Combining ingenuity, belt-tightening, and grit helped brands and retailers successfully navigate the volatile supply chain over the last few years. Turbulent times aren’t quite over, though. Uncertainty lingers about the economic outlook, the rising cost of labor, fulfillment delays, and continued lengthy backorders.
While the unprecedented warehouse space crunch and product shortages have decreased, companies are contending with ever-higher customer expectations around product delivery. Rising costs have forced hard choices between maintenance and growth.
Today’s brands face a daunting challenge. They must simultaneously:
●Build the right fulfillment networks to optimize distance and time for shipping products,
●Maximize cash flow, carefully manage working capital, and
●Create a loyal customer base that will result in repeat purchases.
To meet these pressures, brands and the third-party logistics providers (3PLs) they rely on must continue to innovate and implement a strategic approach that accommodates evolving external factors. Unsurprisingly, brands focus on elements they can control to address process inefficiencies and improve operations.
As warehousing and logistics companies look to the new year for ways to meet fulfillment goals and dynamic customer expectations, focusing on best practices can help position them for success:
Conversations around logistics and efficiencies can often overlook the human element. Given labor constraints and costs, this is a mistake.
Nearly two-thirds of warehouses (64%) anticipate increasing their staffing in 2024 to capitalize on a rising economic wave and keep pace with customer demand.However, finding qualified workers is what they report as the biggest challenge to warehouse staffing, as detailed in the Extensiv 2023 Third-Party Logistics Warehouse Benchmark Report.
Staffing is partly a numbers issue. In September, the U.S. Chamber of Commerce reported the ongoing labor shortage, finding that even if the U.S. were to reach full employment, there would still be millions of unfilled job positions. Businesses with warehousing and logistic needs must retain key local employees.
To keep workers happy, evaluate pay and performance incentives. Front-end investment in staff retention can prevent the much higher subsequent costs that come with recruiting and training new employees. One way to demonstrate commitment to staff is to offer certification classes or training programs that allow workers to grow and upskill without going elsewhere.
Capitalize on available warehouse capacity
The continued rise of e-commerce drove years of a red-hot warehouse real estate market that limited many businesses from expanding. Considering astronomical real estate costs, finding additional warehouse space in existing or new facilities has been an extraordinary challenge over the past few years. Brands, scorched by pandemic-related shortages, overcompensated by over-ordering inventory and then faced the challenge of finding storage solutions.By 2022, the fallout from the pandemic and strong consumer demand led to nearly 60% of 3PLs operating at 90%+ capacity and 20% operating at 100%+.
The good news is that the market is showing signs of slowing. The Wall Street Journal reported this is the case even in historically capacity-challenged areas like Southern California. Businesses with available budgets, like Ryder, Costco, and 3M, are finding new or expanding existing warehouse space to take advantage of the market shift.
Others are choosing to continue operations at 100%+ capacity, doubling down on overflow storage and creative use of dead space (like better utilization of vertical shelving gaps or outdoor containers in parking lots). While this may create challenges (e.g., making it harder for workers to navigate the warehouse floor and pack products that are more dispersed throughout the facility), there’s a clear upside—those who chose this approach were, on average 2.7 times more likely to experience high growth vs. those that kept their warehouse below 100% capacity.
As the post-pandemic economy has stabilized and demand remains strong, many manufacturers/brands are looking to expand their geographic footprint for business growth. Some are pursuing hyperlocal fulfillment, which effectively creates small fulfillment centers within a centralized stock location within an urban area. The move allows companies to avoid the cost of a distribution center in expensive and congested locations while improving delivery times to customers in high-density areas.
Others want to expand their reach by partnering with other 3PLs to create a fourth-party logistics(4PL) network. Beyond the transportation, warehouse, and distribution services that a 3PL provides, a 4PL functions as an integrator and is responsible for managing and coordinating the entire supply chain for a client. It enables geographically dispersed fulfillment that offers competitive shipping rates for customers. For larger businesses with complex supply chain needs, joining or developing a 4PL can be a convenient and effective way to expand reach. For smaller 3PLs, it optimizes omnichannel fulfillment across vast geographical areas, allowing firms to serve more ecommerce customers and manage customers’ orders faster. For companies of all sizes, a 4PL transfers the burden of managing many complicated supply chain issues so businesses can focus their time on great products, premium services, and delivering top-notch customer experience.
Evaluate and invest in technology
Businesses and logistics professionals continue to invest in technology to reap the benefits of increased productivity and profits. A warehouse management system (WMS) is the most commonly adopted technology because it can centralize disparate tasks like inventory tracking, billing, warehouse reporting, and ensuring order accuracy.
For 2024, companies are embracing the efficiencies and cost-savings made available by implementing tech tools that improve labor productivity, integrate artificial intelligence, and simplify mobile barcode scanning. While advanced robotics are promising and hint at the potential of an automated future, businesses don’t have to invest a substantial amount for next-gen features. For many firms, simple robots for storage, warehouse mobility, and picking deliver significant efficiencies and value.
Today’s initiatives, tomorrow’s advances
Amid challenges at every level, from the warehouse to the global economy, today’s retailers and ecommerce companies have a great opportunity to optimize warehouse and fulfillment operations. Prioritizing your workforce, capitalizing on logistics and capacity trends, establishing a broader network, and leveraging new technology can drive successful omnichannel fulfillment for the long term.
Rachel Trindade is the CMO of Extensiv. With more than 20 years across Marketing, Product Management, Customer Success, and Field Operations, Rachel’s extensive go-to-market and marketing management experience has driven dynamic growth for multiple organizations. Having supported two IPOs and integrated numerous companies through mergers and acquisitions, Rachel leads high-growth organizations to even greater revenue growth. Most recently, Rachel served as the Global VP of Marketing at Teletrac Navman, part of Fortive (NYSE: FTV), where she led the global marketing organization across four continents for demand generation, brand, and product marketing programs. Prior to that she served as Vice President of Marketing at HireRight.