8 trends that warehouses will face
In the last few weeks supply chains have never been stressed so hard as before. During the recent corona crisis most of the attention was focusing on the transport industry and cross border trade, however warehouses are a crucial part of a supply chain strategy and also experienced challenges. This blog post highlights eight trend the warehouse market is to undergo and will change the image of the market for the next decade.
Many companies and executives are changing their viewpoint on ‘having goods in stock is dead capital’ to a more nuanced view. After having inventory is a crucial part and tool in todays supply chain managers strategy to deliver customers on time.
1. Higher stock levels
As a result of the recent crisis there will be a trend to increase inventory levels. Warehouses are used to ensure unforeseen demand peaks and troughts in the market.
The higher the uncertainty, the greater need for warehouses. Therefore the future will be less lean and more safety stock.
Increased levels of stock mean a higher need for warehouse space to store them. The additional capacity may come from existing or newly built warehouses.
2. Shift to 3PL
Manufacturers and retailers may regard having a lot of warehouse staff on their payroll as a financial and operational risk.
One of the strengths of 3PL companies is the possibility to overcome this uncertainty and consolidate different labor requirements and use their existing geographic networks to meet.
Companies will rely on logistics specialist to minimize risk and maximize logistic performance
3. Multi-user warehouses
The new normal will require a more flexible mindset to overcome changes in demand, which allow warehouse users to a plug-in on existing warehouse operations. Short set-up times, fast on-boarding of new warehouse staff and proven technology will be essential to enable customers to move into markets quickly when demand pops up.
4. Short term contracts
There will be a move from long term to short term contract lengths with logistic partners to face the challenges of a highly volatile market. Manufactures and retailers now lock most of the time warehouse capacity for 3-5 years. This might work in a stable economic environment, but in variable market conditions, some companies will be faced with too high or too low warehouse capacity.
It might end up in further price pressure and increase the need to run operations ad efficiently as possible, with the Storeganizer warehouse could use the warehouse space as maximum as possible.
5. Warehouse on demand
For a niche part of the market new opportunities lie around the corner. Players active the ‘on-demand’ warehousing like Waredock will see growth as they offer flexible and short-term warehouse storage solutions. As they provide alternatives for long-term lease options, this opens new business opportunities for companies having warehouse assets. By freeing up space and fill the new capacity additional revenues could be generated leading to a higher income per sqm or sqft.
Download brochure6. From low inventory to high availability
Amazon and other e-commerce platforms have created a need to ship immediate orders. It impacted customer expectations to the next logistic boundary and became the new norm.
This pushes businesses to raise stock levels in the supply chain and keep stock on multiple locations, close to the end-user market.
If traditional brick-and-mortar retailers want to compete with e-retailers they have to develop an omni-channel strategy, which is based on having more stock in-store to make home deliveries available or having a network of smaller, local facilities.
7. Green warehousing
Available A-locations space has become scared and new areas for warehouse development are limited. Governments will pay more attention that open space is used in the most optimal way keeping into account the local fauna and flora.
For example the Netherlands is considering blocking any further development of XXL warehouses to avoid the new ‘numbness’ of the landscape.
If new warehouses are be built they have to stock more products on a smaller footprint.
8. Increase of e-Commerce and omni-channels
During the recent corona pandemic, e-Commerce sales and omni-channel logistics saw an acceleration. e-Fulfillment requires another kind of operations than facilities serving traditional retail. Warehouses for e-Commerce needs to be designed for a fast flow of small individual orders coming from a wide range of SKU’s. This means more storage capacity is required to store everything and accurately organize shipping and cross-docking.
Conclusion
The recent crisis challenges some of the methodologies and theories of the last few decades. It will not lead to a complete reversal of these concepts but it will change the strategy and behavior of companies on keeping goods on stock.
Inventory levels will inevitably rise as a response to the coronavirus and the supply chain risks caused by this crisis.
Manufacturers and retailers were stretched to a certain level that they might consider reviewing warehousing in their business. 3PL companies will see a boost as more businesses will consider out-sourcing to have more flexibility in the workforce and rely on specialists who can deal with global trade.
On the other hand these logistics specialists can be confronted with shorter contract duration, which leads to more flexible warehouse storage design and solutions like leasing or on-demand warehousing.
Flexible shopping options like e-Commerce and order online, pick up in-store saw a breakthrough in the past few months. While customers expect businesses to think and act environmentally .
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