This article reviews the main social and technological trends that will shape future warehouses, analyzes their impact, and presents a vision of how the industry can provide speed and agility to support the anticipated demand of the market in 2030, and develop urban distribution centers beyond local areas.
Manufacturing goods through the supply chain ultimately requires cooperation with consumers. Consumers not only promote demand but also set delivery expectations. Therefore, when we consider the warehouse of the future, it is valuable to quickly review the macro changes that have occurred in society. The following are the main trends:
| Population Aging
In the next few years, the global population structure will change due to increased life expectancy, declining fertility rates, and higher education levels. It is estimated that in the next 25 years, the population over 65 will double, reaching 13% of the global population. This will affect global productivity, personal savings, and labor. It will also change consumption and consumer behavior on a global scale, affecting production, logistics, warehousing, and retail.
| Middle-class expansion
The global middle class is expected to more than double between 2009 and 2030, from less than 2 billion to nearly 5 billion. By then, the middle class will account for 60% of the world’s population (ESPAS, 2015, p. 19). Although the poor population still lags behind developed countries in the past, they will have more purchasing power and access to information and communication technologies, and enjoy greater mobility (ESPAS, 2015, p. 20).
| Urbanization
By 2045, the population of urbanized cities is expected to exceed 6 billion. In 2015, 54% of the world’s population lived in cities; by 2050, this will reach 66%. It is predicted that by 2030, there will be 41 megacities with a population of more than 10 million in the world. These developments will affect the production and consumption of commodities.
| Sharing Economy
The growth of Uber, Airbnb, and TaskRabbit are examples of the rapid rise of the sharing economy. PricewaterhouseCoopers (PwC) stated that by 2025, the five key sharing industries of travel, car sharing, finance, personnel, and music/video are likely to generate US$335 billion in global revenue (PwC, 2015). This concept has been extended to the construction industry, and sharing will eventually enter the logistics industry with its heavy assets and infrastructure.
| Globalization and Deglobalization
The increasing movement of goods, capital, and workers across national borders. Nowadays, it is common for companies to develop products in the United States, produce products in China, and sell products in Europe or Africa. Some experts also pointed out that the value created by global data and communication flows is often referred to as Globalization 2.0. McKinsey believes that “data flows to support the flow of goods, services, finance, and people. In fact, all types of cross-border transactions now have digital components.
While globalization continues to advance, the anti-globalization movement is also emerging similar to nationalism, and local demand for purchasing products, especially food, is increasing. This kind of non-globalization has affected the decision-making of consumers in some markets.
| Increased connectivity
The increasingly close connection between people and information is creating greater transparency, better information provision, more critical thinking, and more creative and dynamic individuals. It is assumed that pressure to increase accountability and transparency at different governance levels (and within the industry) will increase.
| Changes in the workforce
With the global population growth in developing countries and the aging population in developed countries, the international population pattern is changing. It is predicted that the change in the working-age population is mainly driven by the high fertility rate, and the explosive growth of the labor force in developing countries will approach 1 billion people. The opposite trend is expected in the most developed economies, and the working-age population will decline in the future (Rand, 2015, p. 15).
In the short term, this increases the emphasis on ergonomics and other factors that increase worker satisfaction in developed countries where the labor force is shrinking. In the long run, China and India may gain importance, while Europe may lose the traction of global governance and economics (Rand, 2015, p. 16).
The supply chain is being affected by some trends brought about by broader changes in society and technological advancement. These include:
E-commerce One of the biggest trends that have caused major damage to the supply chain is the continued growth of e-commerce. In Europe, the average share of e-commerce in retail was 7% in 2015, 8% in 2016, and is expected to reach 8.8% in 2017. Globally, retail e-commerce is expected to increase to 14.6% of total retail sales, and the market size will exceed US$4 trillion (eMarketer, 2016).
E-commerce continues to grow rapidly, partly because of the shortened time between order and delivery. In the early stages of its development, consumers usually wait a week or more to receive an order. Although this may still be the case in certain professional categories, major e-commerce players now typically offer two-day deliveries for many orders, and deliveries the next day or even the same day are becoming more common.
This has created higher expectations among consumers. As e-commerce expands to new categories such as food, delivery time continues to be compressed, and e-retailers are exploring multiple options to consistently achieve the next or the same day delivery.
| Anticipated Logistics
Forecasting logistics is a process that predicts which logistics services will be needed in the future and which areas will be needed. The area where expected logistics has developed is expected transportation. This allows online retailers to predict orders before they occur based on previous customer behavior data. This information is then used to ship or move the goods closer to the location of potential customers for faster delivery. In the future, we will see the expected logistics to extend to the entire value chain.
| Customer-centric production/batch
In the future, customers will increasingly become production centers. The result may be more localized production because customers don’t want to wait for their personalized products. The trend of 3D printing will promote the personalization and localization of production. Adidas Speed Factory in Germany, which allows customers to customize shoes, is an early example of this trend. (Adidas Group 2015).
The impact on warehousing and logistics is significant: these customized shoes have never been to a warehouse; they are shipped directly from the factory to customers, reducing the need for warehouse space.
This is the logistics needed to support the growth of personalized production. Even if we have not reached the stage where “batch single piece” production is feasible for most products, as this trend develops, the company may push production closer to the customer and focus on the next step of production. Moreover, we are likely to push production to a closer position.
| Omni-channel logistics
Consumers are already using multiple channels for shopping. They start and end their buying journey at different points, and expect a lot of information, a certain delivery speed, and a personalized experience. This creates opportunities for retailers to merge different channels and optimize the entire journey for customers, rather than optimizing individual channels (DHL Trend Research, 2015). From a retailer’s point of view, omnichannel logistics can increase customer base and loyalty, while increasing profitability. Shoppers who use multiple channels to shop spend 15-30% more than traditional shoppers.
By 2030, customers’ omnichannel shopping will be further improved, and the channels may be more diverse than they are now. Home delivery is currently the most popular delivery method, and nearly 70% of online shoppers use it. However, about 50% of people have tried online shopping and shopping in stores.
A 2017 survey by PricewaterhouseCoopers (PwC) showed that 33% of shoppers are willing to pick up on the roadside, and 28% of consumers are willing to pick up from a third party. These modes are often referred to as “click and collect”, and experts assume that these modes will grow even more (PwC, 2017). As stated in the DHL 2015 Trend Report:
Looking to the future, we expect to see that the physical assets of the logistics network can be virtualized and managed more dynamically to meet customer needs. It is expected that there will be more focus.
| Same day delivery (faster delivery)
As mentioned earlier, e-commerce continues to grow by shaping and meeting consumer expectations for faster delivery. The next frontier is the same day delivery. According to DHL’s 2017 Trend Research; “Shared Economy Logistics Report,” 41% of American consumers use plans that provide same-day, fast, or on-demand delivery services.
Other studies have shown that 20% to 25% of consumers will spend more money to buy goods on the same day. These high-quality products will cost as much as 3 Euros, 20 RMB and 3 US dollars, depending on the region. Assuming that customers must pay the full cost of such fast delivery, only about 2% of customers are willing to pay extra. McKinsey experts predict that “by 2020, the market share of same-day and immediate delivery may reach 15% of the market” (McKinsey, 2016, p. 9)
Emerging technologies will play an important role in shaping the warehouse of the future and supporting faster delivery. The main technological developments that will appear include:
| Drone
Leading companies such as Amazon and DHL are actively exploring the potential of drones and applying for patents for the use of drones in logistics. Amazon has applied for a patent for an airship that can launch drones over large cities. At the same time, many people have seen the problem of thousands of drones flying over a city. These include traffic jams, noise, and sky obstruction. In terms of energy, flying is the least efficient means of transportation.
By 2030, drones should play a role in the supply chain, although legislation may delay the application of drones. The greatest potential may be that in non-urban areas, drones will satisfy consumers to get the same high speed, that is, 2 hours of delivery, which is possible in cities.
In addition, large drones may play a role in connecting cities and even conducting long-distance cargo flights. In cities, drones can play a role in ultra-high-speed or short-distance delivery. The proportion of packages delivered by drones in 2030 is still uncertain, but any future delivery solutions should be designed to interact with drones.
| 3D printing
3D printing will significantly change the way many products enter the market. The most common 3D printing application today is small plastic parts. This is still a slow and expensive process, and as the technology matures, it should become cheaper and faster. In addition, more advanced machines that can print complex parts of multiple materials, such as printing metal, will appear. There are even companies that create machines to make 3D printed food. By 2030, we may see three levels of 3D printing:
- Some consumers will have cheap, easy-to-use 3D printers that allow them to print small plastic parts based on licensed 3D models purchased online. This will apply to replacement parts for household appliances, plastic casings for mobile phones or children’s toys.
- For consumers who do not know much about technology, or larger and more complex parts, there will be “print shops” in cities. Consumers can send their digital designs to print, or they can order products online and print them on demand. Ideally, these print shops will be integrated in urban distribution centers.
- Complex industrial applications using multiple materials (including metals) will be supported by complex 3D printers in manufacturing or service centers.
| Autonomous Vehicle
Autonomous guided vehicles (AGV) have been used in warehouses for 30 years. In the next 10 years, the use of warehouse AGVs will increase exponentially. There are several driving factors behind this trend.
First, there is an increasing demand for storage flexibility. Changes in processes, product ranges or distribution channels all affect warehouse requirements. The traditional bolt-type automated conveying system cannot adapt to these changes. AGV provides the required flexibility.
Another driving factor is the simultaneous reduction in the cost and performance of AGVs, as core components increasingly support consumer products such as robotic vacuum cleaners and automatic lawnmowers. The economies of scale of consumer goods are greater than warehouse technology and can reduce the cost of basic technologies such as sensors and navigation systems used by AGVs. Technologies that support autonomous vehicles will have a similar impact.
While early AGVs still relied on fixed infrastructure (such as reflectors, floor markings, or tags), this technology now allows AGVs to navigate with the aid of on-board radar and camera systems. Smart software and self-learning functions can interpret the images and instruct the vehicle where to go. This allows the system to be plug-and-play, and therefore easy to deploy and flexible.
Replacing a large conveyor system with a flexible AGV may require hundreds or thousands of small AGVs to operate together. This was impossible in the past, but today, of course, in 2030, the combination of peer-to-peer communications, faster wireless networks, and cloud-based processing capabilities has achieved coordinated operation. As technology advances, advances in sensors and electronics will enable AGVs to move faster, even when interacting with people.
| Mobile Robot
In this case, the mobile robot is a robot placed on top of an AGV. This allows the robot to drive through the warehouse to the location where the product is stored and retrieve the goods. In order to work effectively, these robots require powerful navigation, vision systems, and multi-functional grippers. A certain degree of artificial intelligence is also required to handle almost all categories of products, shelf configurations, and product placement. All these supporting technologies are developing rapidly.
| IoT Connect
As more sensors are installed in machines and processes, there is an opportunity to connect groups of machines or entire facilities to IoT networks to provide visibility into product movement and enable functional maintenance such as prediction. Industrial IoT networks will soon become an important part of efficient warehouse management because they provide the connections and data that smart warehouses rely on.
| Big Data
Big data initiatives have shaped everything from marketing to forecasting. They will also promote key advances in the logistics field, such as the predictive transportation models discussed earlier, and enable machine learning because the integration of real-time and historical data allows machines to continuously improve their operations based on past conditions.