It’s been 18 months since the World Health Organization (WHO) declared COVID-19 a pandemic, and the world is still trying to adjust to the changes and uncertainties associated with it, even causing a domino effect in some instances. The pandemic halted many supply chains last year, closing factories and stores, and limiting manufacturing and distribution operations. Many workers decided to retire, re-locate, or consider new professions. Construction of manufacturing plants and new warehouse sites were also postponed or canceled entirely due to market uncertainty.
Now, a year-and-a half since the pandemic started, activity has picked up, but the disruption has spawned a shortage of 80,000 drivers in the U.S. trucking industry, according to the American Trucking Association. With the lack of drivers and trucks picking up cargo, this is also causing U.S. ports to get backlogged. Construction backlogs are also taking 18-24 months to clear.
Meanwhile, e-commerce is booming more than ever. According to the CBRE Global E-commerce Outlook 2021 report, e-commerce growth will require another 330 million square feet of warehouse space in the United States by 2025. Even as more brick-and-mortar stores start opening, e-commerce is here to stay, registering growth in the 30-40% range. High e-commerce shopping rates combined with construction delays are causing a strain in the supply of new warehouse space, especially as companies shift their inventory management strategies from just- in-time (JIT) inventory management to larger safety stocks for better responsiveness. Online shopping has also led to higher product returns that would require additional space for processing and storage.
But customers don’t care about supply chain issues that may be happening in out of their view. They care about getting their products on time, which has now become a stronger factor in determining brand loyalty and preference. According to a new study from Oracle, 84% of people say delays would cause them to cancel their order and 80% say it would cause them to stop buying from a brand altogether. If companies don’t prioritize their supply chains and prepare for disruptions, they will risk losing valuable customers.
With transportation delays already cutting into fulfillment timeframes, companies need efficient, technology-driven distribution networks that surpass traditional linear supply chains. The challenge is to be able to maintain enough warehouse facilities to meet this rapidly expanding market, and have distribution networks that are agile enough to address unpredictable and disruptive events. But the question is, where and how are you going to build these facilities and create a more flexible distribution network? There will be situations where a traditional warehouse will not work. Existing warehouses can be in locations too far from the market, or will require dependency on strong transportation networks. This is where the flexibility of a cloud-based warehouse management system (WMS) and the ability to rapidly set up “pop-up warehouses” can benefit your warehouse operations.
Consider these four essentials when evaluating your warehouse facilities:
- Do you have the ability to distribute anytime and anywhere? Companies must be able to operate adaptive distribution networks that easily respond to changing order conditions. Warehouses are now processing smaller and more frequent orders, and consumers expect delivery within 1-2 days.
- Do you have real-time visibility into your orders, inventory, and shipments? It is important to have visibility across your whole supply chain to avoid out of stock situations and offer excellent service to customers.
- Can you easily and rapidly deploy fulfillment centers when necessary? Companies should have the flexibility to convert any space into a warehouse when needed. With changing demand requirements, the need for seasonal products, as well as customer expectations of faster delivery times, sometimes you need to set up “pop-up warehouses” closer to delivery locations versus having one big warehouse further away.
- Can you meet and respond to changing business demands? Having a cloud WMS gives warehouses the ability to deploy flexible order picking strategies allowing better management of market changes and demand fluctuations. Worker safety and efficiency is also crucial. This means being able to easily integrate with warehouse automated systems, have minimal downtimes, and promptly respond to any factors that will disrupt operations.
Customer experience is key. While supply chain disruptions are not new, the pandemic has caused dramatic shifts in consumer behavior and expectations, forever altering the retail landscape. With their brands and businesses at stake, companies must evaluate their current distribution process and network models, find ways to successfully respond to customer needs, and prepare their warehouses for the long haul.
Joan Lim is director of product marketing at Oracle and leads go-to-market strategy for Oracle Cloud Logistics solutions, covering transportation, global trade, and warehouse management. Prior to Oracle, Joan held product marketing and strategy positions at Unilever, Qualcomm, Amadeus IT Group and various start-ups focusing on cloud applications and supply chain. Joan has a master’s degree in digital marketing strategy from Georgetown University, and a master’s degree in business from ESSCA Business School in France.