Now is a great time for shippers to take stock of what happened in 2018 so they can prepare for what’s coming in 2019.
With that in mind, we summarized seven warehousing stories and trends from last year and indicated here what they mean for the year ahead
1. FedEx expanded ground delivery to six days a week to process growing volume
What happened: FedEx announced plans to permanently increase ground delivery to six days a week in response to heightened e-commerce demand both year-round and during holidays. This new strategy is the company’s latest step in a series of initiatives to optimize its network and improve service.
What it means for 2019: FedEx’s adjustment shows the extensive impact of high volume on supply chains. It’s likely that we will see more permanent initiatives to handle high demand in 2019 from other companies. These plans could mean increased reliance on technology to meet demand or expansions in traditional offerings like ground delivery. FedEx pursued both strategies in 2018.
2. Walmart announced a new high-tech warehouse to grow its grocery service
What happened: In the fall, Walmart announced plans to open a new, high-tech warehouse in California to distribute food product for its online grocery service. This facility will use specialized technology to store and distribute inventory more efficiently. According to the company, this means moving 40% more volume than a traditional distribution center and reducing food waste.
What this means for 2019: A strong supply chain can be a company’s biggest competitive advantage in a new category, so look for continued investments in the technology and warehouse footprints behind new products and lines of business. As companies launch and grow new categories, they will continue to invest in the supply chain behind them. Online grocery ordering is just one example; new initiatives in any category will drive continued attention to warehousing and distribution.
3. Demand for warehouse space continued to shrink availability rates
What happened: The steady decline of vacant warehouse space was arguably the most visible trend of 2018. The industrial availability rate shrunk to its lowest mark since 2000 in the fourth quarter, revealing massive demand throughout the year.
What this means for 2019: Expect many shippers to turn to alternative warehouse solutions. Growing, technology-based approaches often uncover vacant space that’s difficult to find. 3PLs will benefit from this environment, since they often offer greater storage capacity than industrial availability alone indicates.
4. International trade tensions strained the Los Angeles warehouse market
What happened: Over the summer, trade tensions and looming tariffs threatened retailers preparing for the holiday season. In response, many shippers moved their inventory to the U.S. months earlier than expected, causing a logistical bottleneck at the Port of Los Angeles and catching the nearby warehouse market unprepared. Sudden demand for space forced many shippers to store inventory further inland, raising warehouse costs.
What this means for 2019: Since trade tensions escalated last year and show no signs of stopping, shippers should optimize their networks for cost and efficiency as much as possible ahead of time. Tariffs raise the immediate cost of importing product, but sudden demand on local warehouses means that shippers might pay more in drayage, transportation, and storage costs as well.
5. E-commerce demand began to influence the physical design of warehouses
What happened: CBRE reported that many warehouses aren’t built to distribute e-commerce shipments. Design elements like low ceilings or uneven floors keep these locations from processing orders quickly, increasing the demand for taller, even-floored facilities. However, construction of new warehouses that meet these criteria hasn’t progressed quickly enough to meet demand.
What this means for 2019: Look for more warehouse construction specifically designed for e-commerce fulfillment. As the number of taller, more optimized warehouses rises, other facilities may shift toward B2B and traditional product distribution. Older warehouses have plenty of uses, but new e-commerce demand will shape the future of construction and design.
6. Hiring struggles in warehouses heightened
What happened: A Logistics Management survey revealed that staffing is the top concern in the warehousing industry. Consequently, many 3PLs looked for ways to improve efficiency with a limited workforce last year. Their efforts often meant greater reliance on warehouse management software and automation.
What this means for 2019: Logisticians need to formulate better hiring strategies and find ways to automate processes so they can scale in labor-efficient ways. Warehouses that aren’t fully staffed often struggle to keep up with demand, hurting both distributors and the facility. This challenge is another logistical bottleneck for shippers of all sizes.
7. Reverse logistics became increasingly important for shippers and retailers
What happened: A CBRE report showed that reverse logistics — processing and distributing returned orders — is a serious challenge for many warehouses. The rise of e-commerce and its higher return rates made this problem even worse. To minimize the financial cost of items shipped back, logisticians need to quickly process orders, determine where to send inventory for reselling, and then physically move shipments to new locations. Supply chains are often not optimized for this process and struggle to accommodate returns quickly.
What this means for 2019: Shippers and logisticians should focus on optimizing their supply chains to meet the increased volume of returns. Whether the right strategy means an expanded warehouse footprint or increased reliance on technology, optimization strategy will take on more importance in 2019.
These stories from last year give us insight into what to expect in 2019.The hiring struggles, high demand, and international trade tensions of 2018 will continue to influence warehousing and distribution this year.
Expanded ground delivery, high-tech distribution centers, and new warehouse construction all reflect the growth and evolution of the entire industry.