How Do You Solve A Problem Like Warehousing?
23 January 2020
Author: Jasmine Waters
Particularly in the UK, retailers are currently facing many conundrums. Challenges such as Brexit uncertainty, low consumer confidence and high customer expectations continue to present themselves. Pressures around what stock a brand should hold, where to keep it and the expenses attached to moving it around have left many in a flummox of where’s best to put their finances. Could there be a blanket answer to solving the problem of warehouse woes?
What are the issues?
Stock for UK retailers (relating to expected sales) were at their highest recorded level in October 2019 – with the preparation for any potential backlogs in supply in the anticipation for the initial Brexit leaving date creating a large stockpile. Brands are now facing a need to decide where is best for them to invest, along with questions concerning potential warehouse outsourcing, automation and store fulfilment. Globally, there needs to be a tactical and strategic approach to how to move stock, with local distribution in key places potentially continuing to be a major area of investment. We live in a macroeconomic environment, meaning there is more emphasis on how the economy is performing as a whole. Foreign exchange rates are fluctuating, with an increased shift towards greater protectionism (shielding domestic industries) and closer scrutiny on import tariffs and quotas. On top of this, retailers need to adhere to extreme customer demand for ‘newness’, speed and the influx of product returns. Consumers want instant gratification with their purchases from the moment of initial brand engagement, putting massive pressure on their supply chain.
What are potential strategies?
Warehousing costs also presents a potential problem, with their increasing coming off the back of omnichannel business strategy. Consequences of trying to meet high customer expectations include longer warehousing hours – meaning higher staffing costs and a larger transportation of goods. One potential remedy of this is to introduce a home delivery or ‘click and collect’ service directly into retail stores. Not only is this a more efficient way of managing lots of stock, this could increase a use of fulfilment in store. This would mean a greater need for staff training (as stores are effectively becoming mini warehouses themselves) and would require a keen eye on not separating stock too early to avoid unnecessary protectionism. Other brands are looking to invest in more tech-heavy warehouses, finding solutions for packing and sorting in automation. Despite big brand names investing huge sums of money in this strategy (e.g. Boohoo has invested £36.7m in their distribution centre), most still prefer the combination of human and automated power combined – the human labour power providing much-needed flexibility. Some retailers try to avoid technology altogether, not wanting to invest in automation that could become obsolete in future years. After addressing these issues, there could still remain the question of whether to expand operations with new warehouses or using a third party. When considering this (or any of the above issues), it is important to remember there is no set way of achieving stock success – different strategies will suit different retailers. Our consumers want a great deal from the brands they buy from, which will require careful consideration from brands and retailers about how best to fulfil as much criteria as they can – including the product distribution.
Image source: https://www.accinet.co.uk