I think by now we all know the short term impact COVID-19 has had on warehousing and distribution but the full impact is going to have long-lasting effects. As our staff are social distancing, wearing masks and in many cases working at reduced hours coupled with transportation delays and restricted supplies our businesses have had to adjust to what we now call ‘normal’.
As COVID spread throughout the world some businesses were left with unshipped inventory, others were left at a standstill waiting to receive inventory and struggling to dispatch depleted stocks, on the flipside, some industries saw unprecedented demand as consumer behaviour changed overnight. It’s safe to say that COVID has caused a problematic situation for many businesses, and as things continue are left not knowing where their futures lie. Sure, over the last few weeks the supply chain has stabilised somewhat and businesses have made short term adjustments to meet customer demands – now is the time to start thinking about the long game and how we approach it. We look at the ways COVID may impact warehousing and distribution forever.
Social distancing to stay.
With the announcement of vaccination, this may change over time, but for now, we think it’s here to stay, for a good while yet but warehouses will continue to keep workers more distanced than they were pre-COVID.
Keeping precautions in place to prevent any further or new outbreaks of a virus, as well as seasonal flu, means warehouses will, hopefully, operate safely. So, one-way traffic aisles, hand sanitisation stations and designated work areas are here to stay. Health and safety is the number one priority for us all.
Increase in warehouse automation.
Warehouse automation has become increasingly more popular over recent years helping to improve efficiencies and speed up automated storage and retrieval systems helping to reclaim floor space. Automated storage and retrieval systems can recover up to 85% of existing floor space when compared to standard shelving – this additional capacity will help warehouses deal with demand post-COVID and can help solve staff challenges and manage unpredictable spikes in demand.
Keep more inventory.
Businesses had previously adopted a ‘lean manufacturing’ policy meaning receiving goods just in time for manufacturing to keep costs down to utilise space more efficiently. This policy caused many issues when COVID hit – leaving many manufacturers with inventory shortages and caused production to cease in some cases.
Going forward, to prevent production shutdowns businesses will need to keep more inventory on-site and to hand – how much, will depend on varying factors that will need to be taken into consideration. This will not only mean that warehouse storage space will become more of an issue and with social distancing in place, it will mean managing the logistics of your warehouse could become a lot more complicated.
Increased Warehouse Capacity
In light of the above, this takes us to the fact that warehouses are going to need more capacity post-COVID for many reasons – increases in inventory, meeting increased demand, space for safe social distancing and more storage.
It could be that additional storage is distributed to smaller and more local or decentralised warehouses. Decentralised warehouses will allow businesses to provide same day or next day delivery that the customer expects. Being closer to the customer also means reduced transportation costs and reduces the risk of supply chain disruption. Some businesses will however choose to to partner with a Third Party Logistics company for flexibility and scalability and to utilise supply and distribution resources based on business needs.
Warehouse and 3PL contracts.
Knowing that we need to supply our customers quickly and effectively is important but with the current situation and unpredictability, it means that companies will be more cautious when it comes to warehouse and third-party logistics contracts and partnerships. It could be that the usual 3-5 year contracts will be reduced to 1-2 years going forward.
The on-going growth of eCommerce
We can’t blame COVID for the surge in e-Commerce sales in general but it is responsible for the current boom, which has accelerated eCommerce growth by 4 to 6 years according to Forbes. May 2020 online send was up 77% year on year and this demand is hitting distribution centres hard. With some people desperate to get back to the shops it does seem like the new ways of shopping will continue to be embraced post-COVID.
The e-Commerce growth has meant that there have been significant changes to the profile of the warehouse business. To fulfil e-commerce orders warehouses need to shift from case picking to pallets for retail locations to picking individual pieces into boxes to be shipped direct to end customers.
OmniChannel Distribution
With e-Commerce set to stay, businesses need to embrace omnichannel distribution.
‘Omnichannel distribution is a multichannel approach taken by companies to give customers a way to purchase and receive orders from several sales channels with one-touch seamless integration’.
This solution allows customers to purchase from anywhere (online or in-store) and has the product delivered to where ever they like – home delivery, pickup in-store, click and collect, this also includes the return of the product (ship to return or return in-store).
Distribution centres need to be integrating advanced technologies and software to support omnichannel distribution into their warehouses now to meet with increasing consumer demands.
Cold storage.
As discussed above, there have been some sectors that have grown at exponential rates, one of the fastest has been online grocery shopping. When COVID first hit, panic set in and consumers rapidly booked all available delivery slots for their shopping. This has led to an increase in the demand for cold storage within warehouses, which does not come cheaply. Warehouses will be looking to use automation to manage smaller, more efficient temperature-controlled storage warehouses.
We will endeavour to see further changes with the way we work and how we adjust to the ‘new normal’. Businesses will need to create and amend their back-up plans and will need to continue to be as flexible and as adaptable as possible – for all the negativity COVID-19 has bought us, we need to look on the bright side and see this, albeit, horrendous situation, as a time for us to develop and grow to ensure we emerge stronger and more adaptable.
