The warehousing industry faces numerous challenges in today's fast-paced, technology-driven market. From the rapid growth of e-commerce to labor shortages and rising land costs, traditional warehousing methods struggle to keep up. This article delves into the current pain points in warehousing and explores how smart warehousing solutions can address these issues, optimizing operations and enhancing efficiency across the logistics sector.
E-Commerce and Omni-Channel Emergence
Since 2020, the global e-commerce market has experienced exponential growth, projected to reach US$5 trillion in 2024 with a consistent compound annual growth rate of 15% from 2019 to 2024. This e-commerce surge has fundamentally transformed the landscape of warehousing and logistics. Consumers now expect fast and accurate delivery of a vast array of products, demanding that warehouses handle a significantly higher volume of orders with increased complexity.
The rise of omni-channel retailing further complicates this scenario, requiring warehouses to fulfill orders from multiple sales channels, including online platforms and physical stores. Managing inventory across these channels and ensuring timely delivery is a formidable challenge for traditional warehouses. According to a report by Coherent Market Insights, the omnichannel retailing market was valued at $7.80 billion in 2023 and is projected to reach $19.51 billion by 2030, growing at a compound annual growth rate (CAGR) of 14% from 2023 to 2030. This growth spans various retail formats, including brick-and-mortar stores and e-commerce platforms, and covers industry verticals such as fashion and apparel, electronics and appliances, FMCG and grocery, and home improvements.
Smart warehousing addresses these issues by leveraging automation and real-time inventory management systems, streamlining operations, and enhancing order accuracy. These advanced systems enable warehouses to efficiently manage inventory across diverse channels, ensuring timely delivery and improving overall operational efficiency.
Labor Shortages
The logistics industry is facing a severe labor shortage, exacerbated by the labor-intensive nature of traditional warehousing jobs. These roles often involve repetitive and physically demanding tasks, leading to high turnover rates and difficulty in attracting skilled workers. The aging workforce in many developed countries further compounds this issue, as there are fewer younger workers entering the industry. Additionally, the instability of labor costs adds another layer of complexity, making workforce management even more challenging
According to a study by Descartes Systems Group, 76% of supply chain and logistics leaders surveyed are experiencing notable workforce shortages, with 37% characterizing the shortage as high to extreme. These shortages are significantly affecting financial performance, peak season operations, and logistics partner performance, with 58% of respondents indicating that customer service levels have been negatively impacted.
The study also revealed that specific areas within the logistics industry are suffering the most from resource shortages: 61% of respondents reported shortages in transportation operations and 56% in warehouse operations. Furthermore, 55% of leaders identified knowledge workers as the hardest to hire, highlighting the increasing importance of technology-enabled and data-driven roles in supply chain and logistics operations.
Smart warehousing solutions, such as automated guided vehicles (AGVs), robotics, and automated storage/retrieval system(ASRS), alleviate these challenges by automating repetitive tasks, allowing workers to focus on more strategic and less physically demanding roles. This not only improves operational efficiency but also significantly enhances workplace safety. Traditional forklift operations can pose risks such as unsafe charging practices, accidents from racking collapse due to forklift collisions, and pedestrian injuries. ASRS systems eliminate these hazards by reducing the need for manual forklift use, thereby making the industry more attractive to potential employees. With business performance closely tied to both the quantity and quality of the workforce, leaders in supply chain and logistics must rethink hiring and retention strategies and consider how technology can mitigate current and future workforce challenges.
High Land and Construction Costs
Rising land and construction costs are a major barrier to expanding warehousing infrastructure. Urban areas, where demand for warehousing space is highest, are particularly affected by these escalating costs. The need for larger and more sophisticated facilities to handle increasing volumes and complexities adds to the financial burden.
Despite a gradual acceleration in global construction activity, construction labor costs have averaged a 4.6 percent rise globally over the past year. Additionally, 79 percent of international real estate markets report ongoing skills shortages, which could continue to put pressure on construction prices. These challenges highlight the importance of finding efficient solutions to maximize available space without incurring excessive costs.
Smart warehousing addresses the issue of high land and construction costs by maximizing the use of available space through vertical storage solutions like automated storage and retrieval systems (AS/RS). These systems allow warehouses to expand upwards rather than outwards, significantly increasing storage capacity without the need for additional land. By leveraging these advanced technologies, businesses can mitigate the financial burden associated with traditional warehousing expansion and improve overall operational efficiency, even in a fluctuating economic environment.
Fragmented Supply Chain Network
The traditional supply chain network is often fragmented, with inefficiencies arising from a lack of integration and coordination among different stakeholders. This fragmentation leads to delays, increased costs, and reduced transparency.
Recent surveys indicate that almost every company has experienced significant supply chain issues, with 44% experiencing major challenges due to their supply chain footprint and 49% facing major planning disruptions.
Smart warehousing solutions integrate various elements of the supply chain, providing real-time visibility and coordination. Technologies such as IoT enhance communication and data sharing among suppliers, manufacturers, and distributors.
Additionally, the use of large scale warehouse facilities enables users to consolidate upstream and downstream inventories within a single building, significantly reducing transportation costs and enhancing supply chain efficiency.
Supply Chain Disruptions
Global supply chains are increasingly vulnerable to disruptions caused by events such as natural disasters, geopolitical tensions, and pandemics. These disruptions can lead to significant delays, increased costs, and stock shortages. A resilient and flexible warehousing infrastructure is essential to mitigate these risks. Smart warehousing technologies enable rapid response to disruptions by providing real-time data and analytics, allowing for proactive decision-making. Automated systems can quickly adjust to changes in demand and supply, ensuring continuity of operations even during crises.
Lack of Digitization
Despite the advancements in technology, many warehouses still rely on manual processes and outdated systems. As of 2021, over 80% of warehouses lacked any form of automation whatsoever. In the past decade, around 15% of warehouses have adopted some level of mechanization, while only 5% have implemented advanced automation equipment and solutions. This significant shortfall in automation presents a major opportunity for companies within the warehousing automation ecosystem.
This lack of digitization results in inefficiencies, errors, and increased operational costs. Smart warehousing addresses this challenge by implementing advanced technologies such as IoT, AI, and cloud computing. These technologies enable real-time data collection, analysis, and decision-making, significantly improving operational efficiency and accuracy. By digitizing warehouse operations, businesses can reduce errors, optimize inventory management, and enhance overall productivity.
Looking Ahead: The Smart Warehousing Advantage
The challenges facing modern warehousing are complex and multifaceted, but smart warehousing solutions offer a promising path forward. By leveraging advanced technologies such as automation, robotics, IoT, AI, and data analytics, businesses can address pain points ranging from labor shortages to supply chain disruptions. Embracing these innovations is essential for optimizing operations, reducing costs, and staying competitive in a rapidly evolving logistics landscape.
Note
This article is part of an ongoing series exploring the future of smart warehousing.
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About the Author
Peng-tao Zhang is the Expansion Director at Ally Logistic Property. With over a decade of success in the logistics industry, PT has a proven track record in leading corporate strategy, people management, decision-making, and sales management. Based in Bangkok, PT excels in fostering a positive and healthy work culture, driving 0-to-1 efforts, and managing international client relationships. His multilingual skills and extensive experience in managing multicultural teams have been instrumental in expanding ALP's footprint across Southeast Asia.
About Ally Logistic Property
Ally Logistic Property (ALP) – headquartered in Taipei, Taiwan with regional operations in Bangkok, Thailand, and Kuala Lumpur, Malaysia – is at the forefront of the logistics industry, offering cutting-edge smart warehousing solutions. Our flagship OMEGA Smart Warehousing system integrates advanced technologies such as automation, robotics, IoT, and data analytics to streamline operations, maximize storage capacity, and enhance efficiency. Partner with ALP for innovative, scalable, and secure logistics solutions tailored to your business needs, making logistics simpler, smarter, and more sustainable.