The perfect storm of Brexit and COVID-19, a shortage of warehouse infrastructure, and labour propelled the retail sector into supply chain chaos last year, and brands scrambled to keep up with the pandemic-fuelled growth in online retail.
Experts at real estate advisory firm, Colliers, have since reported that the take-up for large industrial distribution warehouses increased to record annual levels. With only limited industrial space left around the UK at present, rent prices for warehouse spaces have soared leaving retailers facing demand, far outweighing supply.
If you thought the capacity crunch was challenging enough, the smaller labour pool and raw material shortages are also wreaking havoc and placing additional pressure on retailers. New data has revealed that the UK’s retail industry lost 89,000 jobs in the second quarter of 2021, due to reduced high street footfall, vacant stores, and competition for jobs in other sectors, such as hospitality. Meanwhile, shortages of materials such as plastic, paper and wood continue to disrupt supply chains globally, whilst threatening to hamper efforts of economic recovery.
So, how should brands be navigating the retail landscape in 2022 and onwards – not only keeping their heads above water but focusing on growth, when confronted with so many shortages?
Making the most of what you have
The first option, when faced with a shortage of warehouse space for growing eCommerce demand, is to look at existing infrastructures and ensure they are being fully optimised. Additional space isn’t always necessarily the answer, especially as energy bills continue to skyrocket.
Retailers and brands should be starting to look beyond a centralised warehouse model, considering utilising existing physical store spaces that may have become redundant or that have the capacity to work smarter. With the right order management system and picking technology, brands can transform their brick-and-mortar sites into multi-node distribution facilities – making the space work twice as hard by fulfilling the needs of both in-store shoppers, whilst also being able to support online demand.
Even those that do have the warehouse space need to make sure it is maximised, especially with sky-high rent prices and hiking consumer orders to fulfil. This can be achieved by ensuring that the warehouse is well equipped with the right technology and processes. To increase the efficiency of both storage and retrieval, retailers should consider the implementation of automated storage and retrieval systems (AS/RS) underpinned by an effective warehouse management system. This will ensure the smooth flow of goods in and out when the warehouse is full to the brim.
Cloud-based order fulfilment picking solutions will also prove incredibly valuable here. These flexible order picking solutions can be easily integrated within existing systems and can help increase distribution efficiency, by not only speeding up the picking process but increasing picking accuracy.
No vacancies
Ironically, temporary fulfilment centres can offer brands a more permanent solution to this chronic lack of supply. Pop-up distribution centres (pop-up DCs) can be used as an alternative to investing in scarce – and costly – warehouse space. Due to their flexible nature, pop-up distribution centres can be quickly and easily implemented, providing a cost-effective option in the face of rising costs elsewhere.
Maximising your people power
In addition to recruitment, which can feel like a mission with so much competition within the hospitality industry, again it comes down to optimising existing resources. For example, are current employees being given the tools to be as efficient as possible?
In stores, retailers and brands should consider providing shop assistants – who may be experiencing less high street footfall – with the technology to fulfil online orders from their stores. By enabling a cloud-based omnichannel solution, you can leverage your workforce across retail channels – effectively directing retail staff through the pick/pack/ship processes.
In the warehouse, implementing a robust Distributed Order Management (DOM) system to coordinate and take out the manual labour of locating stock – can also free up employee time and boost productivity. An advanced DOM system works by ensuring your order management system (OMS) can divert orders to the appropriate inventory pool – depending on several factors – including delivery address and product type. This will have a significant impact on your ability to keep orders moving to meet consumer demand, despite a shrinking workforce.
Whilst not the right fit for every brand, in terms of cost-effectiveness and efficiency, another option is to turn to automation and robotics-powered solutions. These tools can take on a range of time-consuming – yet essential – tasks historically carried out by human workers. This can include adding more self-checkout terminals to physical stores and investing in more automation tools to update prices, effectively manage inventory and maintain shop floors. By implementing automation to perform these often-repetitive tasks, your intelligent workforce is then freed up to support with tasks that add value to the organisation and build brand loyalty.
Transparency around shortages
When considering warehouse space and labour shortages, the solutions can seem a little more obvious. But when faced with a lack of materials, this can feel impossible for brands to handle. Recently, the UK was hit with a shortage of cosmetics and skincare products due to a major drop in the availability of a key chemical, ethoxydiglycol, found in a host of household items as well as medications. As a result, prices of the compound increased almost tenfold, rising from £12/kilo to £103. In addition, minimum orders required by some wholesales rose to £100,000, leaving smaller companies unable to secure supplies.
Whilst aspects of material shortages may be out of the retailer’s control, it is possible to put measures and considerations in place to reduce the subsequent consequences. By having full visibility across all purchasing channels, brands can limit the problems that may occur that may hamper brand loyalty. Having the infrastructure in place that provides the required visibility and communicates real-time stock information to the eCommerce site avoids disappointment later down the line. Ensuring customer service agents are armed with up-to-date information and insights into any shortages and the impact this could have on delivery timescales is also vital when managing customer expectations.
Executing foresight is key for retailers and brands who wish to overcome the threat that these shortages are currently presenting. Implementing the strategies and technologies discussed here will not only enable brands to overcome the current adversities being faced, but also distinguish themselves from their competitors. Brands that do so can aid growth in the long run whilst building resilience for future periods of uncertainty.
