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From the start of stay-at-home orders came new demands on warehousing that logistics companies are continuing to adapt to. Fluctuations of storage demands have ranged widely, from increased needs for nonessential goods to decreased needs for goods moving quickly, as influenced by the rise in e-commerce.
March brought a sudden demand for personal protective equipment in the U.S. as well as a sudden shortage. Over the first few weeks, many businesses began to devote themselves to PPE distribution to boost the nationwide supply, and some turned to PPE to stay afloat as quarantine dropped other sales to unsustainable lows. Supply chain partners of various backgrounds, without experience in medical supplies, quickly learned to accommodate the strict requirements of PPE, regulated by the FDA as technically “medical devices.”
During March and April, the distribution of essential goods such as PPE was given priority over nonessentials. Consumers experienced processing delays of nonessential goods as they began to turn to e-commerce from their new stay-at-home arrangements. With bottlenecked distribution, these nonessentials caused an increase in warehouse demand.
“When the quarantine started the warehousing industry was in a state of flux, much like the rest of the world. Retailers and SMBs were shutting down; distribution centers and fulfillment centers were prioritizing essential goods and nonessential inventory couldn’t sit in the ports or in trucks. This created an acute spike for warehousing,” explains Saad Shahzad, general manager of Clutter.
“Over the next few months, we saw changes in the industry landscape that are driving a more permanent shift — retailers stopped taking ownership of goods at the ports, so inventory needs to go to a warehouse for consolidation, sorting and transloading.”
Essential goods saw faster throughput and a compressed sales cycle. Where lean, just-in-time manufacturing methods were ideal prior to COVID-19, manufacturing shutdowns now contributed to companies burning through their inventories quickly, demonstrating the need for them to maintain a healthier warehouse stock for future volatility. Nonessential goods, eventually no longer delayed by distribution capacity, also saw inventories depleted as e-commerce continued to increase with consumers regaining confidence in their income.
“E-commerce activity picked up dramatically as the pandemic accelerated the shift away from physical stores to digital shopping. According to the Q2 2020 report from the U.S. Census Bureau, U.S. retail e-commerce reached $211.5 billion, up 31.8% from the first quarter, and 44.5% year-over-year. This caused capacity to decline and utilization to increase, which pushed prices upward by 2% for warehousing. Demand is outpacing supply, even as large 3PL operators like XPO have launched two mega-hubs on the West Coast, bringing an additional 2.4 million square feet to the market,” says Shahzad.
This rise in e-commerce also came with different consumer needs for warehouse management technology to accommodate. Omnichannel distribution demands changed as retailers adjusted their pickup and delivery options. There was an increase in split-case picking from full-case picking as more orders shipped to the customer. On top of this, companies began to understand the need for visibility in their supply chain. Warehouse management technology must be robust to handle these shifts in demand.
“We also saw the pandemic impact some verticals more than others. Apparel, for example, declined 16% as most people began working and schooling from home and social distancing due to government lockdowns. However, other categories like home improvement experienced a 14% increase. PPE was the flavor of the month last quarter, but we’ve seen demand in this vertical come down recently,” says Shahzad. The fact of the matter was Clutter was overwhelmed with demand from companies with supply chain infrastructure needs that changed in an instant, and they weren’t alone in this struggle.
In his recent book, “Adapt or Die: Your Survival Guide to Modern Warehouse Automation,” Jeremy Bodenhamer frames the dilemmas facing the vast majority of retailers today. “The outsized investments of those few major players are driven by equally outsized business numbers. Three of these companies, who are also three of the top online marketplaces in the world — Amazon, Walmart and Alibaba’s collections of marketplaces including B2C and B2B platforms — are so big and generate such mind-boggling traffic and sales that it really only makes sense to speak of them relative to one another. By the end of 2019, Amazon was on track to deliver 3.5 billion packages by the year’s end. These 3.5 billion packages produced at least in part by Amazon’s 150 million mobile users, supposedly 119,928,851 products, and, as of February 2020, upwards of 2 billion site visits per month. Unlike the other two companies, Walmart began as and continues to be a significant brick-and-mortar business.”
One company’s shift from B2C to B2B
Clutter has stood out in the B2C space since its launch in 2015, offering storage solutions for the one in 10 households in the U.S. that rents a storage unit. The company was created to provide an all-around smooth experience for the customer with its process of door-to-door storage — packaging items, cataloging them and shipping them to one of its storage facilities. At the customer’s request, an individual item can be picked and shipped back to the customer.
With the start of COVID-19, Clutter Logistics evolved with a B2B model in the warehouse market to help with the capacity shortage in the U.S.
“Clutter Logistics is well positioned in this environment. We operate +2 million square feet of warehouse space in the U.S. near the ports with our proprietary warehouse management technology. Shippers appreciate our agility and the increased visibility we can offer in this uncertain environment, so they can better connect their supply chain and reduce the risk associated with just-in-time fulfillment to their retail partners. Furthermore, commercial shippers are rushing to build inventory from their international suppliers that they were unable to source earlier in the year,” Shahzad explains.
“We’ve helped one of our home improvement customers transload over 500 containers in the last month, with another 500 containers hitting the port next month. We’re experiencing 104% revenue growth from the beginning of the year, and continue to be very excited to serve our customers during this unique time.”
