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Threats to Warehouses in the Wake of COVID-19

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Warehouses Covid-19 Challenges - Warehouse employee sitting with a facemask
Steve Thompson
Steve Thompson
November 12, 2021

The pandemic has reorganized society in multiple ways as millions of Americans rethink their goals, residency, and careers. A wave of resignations and early retirements signaled many people are tired of their jobs and want to move on. This phenomenon has affected various industries including warehousing. Here's a look at the increasing challenges faced by warehouses in the wake of COVID-19.

How COVID-19 Has Changed Warehousing

Warehouse worker with some Health guidance

Some of the most fundamental changes to warehousing over the course of the pandemic have involved social distancing and faster adoption of digital transformation. While a typical warehouse is spacious enough for crew members to work six feet apart, the ordering of more goods saturates capacity. This situation will likely continue for a while at least through the holidays and winter flu season.

With the help of automated storage and retrieval systems (ASRS), warehouses are able to utilize up to 85 percent of available floor space. This solution helps some warehouses overcome labor shortages and high demand when combined with inventory management software and advanced pick-to-light systems. Pick-to-light systems involve workers using handheld scanners to navigate through inventory for more efficient order fulfillment.

Managers must continue to assess how to increase warehouse capacity while facing the challenges of labor shortages and social distancing. Meanwhile, work-in-progress (WIP) inventory has increased. Key solutions for resolving these issues for larger manufacturers include shifting to smaller decentralized storage hubs and outsourcing more to third-party logistics (3PL) firms.

Labor Shortages and Shipping Bottlenecks

No one in the logistics industry can ignore the huge labor shortage in the pandemic era. The effects of COVID-19 shutdowns have led professionals of various fields to exit the workforce. Positions have been difficult to fill as shipping has slowed down at America's largest ports while global supply chain issues make certain materials more scarce and expensive.

The e-commerce boom is not going away, especially during the holidays when online shopping is at its annual peak. Labor shortages are causing warehouses to rely more on automation technology and enhance picking strategies. They must rethink storage processes as well, such as renting large containers, to prepare for volatile demand.

Going More Digital

Warehouse employee wearing a facemask and using a tablet

Digital transformation has been a major catalyst for keeping supply chains steady. The use of digital monitoring platforms and big data analytics has significantly increased inventory visibility. It's helped overcome challenges faced by warehouses in the wake of COVID-19 by streamlining warehouse operations in the United States and beyond.

Moving toward more IoT sensors that communicate with centralized databases has helped players throughout supply chains get a better grip on gauging available supplies. In some cases, warehouse managers will need to rethink supplier lists in order to meet consumer demand. Digital tools and machine learning programs help speed up searches for both suppliers and new employment candidates.

Customer Satisfaction Is at Stake

In the years leading up to the pandemic, there was growing awareness from manufacturers to retailers that the focus in the age of online shopping should be consumer satisfaction. Part of this satisfaction derives from a speedy and accurate shipping process. Furthermore, emphasis on handling returns becomes a tipping point for warehouse managers to maximize customer satisfaction.

But when bottlenecks develop and persist in supply chains, it can have an adverse effect on consumer response. The average American doesn't have a clear concept of how supply chains work, so they may not be sympathetic to higher prices and later deliveries. The minority of consumers who are more knowledgeable about the shipping process will likely remain loyal to favorite brands and tolerate slowdowns, but brands cannot rely on this group alone.

Modern Distribution Centers

The deployment of modern lean distribution centers began to create a competitive advantage for brands leading into the pandemic. Considering the challenges faced by warehouses in the wake of COVID-19, this decentralized solution is powerful for offsetting rising transportation costs. Real-time digital communication within the supply chain allows for smaller warehouses to order the right amount of safety stock and store inventory more efficiently.

Access To Real-Time Data

The combination of tracking data in real-time and AI technology opens up new opportunities for taking advantage of big data applications. The more managers learn about the quantities and qualities of their operations through real-time data, the faster they can correct inefficiencies. Reducing waste in both production and logistics points a warehouse toward achieving its goals of improving the speed and accuracy of order fulfillment and shipping.

The more companies utilize big data analytics in real-time, the more they must invest in building robust layers of cybersecurity for data protection. The jackpot for cybercriminals is to infiltrate and steal data from large corporations. While all businesses can be targets, cybercriminals can make the most money by selling trade secrets and other confidential data via the black market.

Warehouses can elevate data protection by outsourcing to IT specialists, much the same way they outsource to 3PL firms. The most advanced and reliable 3PLs have their own in-house or outsourced high-quality tier 1 data centers. The use of 24/7 monitoring software integrated with machine learning cybersecurity software helps detect and block cyber threats in real-time.

Future Outlook for Warehousing

Warehouse worker wearing facemask scanning a box

Some of the biggest challenges faced by warehouses in the wake of COVID-19 will likely persist through at least 2022 and possibly 2023. The tremendous growth in e-commerce and consumer demand through the pandemic points to inflation, bottlenecks, and complaints. For these reasons, it's imperative for warehouses to adopt strategies that increase the odds of business resilience.

Some of the proven solutions that are helping warehouses improve their operations during the pandemic include:

1. Omni-Channel Distribution: Creating multiple delivery options for consumers.

2. Micro-Distribution: Use of local mini-distribution centers to supply retailers.

3. Shorter Contracts: Economic uncertainties push warehouses and 3PL partnerships toward shorter-term agreements.

4. Greater Scalability: The more picking strategies are refined, the better analysts can scale future inventory and order fulfillment with greater flexibility and accuracy.

5. Increasing Automation: Operational sustainability will depend on big data monitoring of storage and shipping processes.

Conclusion

Warehouses face enormous challenges in the immediate years following the pandemic because demand will be high while supply chains encounter slowdowns. Some of the major challenges faced by warehouses in the wake of COVID-19 will involve limited labor, a deeper investment in new technology, and access to capital.

Ultimately, warehouses are poised to recover as the most resilient firms will survive. Contact pallet builders near you to learn more about how you can prepare for supply chain disruption.