The pace of change in warehousing and logistics has never been faster. Technology, macro economic conditions and changing consumer behaviour, are having a huge impact on the way warehouses and distribution centres are being designed and operated. Here are 5 of the most significant ones we encounter as WMS specialists.
Location is not always important
It used to be the case that the Midlands/Northampton area was the ideal location for a warehouse, but that’s becoming less important. In the future, a central location won’t be as necessary, provided you have a DC process that fulfils the ecommerce model and easy access to appropriate transport links. In many cases, logistics operations will be fulfilled using a pallet or parcel network, which makes a central location less important. For instance, we’ve been working with a company that has a central DC in Fareham. It has proved an ideal location and they work with pallet networks and couriers to obtain UK wide coverage.
Brexit will have a significant impact on labour costs
Whatever your political views, Brexit is having an impact on the logistics industry. The UK now has an ever-decreasing pool of skilled warehousing labour and that labour force also no longer regards the UK as their preferred choice of a country in which to live and work. This change is partly due to the reduced value of the pound, but in addition, the negative publicity surrounding immigration. Many warehouses are already seeing the impact of wage inflation as a result of the shrinking labour pool. Management will need to identify a way to work more efficiently and limit exposure to increasing labour costs.
Buildings are getting taller
There is a definite trend towards having larger, taller warehouse buildings and this will continue as property costs continue to increase. Although for larger operators where centralisation is important, taller warehouses bring operational advantages, most SMEs don’t need a DC on that scale and it brings with it a temptation to hold too much stock. For many e-commerce businesses, inventory is being pushed back up the supply chain and if you are a distributor, it’s good business practice to avoid holding large amounts of stock. It is estimated that holding £1m in stock over a year creates over £150K in servicing costs. Inventory is the biggest single cost for a business, so holding greater volumes simply because there is available space isn’t commercially sensible. Having a taller DC able to hold more stock contradicts the wisdom of minimising the amount of stock being held in order to be as efficient as possible.
Increasing energy costs requires more focus on sustainability
All companies are keen to improve their environmental performance as much as possible but a totally zero carbon DC is very difficult to achieve in practice. To put this into perspective, the amount of CO2 generated when creating a 1m2 area of concrete is nearly 160kg and many new warehouses will be 1km2 in area. Companies that have environmental credentials at the heart of their brand decision making will want to make the investments needed to swap steel for wood and have a living roof for example, but the vast majority won’t see the value in going to these lengths.
IT systems are more important than ever
In any new build warehouse, it would be a tragedy not to embrace the opportunity to introduce some form of data capture and WMS capability from the outset and yet the sad reality is a lot of companies will still do this, as I experienced very recently on a site visit.
IT needs to be at the centre of all the decision making in a business because this is the best way to identify a great process. Amazon is a classic example – they took years to make any profit but now, as a result of all that effort into IT and infrastructure 15 years ago, it’s gravy every month! The same applies to automation and robotics. Retrofitting automation into an existing infrastructure and legacy equipment is very difficult and always means a compromise.
Companies implementing automation will be looking to have specially adapted, purpose built warehouses, with technology placed at the centre of the decision making process.
Author Eric Carter, Solutions Architect at Indigo Software.