UK Business Trends 2020-2021: Significant Changes in the Warehouse Industry
By: Fatmir, redwigwam
The warehouse industry, with its highs and lows, often provides a valid forecast tool on the overall state of the economy. If this theory holds true, then the last few years have been very profitable. Big sheds have been growing in numbers and size, and even the COVID-19 pandemic has led to increased demand across the industry.
Labour Market Information indicates that the warehousing and storage industry will continue to expand through the end of this year. Industry revenue is expected to grow at an annual rate of 1.8% to £19.6 billion. This article will review several 2020 warehouse trends and what investors can expect for the coming year.
Impacts of Covid-19 on the Warehousing Industry
The pandemic in 2020 produced a transformation in the warehousing sector. This was fuelled by online retailing and uncertainties with the global supply chain. The departure of the UK from the European Union and new, unexpected challenges amongst CFOs and financial professionals, was also important in shaping warehouse changes. Companies were challenged with increasing their inventories to meet short- and medium-term disruptions. Many of these problems were brought on by Brexit and COVID-19, as they forced many companies to rethink their warehousing strategies. Whatever success was earned from meeting inventories led to assumptions that companies could balance their customer expectations for on-demand deliveries and cover the costs of providing it even after the pandemic lessened.
The pandemic was a motivating factor for the strong demands that were already in place. It accelerated structural changes that drove occupational demand, caused by a predominant shift to online shopping.
Amazon has led the way, offering 36% of the take-up and an additional 11% for leasing deals of less than 12 months due to the pandemic. But will demands for warehousing become the norm rather than the exception?
We also saw a shift into a more flexible working pattern. Many people turned to warehouse working to support their income when they had their hours cut or lost their jobs altogether. It made sense for them to turn to an industry that was booming – but the industry needed to change to accommodate a need for more flexible working patterns
Labour Shortages and Brexit
With a tight labour market and already existing issues with Brexit and exiting the EU, there were already growing problems with retaining employment. Talented, experienced warehouse workers would drift from one warehouse job to another for little more than better benefits and a pound more per hour. The solution to this problem is multi-faceted, including higher pay, more training and benefits, and a reward system. Companies must look to labour market opportunities to promote worker personal development and specialised training to remain competitive.
Warehouse Management Systems
The use of warehouse management systems (WMS) and automation will increase through 2021. This includes implementation of automated conveyers and sorting systems. Other supporting technology includes AGVs, transport management systems, and palletisers. Automation is an area that warehouses cannot afford to overlook. They must retain the high expectations of consumers as they move forward.
Regional Versus Centralized Warehouses
The argument for centralised warehousing has many proponents. This has been the normal shift for several decades.
But the pandemic once again changes the methods of doing business. Customer demand has increased, and firms do what they can to stay ahead of the competition and offer advantages. One of these advantages is reducing delivery times, and this can be done best with regional warehousing.
Regional warehouses allow large-scale employers to deliver items for customers on the same day, or at least within 24 hours. This is something that warehouse centralisation cannot offer. The psychology of immediate gratification is difficult to beat. Smaller regional warehouses will become commonplace, offering fast-track deliveries in a fraction of the time with fewer errors. This is a vital change to stay competitive.
Improved RFID Technology
The Internet of Things (IoT) will play a more dominant role in warehouse production. This links together various devices to expedite goods that are commonplace in the supply chain. It will automate supportive services such as order picking and inventory tracking.
RFID (Radio Frequency Identification) is finally available to smaller businesses based merely on lower costs. Many warehousing companies are expected to invest in RFID technology this year due to its low-cost solution.
RFID makes it easier to track the location of stock, making each warehouse an efficient distribution chain. Retailers, logistics companies and manufacturers will also take advantage of some of the features that RFID has to offer.
Task Interleaving and Cross-Docking
Training warehouse new hires is often a lengthy process. On average, a new employee can take nearly 60 hours to successfully navigate a warehouse training program. To lessen this time, warehouses are migrating to voice-only systems that combine voice picking and screen-direct picking. These can be controlled simply with mobile devices, like a mobile phone.
Another option is task interleaving. This can track the location of employees and data link that location to device usage to maximize productivity. This saves time and allows staff to engage more tasks.
Cross-docking will become more popular as well. This allows warehouses to minimise the manual handling of materials.
Product Returns on Social Media Sites
As many as 34% of consumers make impulse buys through social media sites. One site specifically, Instagram, has seen a marked increase in consumer impulse buys since May 2019. Buyers have been able to use Instagram to shop and check out thanks to built-in tools. This has prompted a dramatic increase in impulse buys, leading to a higher rate of returns. Incredibly, as much as 1/5 of all returns made by online shoppers will soon be attributed to social media consumers.
The need for warehouses to reduce their impact on the environment will drive several new eco-conscious initiatives. This includes a more active recycling program, high-efficiency equipment that reduces energy consumption, optimising vehicle use, and biodegradable packaging.