Distribution Center
“Just in case” inventory strategies will be the norm – for now
As customers continue to demand faster delivery, DCs are forced to have more inventory on hand than ever have before. “Just in time” inventory strategies no longer cut it. In 2020, DCs will pivot to “just in case” inventory strategies that will help reduce or prevent future supply chain disruptions.
Leveraging innovation to embrace omni-channel fulfillment
Many DCs were built to pick cases of goods, place them on pallets and ship them to retailers. But now, due to the growth of e-commerce, DCs must not only fill retail store orders, but also send eaches—one item, rather than a case of items—directly to a consumer.
Transforming retail space into distribution space
More and more retailers will be utilizing existing brick and mortar store locations for fulfillment. As a first step, many retailers are now offering BOPIS (buy online, pickup in store); often offering curbside pickup.
DCs will “Build Up” to create more space
CBRE has revealed that the United States will require 330 million square feet of warehouse space, committed solely to online fulfillment, by 2025, due to the continuous surge in e-commerce sales. At the same time, according to Jones Lang LaSalle IP, Inc. (JLL), the demand for industrial real estate is expected to reach an additional 1 billion square feet by 2025, as warehouse is at an all-time low.
On-demand warehousing will enhance storage capacity
As another means to improve distribution, fulfillment and storage initiatives, DCs will also look to utilize space only when they need it using on-demand warehousing. With a “pay as you go” model, DCs will find additional storage space without costly set up fees or long-term lease contracts that are typically associated with 3PLs.
E-commerce will lead to more returns
The steady upturn in e-commerce has resulted in a significant consequence that is often overlooked: returns. $102 billion of merchandise purchased online in 2020 was, in fact, returned. As total e-commerce retail sales are expected to increase yet again this year, so will returns.
Automation will combat labor shortages
The combination of retiring baby boomers (shrinking the labor pool), the explosion of e-commerce (putting more pressure on the DC) and the unforeseen COVID impact (less workers able/willing to work) has made labor the number one challenge for DC’s this year. From finding, hiring and keeping labor, which ultimately costs more due to increasing wages, DCs are struggling to do far more with fewer resources than ever before.
DCs will turn to automation to help alleviate the labor shortage. Automation will no longer be viewed as a competitive advantage, but rather, a necessity. Currently, the worldwide warehouse automation market accounts for more than $10 billion in annual spending, according to ARC Advisory Group. As DCs begin to implement automation (from automated storage and retrieval solutions to robotic cube systems), these expenditures will likely rise beyond the $10 billion aggregate this year.
Robotics integration will rise
In response to labor shortages and increased customer demands, robotics usage will rise exponentially in 2022. The demand for robotic goods-to-person systems will increase fourfold by 2023, according to Gartner, Inc. And by 2025, up to 50,000 robotic warehouses will potentially be developed, while 8 million robots may be shipped to users by 2030.
Goods to person robotic systems such as drones, cobots and autonomous mobile robots (AMRs) will be especially popular this year. Many DCs will look to use cobots (collaborative robots that can work alongside humans) in combination with a space saving automated storage and retrieval system to maximize efficiencies.
Wearable technology will become more popular
According to the Materials Handling Industry (MHI) association, roughly 70 percent of fulfillment centers are expected to utilize wearable technology the next few years. The latest generation of wearable technology will be especially useful for DCs in 2022, as they support increased pick accuracy, enhance productivity, reduce worker fatigue and save money during the fulfillment processes.
Although bands, smart glasses, smartwatches, USB cufflinks, voice headsets and wearable computers have been popular in recent years – DCs will be implementing wearable technologies into the fulfillment process in record numbers throughout 2022.
Millennials will become DC leaders
Renowned for their higher education (nearly 60 percent have bachelor’s degrees and roughly 30 percent have master’s degrees, according to a survey by Peerless Research Group), and a passion for supply chain management, many Millennial employees at DCs will be transitioning to leadership positions this year. After all, this generation of workers (born from approximately 1980 to 1995) have 20+ years of logistics or supply chain experience already.
Sixty-nine percent of the respondents have shown loyalty to their employers, as they’ve only worked for one or two companies so far. And now they will be rewarded for their passion and dedication, as more and more Millennials will begin to receive leadership opportunities this year. As Millennials rise into these positions, DCs will further embrace automation, robotics, WMS, wearable technologies, blockchain and IoT.
