Warehousing and distribution have experienced an enormous level of positive and negative impacts from the COVID pandemic. Various vaccines are being rolled out and some countries are beginning to make progress to get the coronavirus under control. So, now may be an appropriate time to start turning some attention to the recovery from the pandemic and entering a “new normal.”
Certain COVID impacts like wearing masks, keeping a 6-foot physical distance from others and remote learning still may be with us a while longer but on a temporary basis. However, the impact of COVID on warehousing and distribution is going to have long and lasting effects throughout the world.
The supply chain has stabilized somewhat, and short-term adjustments have been made to warehousing and distribution to meet customer demand as best as possible. What will warehousing and distribution look like post pandemic? What impacts are expected that will reshape the supply chain in the near and long term? Here are some thoughts on some of those impacts.
Continued Physical (aka Social) Distancing
Physical distancing will continue even after COVID is no longer a threat and mask mandates go away. It might not be 6-feet, but warehouses will continue to keep workers spread further apart than they were pre-COVID. This distancing could include keeping and maintaining one-way traffic aisles, sanitization stations and designated work areas. Some form of physical distancing is here to stay to ensure the overall health and safety of the workforce and to prevent the spread of a future pandemic, as well as the common cold or flu viruses.
Accelerated eCommerce Growth
The COVID pandemic did not initiate the eCommerce boom, but it undoubtedly is responsible for the surge in demand. Forbes reported that COVID accelerated eCommerce growth 4 to 6 years. One example statistic shows that total online spending in May 2020 was up 77% year over year. Warehouse and distribution centers are not new to eCommerce, but they are struggling to keep pace with the rapid increase in demand.
Some consumers are looking forward to return to in-store shopping, but the data suggests the eCommerce boom will not diminish when COVID subsides. A recent Bizrate Insights survey found “60% of shoppers reported buying product online instead of in-store due to COVID-19, and 32% expect to continue to shop online”.
The sustained impact of increased eCommerce orders has caused warehouses to pivot from case picking to pallets destined for retail locations to picking individual pieces into boxes to be shipped direct to the end-user customers. This represents a major impact for material flow, processes and storage technologies as the warehouse makes the shift from full case to split case picking.
Increased Omni-Channel Distribution
The eCommerce boom is here to stay and so is omni-channel distribution. Omni-Channel includes responding to customer demand and letting the customer purchase from anywhere (in-store, online) and delivering the product where they would like (ship to home, pickup in store, curbside pickup). This also includes the return of the product (ship to return or return in-store) known as reverse logistics. This leaves warehouse and distribution centers looking for advanced processes, technologies and software to support omni-channel distribution.
Mini-Distribution from Stores
Customers are demanding faster shipments and retail businesses will need to look to leverage existing brick and mortar locations as mini-distribution centers. They will aim to build a larger distribution network without a large investment.
Equipping existing retail store locations with distribution capabilities can be more cost effective than partnering with a 3PL (third party logistics) or establishing additional warehouses. The deployment of right inventory management software and a compact storage device makes it possible and cost effective to transform an existing back storeroom into a mini-distribution center.
Just In Time (JIT) Changing to Just In Case (JIC)
Most manufacturers had adopted lean manufacturing as a best practice prior to the pandemic. Receiving goods just-in-time (JIT) for manufacturing kept inventory costs down and utilized space more efficiently. COVID hit and this lean strategy left many manufacturers with inventory shortages and in some cases caused production to stop completely.
Lean manufacturing will remain a best practice, but manufacturers will keep more inventory (Just In Case – buffer stock) on hand to prevent future inventory shortages leading to production shutdowns.
Increased Cold Storage Demand
COVID’s impact caused some sectors of eCommerce to grow at a faster rate than others. One of the fastest growing eCommerce sectors is grocery. Consumers fought online for grocery pickup times when COVID first hit. Today, many consumers are not headed back into the store, preferring online pickup to an in-store visit.
Increased online grocery demand, the decline in dining out, along with a growing need for storage of flowers, poultry, berries, beef and pharmaceuticals has increased the demand for cold warehousing. Cold storage adds significant costs to a warehouse, so warehouses will look to use automation to manage smaller, more efficient temperature-controlled storage warehouses
Increased Warehouse Automation
Warehouse automation has increased and has been gaining steady traction for years. COVID will increase the speed of its adoption. Warehouses will turn to automated storage and retrieval systems to help reclaim floor space and improve the efficiencies of their workforce.
Automated storage and retrieval systems (ASRS) can recover up to 85% of existing floor space when compared to standard shelving. Warehouses need this additional capacity to meet post-COVID challenges. Combined with pick to light systems and integrated inventory management software, ASRS can help warehouses solve labor challenges and manage unpredictable spikes in demand.
Smaller Decentralized Warehouse Locations
Customers are expecting same-day or next-day delivery and manufacturers will seek to decentralize their warehouse locations. Being closer to the customer decreases transportation costs and reduces the risk of supply chain disruption if there is a delay/interruption in one part of the country, but not another.
Some manufacturers will look to establish these decentralized warehouse facilities in key locations while others might seek to utilize established 3PLs. When new satellite distribution centers are established, warehouses will seek to use high density automation to keep the warehouse footprint small and limit the initial investment and ongoing required labor costs.
The Bottom Line
Change has been happening at an exponential rate. Dr. Peter Diamandis, international pioneer in the fields of innovation, incentive competitions and commercial space, reminds us that “The only constant is change, and the rate of change is increasing.”
Now, companies are creating contingency plans for their contingency plans. An unpredictable future means warehouse and distribution centers will look to be as adaptable and flexible as possible. Their main focus will be on agility and how to best utilize space and efficiently manage labor, their biggest expense.
-Glenn Ebersole, Director of Business Development