in the
sell process.
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