kardex 2023 Warehousing Outlook

Product Information

Specifications

• Product Name: Warehousing Outlook 2023
• Features: Provides insights on important trends in warehousing for the year 2023
• Manufacturer: Deloitte

FAQ

• Q: Why is automation important for warehouses?
• A: Automation helps reduce reliance on manual labor, increases efficiency, and addresses labor challenges amidst shortages.
• Q: How can third-party warehousing benefit businesses?
• A: Third-party warehousing allows for expanded inventory in specific locations without the need for costly property investments, providing flexibility and cost-effectiveness.

How-to Guide

Warehousing Outlook 2023

• 80% of surveyed executives experienced a heavy or very heavy impact on their supply chain by at least one disruption over the last 12–18 months
• 90% of surveyed executives have agreed that the frequency of these disruptions has increased over the last decade, and the pandemic has exaggerated the impact
• 50% of surveyed executives agreed that these disruptions significantly affected their productivity and profits

Source: Deloitte analysis of 2022 manufacturing supply chain study data.

Disruptions are here to stay

Last year put supply chains at the centre of the national conversation.
Of the 200 US-based manufacturing executives Deloitte surveyed for their most recent supply chain survey, 80% reported a “heavy or very heavy impact on their supply chain by at least one disruption over the last 12–18 months,” and 90% of those surveyed reported, “the frequency of these disruptions has increased over the last decade.” Further, 50% reported these disruptions have significantly affected their productivity and profits. This report comes off the back of their 2021 survey, in which 72% of US-based manufacturing executives “predict that disruptions similar to the ones experienced during the pandemic will continue.” 1
Despite supply chain disruptions dominating the discussion, the ongoing labour crisis continued to trouble warehouses around the country. While the labour outlook is uncertain, supply chain issues will likely continue. This has warehouses and DCs doubling down on automation to help.
Take a look at how you can pivot your warehousing strategy for what’s coming in 2023. This guide will:

• Discuss eight of the most important trends for warehousing in 2023
• Identify how these trends may affect your business
• Provide actionable takeaways for how to address each trend

Warehousing Outlook 2023

1 “Just-in-case” continues, for now at least

Supply chain issues are here to stay, with experts predicting ongoing disruption well into the mid- or even late-2020’s 1, – which means so are “just in case” inventory strategies. Pre-covid lean manufacturing and “just in time” inventory strategies were the best approach to stay competitive and avoid being cash-strapped with slow-moving inventory, but that’s no longer the case. To combat the challenges of the past 24 months (COVID, labour shortages and supply chain disruptions) most DCs have pivoted to a just-in-case inventory strategy.
While 2023 will see DCs ease up on “buying any inventory they can get their hands on”, most will not transition back to a just-in-time inventory strategy just yet. Supply chains are still too fragile – flexibility will be the key to inventory management in 2023. DCs will err on the side of caution and continue to hold a bit more inventory than they need, leaving you to figure out how to accommodate the inventory in the short term (automated storage and retrieval solutions can be a great solution!) 2
Action: With inventory shortages and supply chain issues set to persist, continue leveraging a flexible just-in-case inventory strategy to ensure you have the inventory you need to fill orders.

#2 Labor shortages continue spurring automation boom

• The labour shortage is easily the second most talked about topic in warehouses nationwide – the combination of retiring baby boomers (shrinking the labour pool), the explosion of e-commerce (putting more pressure on the DC) and the lasting impacts of
• COVID (fewer workers able/willing to work) have made labour a top challenge for DCs year over year. According to the U.S. Department of Labor’s (DOL) Bureau of Labor Statistics (BLS) after the onset of COVID unemployment peaked at 15.7% in summer 2020 within the Warehousing and Storage sector. Last year this sector saw unemployment drop to just over 4% – on par with 2019 levels. Not only was labour harder to find in 2022, costs increased. The BLS reported labor rates have risen ~23% in 5 years with a mean hourly wage of $18.39 and a mean annual wage of $38,260 (neither of these numbers is fully burdened).
• The outlook for labour in 2023 is uncertain. Some experts are saying unemployment might hold at just over 4% in 2023, others are predicting an increase to over 6% because of inflation. 3 Either way, DCs are doubling down on automation to reduce their reliance on manual and unpredictable labor. Shifting to automation helps warehouses insulate themselves from the fluctuating labour pool while increasing overall performance.

Action: To reduce reliance on manual, unpredictable labor, turn to automated solutions that directly address labor challenges.

#3 DCs carry on embracing the urban lifestyle

• In this new age of e-commerce, same-day delivery is now a basic expectation for most customers. To match these heightened demands, many retailers are adapting and getting closer to urban customers – literally – by establishing DCs in urban areas.
• It’s a two-part approach. On one hand, companies are building completely new DCs in densely populated urban areas. In doing so, they can have products delivered same-day via local delivery vehicles at a lower cost long term. On the other hand, DCs will continue the trend of utilizing existing brick-and-mortar store locations for fulfilment in 2023. These converted retail spaces offer many of the same benefits as brand-new DCs, often at a lower up-front cost. 4

Action: Be creative when planning for the future and consider urban DCs to promote ongoing growth and manage rising customer expectations.

#4 Optimizing the existing floorspace is a necessity

• Warehouse space has never been so scarce and so expensive. Recent data shows the U.S. industrial vacancy rate fell to an all-time low (3.2%) in 2022 while industrial rent reached an all-time high of $8.36/square foot. The outlook for 2023 isn’t much better as vacancy rates are expected to remain around 4% while rent continues to creep up. 5
• Rising costs, low vacancy rates and insufficient new industrial space will see DCs continue to double down on the “building up” trend that accelerated in 2022.
• Automated storage solutions that utilize full floor to ceiling height are allowing DCs to fit more inventory in drastically less floor space.

Action: Build up – not out – and get away from over-priced and under- utilized floor space using automated storage and retrieval technologies.

Learn how ASRS can optimize your space.

#5 Third-party warehousing will continue to grow

• While space troubles remain at the forefront of warehouse managers’ minds, third-party or on-demand warehousing will continue seeing an uptick in 2023.
• Third-party warehouses offer a unique opportunity for businesses to store more inventory – helping facilitate a “just in case” strategy – and manage increased growth while avoiding the risk associated with a permanent space expansion.

Action: Explore third-party warehousing to expand inventory on-hand in specific locations while avoiding expensive property investments. 6

#6 Return troubles set to return in 2023
By now most people have heard the stat, “at least 30% of all products ordered online are returned.” 7 Returns have proven to be such an issue that major retailers have implemented some seriously dramatic return policies – some going so far as to not accept returns at all. 8 To remain competitive, retailers and DCs must be ready to handle returns and invest in their reverse logistics processes, or else they’ll continue to eat losses at further increasing rates as e-commerce continues to grow.
Action: Get ahead and establish a smooth reverse logistics program – to avoid bleeding money in the long term.

Learn more: Improving returned good management with ASRS

#7 Goods-to-person robotic integrations continue to rise
In response to labour shortages and increased customer demands, robotics adoption in warehousing rose exponentially in 2022 and is set to continue rising in 2023 and beyond. 9 By 2025, up to 50,000 robotic warehouses will potentially be developed, while 8 million robots may be shipped to users by 2030. 10 DCs will continue to explore the use of order fulfilment robotics – such as robotic cube storage and autonomous mobile robots (AMRs) – in the warehouse in 2023.
Further, DCs will look to use cobots (collaborative robots that can work alongside humans) in combination with a space-saving automated storage and retrieval system to maximize efficiencies. 11
Action: Don’t be intimidated by robotic solutions – they are intuitive, adaptable and scalable to a variety of DC applications and easier to cost justify than you might think!

#8 Millennials rise in the ranks of DC leaders
In 2023, expect even more millennials in leadership positions at DCs across the country as they begin to reach their peak earning years. 12 They continue to boast impressive higher education and master’s degree rates, most holding these degrees at rates of roughly 60 and 30%, respectively, according to a survey by Peerless Research Group. This level of education has accelerated millennials into leadership positions faster than anticipated. Known for their adaptability and willingness to invest in new technologies, expect DCs to further embrace automation, robotics, WMS, wearable technologies, blockchain and IoT as millennials become decision-makers in the warehouse.
Action: Continue hiring within and trusting the younger talent in your organizations – their unique perspective and willingness to try new technologies are the future of warehousing.

Rise of the Millenials

• DCs are finding Millenials working in the supply chain are smart, committed, reliable and enthusiastic – and they’re being rewarded with management roles in 2022.

Diving into the labor shortage

What DC workers want

References

1. “Meeting the Challenge of Supply Chain Disruption”, Deloitte Insights, September 2022
2. “Time to Tighten Up on Inventory Management”, Modern Materials Handling, January 2021
3. “The ‘Scariest Economic Paper of 2022’ Predicts Big Layoffs Over the Next 2 Years as the Fight Against Inflation Gets More Intense”, Business Insider, September 2022
4. “The New Heart of Urban Spaces – Understanding and Embracing the Value of Logistics in our Communities”, Rider Levett Bucknall, April 2022.
5. “U.S. Industrial Marketbeat Reports”, Cushman & Wakefield, July 2022
6. “2022 State of the Third-Party Logistics Industry Report”, 3PL Central, 2022
7. “E-commerce Product Return Rate – Statistics and Trends”, invest, May 2022
8. “Major Retailers Are Considering Dramatic Return-Policy Changes”, Entrepreneur, June 2022
9. “‘Golden Era of Robotics Adoption’ Kicks Off in 2022, Strategist Says”, CNBC, December 2021
10. “Top 3 Predictions on the Future of Automation in Warehousing”, Robotics and Automation News, December 2021
11. “How Robots Are Changing Distribution and Fulfillment Warehouses”, George Brown College, July 2021
12. “Millennial’s High Earning Years Have Arrived – Here’s How To Prepare”, Forbes, September 2021

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References

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