Connections for Success



Sunny Outlook for Distributors
Brandon W. Vahl

The U.S. warehousing and distribution industry is about to become faster, bigger and leaner, according to a 2013 survey by the telecommunications consulting firm Motorola Solutions.

Upbeat Findings

After years of financial restraint, many warehouse information technology and operations professionals are optimistic about the industry’s outlook and intend to loosen their purse strings on spending over the next five years. The 2013 Warehouse Vision Report found that:

  • 35% plan to add new locations;
  • 38% anticipate expanding their existing warehouses and distribution centers;
  • 45% expect to hire more employees; and
  • 54% intend to increase order volumes and the number of SKUs.

The survey concludes that “[A]s the global economy continues to recover, the warehousing industry — after a period of marking time while under intense pressure to reduce inventory levels to free up capital — is now in the position of having to quickly keep pace with today’s increased fulfillment demands.”

These comments were echoed by the Institute for Supply Management (ISM).  A recent report by the ISM noted the gauge of factory activity rose to 53.7 in March indicating the nation’s manufacturing sector picked up modestly. A reading above 50 indicates general expansion.

Improved Inventory Tracking

Many distributors are decidedly low-tech when it comes to inventory management and other day-to-day operations. In fact, more than 40% of warehouses still track inventory using hand tallies. But that is expected to change over the next five years.

Nearly two-thirds of survey participants plan to equip employees with mobile devices that sync with networked warehouse management systems. And more than 80% expect to transition to bar-coded inventory tracking systems. This transition will improve workplace efficiency and internal controls in preventing inventory misstatement and fraud. It will also lead to more accurate and timely financial statements which drive decisions by management.

Streamlined Training

Adaptable, interdisciplinary employees are the key to implementing these new technologies and responding faster to customer demands. However, employee training programs can be expensive. Some distributors are reluctant to invest in training because turnover among warehouse employees has traditionally been high. Despite plans to become more tech-savvy, respondents seek to reduce employee-training time by an average of 44% over the next five years.

Distributors that invest in new technologies, only to skimp on subsequent employee training, could be making a costly mistake. A skilled, dedicated and agile workforce can be one of your most valuable assets — and, if properly cultivated, can become a competitive advantage.

Staying Grounded

The U.S. economy is improving, albeit slowly. You are not alone if you plan to add or expand facilities, automate inventory tracking or hire more workers in 2014 and beyond. But it is vital to avoid getting swept up in the constant barrage of media hype and becoming overly optimistic. A financial professional can help you create realistic capital and operating budgets. In turn, these budgets can help attract lenders to finance your expansion plans.

If you have questions or would like to discuss your current and planned inventory management upgrades, please contact Brandon Vahl at [email protected] or call him at 312.670.7444.

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Forward Thinking