Certain parts of the COVID pandemic – fingers crossed will only be temporary. However, the impact of COVID on the warehouse is going to have a long-lasting effect. As the virus spread throughout the world, we saw a ripple effect. An outbreak or transportation delay in one part of the world would have a devastating impact globally, causing shutdowns due to warehouse closures or missing or delayed supplies. The global supply chain struggled to keep up as the virus spread.
Within the warehouse, some organisations were left with excess stock that they couldn’t ship. Others were at a standstill as they waited to receive stock at their depleted warehouse. Combining that with supply chain nightmares with unpredictable consumer behaviour – some industries saw unprecedented demand, while other sectors saw demand plummet – is leaving warehouses in a bind.
The supply chain has stabilised, and warehouses have made short term adjustments. Although freedom day has been pushed back, it’s time to start thinking long term; COVID has likely changed Warehousing and Distribution Forever. What can you do?
Pre-Covid, the majority of manufacturers had adopted lean manufacturing as a best practice. Receiving goods just-in-time (JIT) for manufacturing kept inventory costs down and used space more efficiently. However, when COVID hit, this lean strategy left many manufacturers with inventory shortages and, in some cases, caused production to stop completely.
While lean manufacturing will always remain a best practice for many, the balance between JIT inventory and safety stock will change. Therefore, manufacturers should keep more inventory (buffer stock) on hand to prevent future inventory shortages leading to production shutdowns.
This will, however, increase warehouse space and capacity issues.
COVID has sped up the adoption of Warehouse automation. In its aftermath, warehouses are coping with adjusting inventory counts, making space for work in process (WIP) and speeding order delivery. It’s even more likely 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 much more existing floor space than traditional shelving. Warehouses need this additional capacity to meet post-COVID challenges.
COVID disrupted the global supply chain in ways no one could predict. As the global supply chain is starting to stabilise, manufacturers are revaluating their processes. Many are considering reshoring/nearshoring – bringing manufacturing tasks in-house or closer to home.
Reshoring manufacturing operations can increase control in the supply chain to prevent future crises while also significantly saving on transportation costs. So take a stand and refuse to be caught in a global supply chain nightmare again; reshoring initiatives are taking hold; however, they will require additional warehouse capacity.
While some warehouses were overwhelmed with orders and facing staff and stock shortages, warehouses just down the road saw orders dry up and we’re left with an abundance of inventory.
In the wake of COVID, warehouses will likely look to implement scalable processes to manage unpredictable demand. For example, using a combination of material handling technologies and software solutions, warehouses will deploy flexible order picking strategies to easily handle the highs and lows in order demand. In addition, warehouses may wish to demand picking systems and processes that can increase or decrease picking speeds overnight – by adjusting staffing requirements.
With unpredictable supply chains, manufacturers will need to make space for additional WIP. Since COVID, supply chain hiccups are common, and manufacturers need to be prepared to handle them. As a result, manufacturers are left with the half-finished product (WIP) waiting to be completed when parts are delayed.
However, WIP inventory adds up. Manufacturers will need a solution to handle stockpiles of WIP, so they aren’t damaged or lost while they wait to be completed. Increased WIP inventory could be another catalyst for integrating some high-density automation into the warehouse.
As already seen, Warehouses are going to need more capacity post-COVID for a variety of reasons. Increased inventory on-hand, meeting increased demand, not to mention the additional space for social distancing right now, leads to more storage locations and more capacity.
This additional requirement might be spread out in smaller, more local or decentralised warehouses, but the overall capacity of total warehouse space will need to increase. Increasing warehouse capacity without additional properties is what Ikon do best; if you’d like to find out how we can help you, get in touch.
To provide same-day or next-day delivery customers are expecting, manufacturers will seek to decentralise 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.
While some manufacturers will look to establish these decentralised warehouse facilities in critical locations, others might seek to utilise established 3PLs (Third Party Logistics). And, whilst new satellite distribution centres are established, warehouses will seek to use high-density automation to keep the warehouse footprint small and limit the initial investment and ongoing required staff costs.
While the COVID pandemic didn’t start the eCommerce boom, it is undoubtedly responsible for the recent surge in demand. Warehouse and distribution centres aren’t new to eCommerce, but the rapid increase in demand has most struggling to keep up.
The sustained impact of increased eCommerce orders has changed the order profile of the warehouse significantly. To fill these orders, warehouses need to pivot from case picking to pallets destined for retail locations – to picking individual pieces into boxes to be shipped directly to the end consumer. This is a significant change for warehouse operations – material flow, processes and storage technologies will all be impacted as the warehouse shifts from entire case to split case picking.
As demand for faster delivery rises and companies decentralise their warehouses, stock visibility will take on new importance throughout the supply chain. The ability to know, in real-time, exactly what inventory is on hand at each warehouse is the key to assigning and filling orders efficiently.
Few companies have complete visibility into the inventory in their supply chain. As warehouses look to decentralise operations, the need for real-time inventory visibility will increase tremendously.
The impact of COVID 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. Even now, many consumers aren’t headed back into the store, preferring online pickup to an in-store visit.
Increased online grocery demand is set to increase the demand for cold warehousing in the future. Cold storage adds high costs to a warehouse. Warehouses may look to use automation to manage smaller, more efficient temperature-controlled storage warehouses.
As we settle into our post-COVID lives, the only sure thing is that nothing is certain, and we are seeing businesses creating backup plans for their backup plans. With an unpredictable future, warehouse and distribution centres will and should be looking to be as adaptable and flexible as possible, with a primary focus now on how to best utilise space. We can help with that – get in touch.
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