January 11, 2022
2022 Distribution Operations Outlook: Level-Setting in a Challenging Environment
This article first appeared in Modern Distribution Management (please note subscription needed), December 2021 issue. Author: Elizabeth Galentine, featuring Dave Haley, Customer Success Executive, Open Sky Group. Excerpts from the original article appear below.
“Supply chain issues will touch everything from the way salespeople spend their time and prioritize customer relationships to facility management, pricing, and labor strategy.
The effort to overcome supply chain challenges will continue to impact most elements of distributor operations in 2022. Backups will touch everything from the way salespeople spend their time and prioritize customer relationships to facility management, pricing, and labor strategy. However, after more than a year of such conditions, distributors are better equipped to deal with the disruption…
Supply shortage strategy
Rethinking service levels will help… Most distributors do not differentiate service levels between their biggest and most-profitable customers and low-growth or one-off transactional customers. Tweaking lead times, product availability, and pricing to prioritize higher-value customers can help to ease the burden on those most important accounts.
The concept of shifting service levels based on customer value has gotten lip service in the past, but 2022 is the time to make it a reality…
Facilities impact
The inventory volatility that can come with supply chain issues, along with the continued growth of e-commerce, will push the need for more warehouse space in 2022, says Dave Haley, customer success executive at supply chain software consultancy Open Sky Group. ‘The demand will be high and in limited supply,’ he says.
Rent expense is projected to rise by as much as 7% in 2022, according to Motley Fool, while at the same time CNBC reports 1 billion square feet of new warehouse space will be needed by 2025…
‘By better utilizing your current space, you can reduce or perhaps eliminate needing to acquire more square footage,’ Haley says.
On a related note, the ongoing driver shortage — estimated to be at more than 80,000 open roles, according to Fortune, is not likely to ease into 2022. To manage what they can control, Haley recommends distributors consider a transportation management system…
Talent management
On top of these operational challenges is the continuing labor shortage. According to the Bureau of Labor Statistics, there are 10.4 million open jobs in the U.S. with just 6.9 million unemployed. Forbes reports close to 500,000 open warehouse jobs, notes Haley.
To mitigate these issues, he says, distribution operators can reduce the amount of time needed to service customer orders. Three steps Haley recommends distributors take…
Meanwhile, expect a lot of back-to-basics distribution management in 2022…”
