Part 1 of a 3 part series of posts inspired by the 31st Annual State of Logistics Report
Despite the many disruptions introduced into shippers’ supply chains by the COVID-19 crisis, new research shows positive signs for the warehousing sector. Due to factors like an all-time low vacancy rate, the pre-coronavirus market could handle the short-term impacts of the pandemic.
Demand for warehouse space seems primed for the long term as well because of the high growth in e-commerce and emerging reshoring discussions. With these favorable market conditions (from a supplier’s perspective, at least), what should the industry expect next?
According to the 31st Annual Council of Supply Chain Management Professionals’ (CSCMP) State of Logistics Report, here are three of the most notable trends the industry should be on the lookout for in the remainder of 2020 and beyond.
1. Labor Limitations
Because the average hourly wage for logistics employees often fails to measure up to other related industry averages and tends to be seasonal, there’s a big issue with labor shortages in warehousing. Shippers need to prepare for this challenge now, especially for operations that still rely heavily on manual processes.
Companies facing such challenges should try implementing creative solutions like searching for employees who are already in fields that require similar skill sets and schedules or offering more competitive pay/benefits to attract and keep skilled laborers.
2. Uncertainty Surrounding Construction
Currently, a significant 300 million square feet of warehouse and distribution space is under construction. To put this colossal number even further into perspective, more than 80% of the construction is speculative, meaning it doesn’t have a specific buyer or formal contract commitment based on CSCMP’s data.
While this speculative construction was initially put into the works because many people had high hopes for warehouse demand, COVID-19 slowed down many of these projects. Now, the logistics industry can expect much less of that space to come on-line before 2021.
3. Forward-Deployed Inventory
As stay-at-home orders led to a significant shift in consumer buying patterns from traditional in-store purchases to soaring on-line shopping demand, many retailers are responding by developing localized distribution strategies. By leveraging forward deployment of inventory through nearby urban centers or creating mini-warehouses in store backrooms, companies can increase flexibility in their fulfillment processes.
For example, Target was able to fill 80% of its e-commerce orders through just their stores last year, according to the State of Logistics report. With all of the uncertainty surrounding warehousing space, this could be an ideal solution for companies struggling to manage their growing e-commerce needs.
COVID-19 revealed a lot about the existing gaps and inefficiencies in many local and international supply chains. Those that were unprepared and lacked the operational efficiency to keep up with panic-induced buying could not meet on-time expectations. Those shippers that showed more resiliency were able to do so by capitalizing on their key partnerships, maximizing their use of labor, and integrating de-bottlenecking strategies to account for surges in demand.
All shippers can take a page out of this book and start prepping your operations today for these projected trends, so you too can thrive through equally unpredictable times in the future.
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