Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
Warehouses across the U.S. are filled to the rafters, and another wave of imports is coming soon as retailers stock up for the holiday peak season. That puts most companies in a pinch as they look for ways to deal with the extra inventory.
Conventional wisdom says that retailers can simply move their goods from expensive coastal distribution centers to cheaper rural locations or ship them directly to brick-and-mortar stores, “forward positioning” the inventory closer to consumers. But nothing comes for free in logistics; in practice, every option comes with its own costs and challenges.
For example, warehouse space is hard to find anywhere right now, thanks to soaring demand during the pandemic rebound. And even if you can find space, good luck paying for the truck to get your goods there; freight costs are higher than ever, thanks to rising fuel costs and tight capacity.
The conflict is real. A survey released in June by the shipping and mailing services provider Pitney Bowes showed that big retailers are now offering widespread discounts to shoppers as a way to draw down their inventory. “This summer will present both new challenges and new opportunities for brands,” Vijay Ramachandran, VP market strategy, global e-commerce at Pitney Bowes, said in a release announcing the survey’s findings. “Overstocks and markdowns will impact profitability but also create new openings to sell, as a large portion of consumers seek out deals—further aided by the return of [Amazon’s] Prime Day and other mid-year promotions. At the same time, our survey found a growing number of consumers cutting back on retail spending altogether as they react to record inflation and gas prices, and rising interest rates.”
Caught in a vise between rising stocks and slowing consumption, companies have to be more precise than ever in balancing the costs and benefits of carrying inventory, says Steve Denton, CEO of Ware2Go, a third-party fulfillment services provider that is owned by UPS Inc.
Waiting out the storm is not an attractive option, either. “The cost of storage is higher than [it was] a couple years ago because of the lack of warehouse space,” Denton says. “That means the margin evaporates if you carry [inventory] too long.”
FINDING NEW MARKETS
As for how companies can clear out some of that overstock, Denton urges them to explore new sales channels beyond the classic options of direct to store (DTS) and direct to consumer (DTC). For many merchants, an easy option is to liquidate their goods by selling them on a secondary market—such as Overstock.com or T.J.Maxx—or to sell them to the giant online retailer Amazon.
However, Denton points out that even those options carry some costs, such as the extra labeling compliance costs required of “Amazon 1P”—or first-party—partners (meaning companies that sell their products directly to Amazon, which then sells them to consumers). Choosing the “Amazon 3P”—or third-party—option could cost even more, since only the digital sale itself occurs on the Amazon marketplace in that model, leaving merchants to take care of order fulfillment and shipping themselves.
As companies fight their way through the thicket of rising inventory management costs, many are turning to a middle ground between the in-store and online models, using their stores as small DCs. That’s where software analytics has become an important tool for balancing the strengths and weaknesses of the purely warehouse and retail sites, says Amy Tennent, senior director for product management at Manhattan Associates, a supply chain software developer.
As Tennent explains, the “simple” decision to forward-deploy goods to a retail store actually represents a potential minefield. In theory, stockpiling goods at stores should shrink a retailer’s shipping costs by enabling practices like “buy online/pick up in store” (BOPIS) or minimizing shipping distances for items sent to consumers, she says. In pursuit of that goal, some companies create “mini fulfillment hubs” within some of their retail sites, then task their store employees with picking and packing orders for home delivery.
However, that strategy may have drawbacks because managers at each location must decide how much store labor to devote to e-commerce fulfillment work, as opposed to serving customers in the showroom, says Tennent. Make the wrong choice, and parcel shipments could be backlogged for days, or impatient customers could walk out of the store. “You need to identify specific labor assigned to the job, otherwise your store team will have to [fulfill online orders] while also serving customers,” Tennent says. “If they get only two or three orders a shift, then store associates can do it just fine. But if it’s 50, 100, or 150 [orders], then they need the right tools in place: pick-path optimization, batch picking, prioritizing orders, sorting and staging the products after picking, and a packing station.”
Generally speaking, the retailers most likely to benefit from forward-deployment strategies are those that are able to assign committed resources to the task, Tennent says. Ideally, that would mean deploying a dedicated labor force for every shift, using cloud-based software like supply chain management and warehouse management systems to balance all the variables.
JUMPING IN WITH BOTH FEET
When it comes to inventory-balancing technology, retailers have other tools at their disposal as well. Another type of software for the job is an order management system (OMS), a critical tool for coping with overstocks in any location, says Carson Krieg, industry solutions + strategy, last mile, at project44, a provider of freight data and supply chain visibility solutions.
Typically, the best results come when a retailer has both OMS software and a limited number of stock-keeping units (SKUs), he says. That combination allows companies to choose the most efficient option. Three common choices are: 1) to deploy inventory to multiple microfulfillment centers (MFCs) that are dedicated to shipping orders; 2) to rent short-term shared warehouse space through a marketplace like Flexe,Flowspace, or Stord; or 3) to use their own brick-and-mortar locations in the local market and implement a ship-from-store strategy.
But of course, not every company is able to take full advantage of those options; many lack the necessary software or have an extensive product catalog. “If the retailer has a [large] number of SKUs, it may not benefit [it] to implement an MFC strategy due to the storage costs in local markets. It will depend on the maturity of [the retailers’] pick, pack, and ship processes and their cost to stock additional forward inventory,” Krieg says.
When it comes to clearing out their overstocked warehouses and reining in their storage costs, companies today have more choices than ever before. Among other options, they can ease the pressure by turning to liquidation websites, Amazon partnerships, shared warehouse space, and hybrid retail/DC facilities.
Choosing among those options may not be easy, but with the right logistics partners and finely tuned software, warehouse leaders can realistically assess the costs and benefits of every choice. No option offers a silver bullet, but experts say that strategies abound for managing the nation’s inventory glut.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.