Is Your Warehouse Reaching Its Full Potential?

By Derek Browning, Director of Operations – Consulting

It’s consumed our headlines the last two years—supply chain issues are running rampant across industries with chaos at ports, distribution centers, and along shipping routes. Manufacturing delays, raw material shortages and long-term effects of the bullwhip effect are contributing to the challenges, and now softening demand curves are leaving inventories at near-record highs.

Warehouses, an essential part of supply chain recovery, have been deeply impacted by the turmoil of COVID-19. They’re grappling with capacity overflows, supply and demand imbalances, and labor shortages; many are also redesigning fulfillment processes in reaction to growing e-commerce demands.

With all this turbulence, distribution leaders are trying to differentiate themselves in an industry fighting for qualified labor. Finding that wage competition only covers gaps temporarily, organizations are embracing the need to rethink their short- and long-term strategies to better manage inventory and capacity. And on the facility floor, developing a culture that empowers workers and prioritizes efficiency can optimize operations amidst disruptive environments.

Develop proactive, flexible inventory strategies for the short- and long-term.

The onset of the pandemic initiated several consumer behaviors that strained warehouse operations. Demand skyrocketed across industries as consumers panic-shopped for everything from toilet paper to frozen meat. Retail commerce shifted heavily to include a blend of click-and-collect and e-commerce fulfillment. Supply chains designed to accommodate 4-6% e-commerce rates began seeing rates closer to 15-25%. This placed a heavy burden on distribution facilities and warehouses to support this demand channel shift, moving work historically performed in retailer locations to distribution centers.

Now that we’re seeing demand and consumer purchase behavior normalize, facility leaders are shifting towards becoming more strategic and proactive. With warehouse vacancy rates at all-time lows and parking lots full of temporary storage, shippers are beginning to question past decisions to triple safety stock and acquire additional space in response to lags in global manufacturing.

Instead of knee-jerk reactions to keep safety stocks high, or abrupt overreactions to cull inventory, supply-chain operators need to pause and assess their inventory strategies and how they use existing space. Short-term solutions may include a needs-based inventory stratification with storage strategies, temporary racking strategies for surge inventories, and allocation processes that pass along lead-time challenges to margin-appropriate accounts.  Long-term solutions may include inventory strategies that ignore demand amplification signals, near or re-shoring sourcing strategies to alleviate supply constraints, and modular distribution center designs that allow channel flexibility.

Empower the front-line worker to increase efficiency.

Truck drivers aren’t the only in-demand talent in the shipping and logistics space—warehouse workers are also highly sought after. Unemployment in the transportation sector has seen a rapid decline over the last few years, beating pre-pandemic levels in April 2022. There’s no doubt that high order volumes and shifting customer demands have since pushed shippers to offer competitive wages and benefits to reduce turnover. Now is an ideal time to invest in workplace culture and training. Employers can help employees feel valued while expanding their skill set and improving warehouse functionality by offering them opportunities to learn and grow through coaching and other programs.

Part of this training should extend beyond culture and into methods for increasing efficiency and reducing waste to create a better work environment and a more effective strategy for warehouse management. Companies like Transplace offer Lean Enterprise Transformation solutions, which serve as guides to help teams work smarter—not necessarily harder. These solutions take an employee-centric approach to equip and empower the front-line worker to see and solve problems that impact their daily operations. This empowerment can have a dramatic impact on realized business results. Research shows that engaged employees stay longer while operating at higher and more meaningful productivity levels.

The worst may be over, but there’s still work to do.

Though the darkest days of the pandemic may be behind us, supply chain issues are far from over. There’s still a pressing need to optimize warehouse operations and build a strong foundation for shipping and logistics. Warehouses can re-establish the status quo from an industry and process perspective while also training and empowering employees to make decisions that maintain an optimized environment.

When shippers see warehouses as more than storage facilities, these facilities can be transformed into nimble, fast-moving velocity centers that drive value throughout the supply chain.