James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
When it comes to their software, a lot of warehouse and DC managers have their heads in the clouds these days. Rather than buying a traditional warehouse management system (WMS) and installing it on their corporate servers, they're opting for cloud-based applications that are hosted by the vendor or a third-party on an off-site server, often far away, and delivered via the Internet.
Much of the appeal of cloud-based solutions is their low cost. Companies can avoid a hefty upfront capital outlay for software licenses as well as ongoing expenses for upgrades and maintenance. At present, most cloud-based WMS users are small warehouses that use basic equipment like forklift trucks, bar-code scanners, and radio-frequency devices in their operations.
But what if a user wanted to trade in its forklifts and RF devices for, say, sorters, carousels, pick-to-light systems, or automated storage and retrieval systems? Would it have to rethink its choice of software? Or is it possible to use a cloud-based WMS to run a facility with sophisticated automated material handling equipment?
Not for the faint of heart
Industry experts say that while they haven't seen much activity in this area yet, it is possible to use a cloud-based WMS to manage an automated facility. "Our market is still green with respect to integrating material handling equipment in the cloud, but it can be done," says Frank Camean, president of the 4Sight Supply Chain Group, a supply chain consulting and systems integration firm.
Nonetheless, they caution that this type of project isn't for the faint of heart. Along with the usual challenges of getting an automated system up and running, a company would also have to address some issues raised by remote operation. "Fragility, security, and response time are all issues with cloud-based computing," says Steve Martyn, chief executive officer for systems integrator Glen Road Systems Inc.
In the case of a fast-paced, high-throughput warehouse operation, for example, one of the top concerns would likely be the potential for delays in communications. With a cloud-based setup, information has to travel back and forth across the Internet, making some time lag inevitable. But even a lag of a fraction of a second could be too long for tasks that require split-second timing—like the transmission of instructions from the WMS to a high-speed sortation system. "I have a certain time window to read a bar code and get that information back to the sorter," says Paul Faber, director of software and systems integration at the consulting firm Tompkins Associates.
To prevent these kinds of delays, a robust warehouse control system (WCS) is essential, the experts interviewed for this story agreed. A WCS, which would be installed at the warehouse, essentially serves as a local agent for the remote WMS, downloading information on what items need to be put away or retrieved from inventory and then converting the information into instructions for the sorters, carousels, conveyors, and so forth that carry out the tasks. Because the WCS processes the data on site, it reduces the risk of delays caused by a disruption in communications.
But one software executive cautions that a WCS alone may not be enough. Chad Collins, vice president of marketing and strategy at HighJump Software, says pilots of his company's cloud-based WMS indicated that in some cases, a special "controller unit" might be needed in addition to the WCS. The special controller would sit between the WMS and the WCS, relaying real-time information from the WMS on, say, items needed for a shipment to the on-site warehouse control system.
A matter of volume
Another consideration for a company considering a move to the cloud is transaction volume. No matter how robust a facility's WCS may be, if its transaction volume exceeds a certain level, a cloud-based WMS might not be viable because of the risk of slow response time.
"If you're in a high-volume environment, I'd be hard pressed to see someone doing this," says Camean. "Bandwidth and firewall can become a challenge."
Still, Camean says he wouldn't rule out the possibility altogether. If a company could devise a way to batch communications from the cloud-based WMS to the WCS, he says, this type of setup would work. The WMS would collect instructions regarding which products need to be picked for a shipment; the WCS would then coordinate the activities of the material handling equipment to carry out the task. "Let the WCS do everything that needs to be done and then send word back to the WMS that the actions have been [completed]," he says.
Safe and secure
Another issue that inevitably comes up with cloud computing is data security. It's not uncommon for companies to have trepidations about allowing their critical inventory information and financial records to be stored on a computer many miles away, outside the company's IT domain.
"It becomes a major concern for the customer where the data exists and how they access it," notes Jerry Koch, director of corporate marketing and product management at Intelligrated, a manufacturer of automated material handling equipment. "There needs to be a security scheme in place to provide for [protecting] the information going back and forth [between the WMS and WCS]."
That's why it's so critical to pick the right hosting vendor for the job. Camean advises companies to ask the vendor detailed questions about its data protection procedures, including its processes for data backup and recovery in the case of disaster. He adds that companies should be aware that some hosting services charge extra for data recovery.
It's all about money
Because of their complexity, these types of projects will require extensive testing and debugging before going live, the experts say. In fact, when it comes time for the pilot, they recommend bringing in all of the vendors involved—the suppliers of the WMS, the WCS, and the material handling equipment as well as the software hosting company—in addition to the warehouse's operations and IT personnel.
"Many folks need to be involved ...," says Camean. "It's not as simple as connecting the WMS to the WCS."
Given all the complexities, it seems fair to ask why any company would consider using a cloud-based WMS to manage a highly automated facility. According to the experts, the decision to go with a cloud solution would likely be based on IT-related factors, not by warehousing or distribution considerations. In other words, companies would take this route to avoid having to invest in hardware and software, and more importantly perhaps, to avoid having to maintain an in-house IT support staff.
"The software provider is managing the technology on your behalf so you don't have to develop this IT expertise," says Collins of Highjump. "Limited IT resources would be the driver [for adopting a cloud WMS]," adds Camean. "You could save a ton on labor and maintenance."
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
The clean energy transition continuing to sweep the globe will give companies in every sector the choice to either be disrupted or to capitalize on new opportunities, a sustainability expert from Deloitte said in a session today at a conference in Orlando held by the enterprise resource planning (ERP) firm IFS.
While corporate chief sustainability officers (CSOs) are likely already tracking those impacts, the truth is that they will actually affect every aspect of operations regardless of people’s role in a business, said John O’Brien, managing director of Deloitte’s sustainability and climate practice.
For example, regulatory requirements on carbon emissions are expanding in every region, which means that even if a specific company doesn’t have to change its own practices, it will almost definitely need to flex to accommodate its partners and suppliers as they track scope 3 emissions or supply chain practices.
Likewise, companies are starting to challenge the classic concept of “force majeure” events than can cancel service providers’ contractual duties due to unforeseeable weather events. As the new argument goes, extreme weather patterns increasingly occur in accordance with climate scientists’ forecasts, so those hurricanes and wildfires are in fact foreseeable after all.
But one strategy for coping with the cost of those changes is to mine the power of the data that most companies will soon need to collect as part of their evolution. Instead of simply tracking its trucks to trim their routes and emissions, a transportation company could use the same data to manage their maintenance and fuel consumption.
“The climate management transition is going to be a massive disruption, but with that comes massive opportunity,” O’Brien said from the keynote stage at the “IFS Unleashed” show. “Don’t waste compliance efforts just on compliance, use it to create new value. You’re collecting all that new data, so use it!”
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.