Warehouse management is experiencing a paradigm shift. Analysis shows that every £1billion of online sales, approximately 1.36million square feet of warehouse space is required in order to fulfil orders. With UK online sales forecast to rise by up to £67 billion over the next five years, e-commerce may drive additional requirements of 92 million square feet of space to meet the surge in demand. However, this isn’t the only challenge that organisations are facing, with new expectations of same day, free delivery becoming increasingly important for consumers.
In order to successfully meet these changing customer needs, retailers are facing a pressing need to revamp existing fulfilment strategies in order to keep pace. We have seen agile examples of this throughout the pandemic – in the US, Gap said it doubled down on turning stores into mini warehouses when people couldn’t visit malls to shop.
Warehouses have also had to rapidly pivot from fulfilling bulk orders for stores to fulfilling individual orders for customers shopping from home. From picking and sorting items to packaging and posting, it is more process-intensive and time-consuming than shipping goods in bulk to stores – meaning a massive increase in per unit fulfilment costs for retailers.
Therefore, the ability to respond quickly to the changing environment will be crucial moving forward – such as having the ability to reconfigure the supply chain to pick and fulfil in a different way for e-commerce rather than for stores.
On top of everything, there is a greater labour requirement in line with increased fulfilment capacity. This has created a war on talent in fulfilment hot spots and an increased reliance on the temporary workforce. Data shows warehouse employment reached the highest level ever recorded with 1.25 million workers in the warehouse and storage sector in Q4 2020 – unsurprising when you consider Amazon alone hired an average of more than 2,800 workers per day between July and December 2020.
This is not only more costly but can also lead to degradation in quality and service. As such, retailers are seeking new ways to help control labour costs and increase workforce productivity.
How are business leaders responding?
Warehouse management stakeholders are embracing technology to meet these challenges, ranging from automation and robotics to work orchestration, task management and warehouse devices.
Let’s start with automation. Already well-established within warehouses for some time, retailers are now increasingly turning to automation to cut costs and reduce their reliance on the workforce. They recognise that automation reduces risk – both by minimising capacity problems but also service issues that result from needing to flex up staff numbers at peak periods.
Blue Yonder’s data shows that 14 percent of retailers have automation across their fulfillment locations today, with 21 percent expecting full automation in the next 12 months – representing a 50 percent growth. Almost a quarter (23 percent) of retail executives expect to have most of their fulfillment locations automated in the same timeframe.
By augmenting the human workforce and removing manual processes from operations with robotics and other automated solutions, retailers can prevent congestion in their fulfillment centres and keep orders flowing seamlessly, reducing costs to ensure profitability.
In the same vein, a new era of robotics is providing a flexible and cost-effective alternative to the huge investment associated with fixed automation in the warehouse. With many now operating on a consumption model, the warehouse can scale up and down based on their requirements, and only pay for what they use. This ensures a flexible service with a quick time to value.
Elsewhere, warehouse wearables have been hailed for their use in delivering productivity gains. No longer constrained to handheld scanners (or ‘bricks on sticks’ as they also are known), today’s wearables are geared around increasing operational efficiency. For example, warehouses that are using smart glasses and smart gloves are reporting significant efficiency gains compared to using handheld scanners.
These types of solutions allow workers to quickly scan barcodes without picking up packages, for example, allowing for a faster, more ergonomic process. Scanner-enabled wearables also allow employees to automatically send reports to management that would otherwise have to be manually processed.
Leveraging the dual benefits of LMS and WMS
On the software side, more warehouse leaders are looking to carrier management systems that are integrated into their warehouse management system (WMS). Again, this is in response to both increased demand and higher expectations on the part of customers, particularly when one order from a retailer might see several items shipped separately, all from different locations. A parcel tracking capability means the customer can receive specific information as to which order is being delivered, at what time and by which carrier.
Labour management software (LMS) is another system that can be integrated with the WMS that manages and measures the productivity of workers. Similarly, WMS improves functions like scheduling and encourages employee engagement. The aim of a WMS is to drive efficiency gains from employees while also reducing the reliance on workers. Both systems are must-haves given the challenge of attracting and retaining a skilled warehouse workforce in a competitive labour market.
Enabling an agile approach to operations
Alongside implementing technology solutions, business leaders are adapting their operations in line with ‘the new normal’.
For example, retailers are standing up smaller distribution facilities that are closer to customers, such micro fulfilment centres, or dark stores. They leverage these additional performance sites when they need extra capacity or perhaps because their traditional warehouses have been forced to close because of the pandemic. The goal for the retailer is to fulfil orders from wherever it has the capability and the inventory at any given time, whether that’s a distribution centre, micro site or in-store.
Similarly, retailers want the ability to easily switch on and off their different delivery propositions as per their requirements – if a store is closed or if it hits capacity with a particular carrier – flexibility in their fulfilment propositions is key. As a result, there are specific light touch WMS that play into that field that can be stood up quickly.
At the same time, there has been an increase in ship-from-store, where retailers leverage their in-store inventory to fulfil orders. This not only alleviates pressure on the distribution centre, but it potentially reduces shipping costs and increases delivery speed by moving distribution points closer to destination.
This new normal is here to stay, and warehouse stakeholders need to not only adapt to today’s business requirements but prepare for future challenges far beyond the pandemic. This relies on them embracing digital transformation to gain an advantage in a fast-changing, disruptive and highly competitive landscape.