AUTOMATION & ROBOTICS
THE RISE OF THE INTELLIGENT WAREHOUSE
The warehouse is undergoing a huge transformation, from repository to fulfilment powerhouse, but there are risks to growth that need to be addressed. Robotics, AI and digitalisation could hold the key to boosting capacity. By Craig Whitehouse and Tim Wright, Managing Directors at Invar Group.
W
hat is the shape of modern warehousing and where is it heading? Far from its traditional role as a repository for inventory, the warehouse has become a powerhouse for fulfilment, whether it be replenishing retail stores, feeding just-in-time manufacturing lines or serving a discerning customer base directly through ecommerce. Demands placed upon the performance of the
warehouse have ratcheted up considerably over the past ten years as C-suite decision makers have come to realise the critical role the warehouse plays in delivering on the ‘customer promise’, developing market reach and strengthening the competitive position of the business. Immediacy is now a commercial imperative.
Sales can be won or lost on availability, speed of despatch and proximity to the customer. Short lead-times and late cut-offs play a decisive role in winning and retaining customers – and margins, along with brand reputation, can be enhanced or diminished by the speed and efficiency with which returns are processed and refunds managed. Warehouses are fast becoming ‘fulfilment
factories’, increasingly mechanised, automated and digitally integrated with the wider supply chain. The future looks bright, but there are significant influences and challenges that business will need to consider and act upon in order to mitigate rising costs, protect margins and increase capacity.
COSTS ON THE RISE Rising costs are an immediate concern with energy prices spiking, wages increasing and container shipping rates – although stabilising – still higher than the pre-pandemic norm. In addition, the National Living Wage rose by 6.6% to £9.50 an hour last April, coinciding with a hike in National Insurance of 1.25p in the pound for both employers and employees. Such increases in cost can quickly erode margins, leading many companies to look at point solutions where automation can be scaled up over time.
LABOUR AVAILABILITY Labour is no longer easily and readily available. Logistics UK reported in late 2021 that more than 13% of businesses were experiencing severe problems recruiting warehouse staff, compared to autumn 2020 when zero respondents recorded
such difficulties. Similarly, the UK Warehousing Association recently reported that some warehousing businesses were experiencing vacancy rates of over 20%, with its CEO, Claire Bottle, saying the warehouse industry is ‘tens of thousands’ short in terms of employees. Uncertainty is a big issue for many businesses
using flexible labour. Firms can find that up to 20% of gig-economy labour may not show up, creating significant problems for businesses during critical peak periods. Uncertainty over labour availability can now be a key factor, above cost of labour, in businesses choosing to invest in automation.
SUPPLY ANXIETY AND THE GREAT SPACE SHORTAGE Supply issues are a major concern, both in the manufacturing and retail sectors; a combination of the after-effects of a post-pandemic global recovery and complexity arising from post- Brexit customs procedures. Uncertainty over lead-times, deliveries and the supply of parts is hindering planning, impacting production lines and creating gaps on retail shelves. These issues with supply have led many businesses to adopt strategies that enhance supply chain resilience. Consequently, organisations are sourcing goods closer to home and importantly, increasing levels of inventory, leading to unprecedented demand for warehousing space. In the autumn of 2021, property agent Cushman
& Wakefield reported that available space in the UK had fallen below 50 million sq ft, the lowest level since it started tracking availability in 2009. However, this shortage of space is not a
sudden phenomenon, nor a short-term problem, and it has been exacerbated by the steady growth of ecommerce. A report published in January 2022 by the British
Property Federation and Savills finds that demand for warehouse space across England has been underestimated in planning policy for a decade and that future demand is likely to be at least 29% higher than past levels. This chronic shortage of warehouse space has seen rents rise 61%. With space in such short supply and rents rising,
businesses will need to focus on maximising productivity within the cube. However, many businesses are overlooking – or are unaware of – the potential to use readily available technology to drive performance, and hence capacity and
20 FEBRUARY 2023 | FACTORY&HANDLINGSOLUTIONS growth, from an existing footprint.
THE IMPACT OF ECOMMERCE Ecommerce has radically changed the dynamics of the warehouse. A shift in emphasis away from pallet loads towards single or few-item order picking processes required for ecommerce has dramatically increased dependency on finding sufficient pools of available labour. Until recently, this wasn’t a problem. However, labour is now a scarce resource. Businesses wishing to grow and increase capacity are constrained by the poor availability of labour and the competition from local businesses for those same, limited resources. As a result labour rates are rising. The pandemic propelled ecommerce to new
heights. ONS figures put Internet sales as a percentage of total retail sales at 30.4% in November 2021, a considerable rise on the pre- pandemic peak of 21.6% in November 2019. At the height of lockdown in January 2021 that figure hit 37.8%. And although figures have returned to more modest growth, with shoppers returning to the high street, expectations for ecommerce remain high. According to a report into ecommerce
published in February 2022 by Metapack with Retail Economics, UK retailers are expecting an additional £19.6 billion of online home deliveries by 2025, with online predicted to account for 49.7% of total non-food sales within that timeframe. Importantly, ecommerce has also given manufacturing businesses the opportunity to sell directly to customers. How these businesses approach fulfilling Internet orders may well play a critical role in determining how successful they are.
THE CHALLENGE TO SUPPORT GROWTH Supporting and enabling the future growth of the businesses has become a major challenge for those responsible for fulfilment. Mitigating cost may be a perennial issue for most businesses, but significant structural change within the labour market, following Brexit and the pandemic, together with a constricted warehouse property market – where availability is low and rents high – has placed a great number of companies under intense pressure. How can fulfilment gear-up effectively for growth when labour and space are hard to come by and
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