Impact of COVID-19 on Warehousing and the Supply Chain

1. The Need to Keep More Inventory on Hand Expanded the Use of Safety Stock.   

For most manufacturers, the trend pre-pandemic was to adopt just-in-time manufacturing practices to keep inventory costs lower.  This also helped warehouses to better utilize space.  With the advent of COVID-19, many manufacturers had to reduce staffing due to the need to social distance or even suspend operations entirely for a period of time.  This resulted in inventory shortages. 

Ever a changing balance, the harmony between safety stock and JIT inventory will undoubtedly change.  Manufacturers will need to keep more inventory, known as buffer stock on hand to forestall shortages and minimize supply chain risk.  This will lead to changes in the amount of available warehouse space and capacity issues. 

2. Pandemic-Forced Lockdowns Spurring the Acceleration of Online Shopping, e-Commerce and Last Mile Delivery and Dramatically Impacted Warehouse Operations 

No, it is not your imagination.  The use of online shopping has dramatically increased.  In fact, Forbes estimates that COVID accelerated the growth of e-commerce approximately 4 to 6 years.  Because many warehouses were only handling goods by the pallet, it has been a significant change and added cost to adopt the needed processes and technology to be able to service pick and pack operations needed for D2C e-commerce order fulfillment.  

Warehouses have had to retrain workers to picking individual items, often much smaller in scale.  All of this alters warehouse operational processes, changing the way that material flows, and goods are stored in the warehouse facilities.  Having a top notch warehouse management system designed to help ensure high volume, fast, accurate fulfillment for e-commerce omnichannel operations is essential.  These high-functioning systems manage and optimize labor resources, increase operational efficiency and seamlessly work with other critical systems such as shopping carts, online marketplaces, other technologies and more. 

3. Inventory Visibility Takes Center Stage

As consumers order online, they have come to rely on clear, accurate, timely inventory visibility.  This has become a bit more complicated with the increased volume of online orders.  Now, because of the need for speedier deliveries, companies frequently choose to leverage third parties, such as 3PLs, decentralize their warehouses and use their retail stores for distribution.  Now, it has become essential to know in real time exactly where inventory is in each location in order to ensure fast, accurate order fulfillment.  

Facing consumers mad about stockouts is more than annoying, it can damage a brand’s reputation and its future business.  Having the right technology to provide inventory visibility in real time is crucial, including hardware and warehouse management software. 

4. Labor Shortages and Social Distancing Requirements Bolstered Adoption of Technology Solutions 

Last year during the pandemic, businesses across the supply chain suffered from work stoppages, disruption in labor, and shutdowns.   Many businesses found it challenging to execute the advice from the Centers of Disease Control (CDC) to social distance and the disease ran rampant, especially in operations in which people had to work in close quarters.  

One of the impacts of this is the acceleration of the trend toward the adoption of material handling solutions, automated storage and retrieval systems (AS/RS), voice technology and light technology solutions.  With warehouse operations already experiencing labor shortages, warehouse operators were often forced to replace human labor with robotics and sophisticated technology systems. 

5. Escalation in Need for More Cold Storage Warehouses 

The surge in online orders was not limited to apparel, electronics, and home goods.  Families trapped at home were hungering for convenience.  When restaurants were shuttered, there was a noticeable shift in the food supply chain.  The trend towards meal kit subscription boxes increased during the pandemic, with companies such as HelloFresh growing 90% in the first quarter of 2020 alone.    

Cooking became a popular pastime, and the hobby of making fresh meals, baking bread and ice cream took on new importance.  Grocery stores sold out of yeast and flour and even the partial adoption of plant-based diets surged.  As the American diet became inexorably linked with the new hobbies of a nation of anxious, homebound consumers, the need for refrigerated warehouses escalated. 

 Consumers ordered more fresh foods (when available), frozen foods and prepared foods. This altered warehouse operations, with many 3PL cold storage warehouses also known as public refrigerated warehouses or PRWs taking charge of services needed to facilitate production and speedy delivery to consumers. 

 Twice as costly as an ambient warehouse to build, cold storage warehouses are rarely built on spec, meaning that they need to be commissioned by an owner rather than built to await a purchaser.  The technology needed to run cold storage warehouse operations is expensive, but necessary to ensure the safety of the goods it stores. 

Conclusion 

Global supply chains certainly took a hit during the covid19 pandemic.  The impact of the coronavirus was widespread, affecting issues from human capital to delivery charges.  Because the world is still early in the digital transformation of supply chains and distribution networks, the logistics and supply chain challenges were highly disruptive, especially as some distribution centers and warehouses have been slow to adopt technologies and still largely operate manually. 

The impact on warehouses is still being felt today and is having a transformative effect on the supply chain industry. Whether it started with the disruption in the supply chains of protective equipment or was related to the ecommerce boom, job loss, changes in freight transportation, changing public health advisories for businesses or some other reason, much of the change is here to stay. 

Consumers must be able to count on supply chains, not only for essential items like foods, medicine, personal protective equipment, and hand sanitizer, but for everyday goods that bring them comfort, satisfaction and even joy. 

Looking at this from the perspective of a glass half full, perhaps the impact of the coronavirus was positive in that it demonstrated that complex problems could arise and be solved, at times by close collaboration and problem solving as well as by the adoption of new strategies and innovative emerging technologies.  From artificial intelligence to mobile robots, material handling equipment, and sophisticated management systems, supply chains, warehouses and distribution centers can be made more resilient, defensible against cybersecurity attacks, and efficient with emerging technologies.  ASRS, material handling equipment and mobile robots can compensate for diminishing human capital when workers must be sidelined due to illness, potentially saving lives. 

Not all change is bad, after all.