Throughout 2020, the manufacturing industry experienced historic shifts almost as monumental as the year itself. The COVID-19 crisis has permeated nearly every global industry, and the warehouse and storage industry is no exception.
Although sectors of the warehouse and storage industry suffered when manufacturing was stalled due to COVID-19-related lockdowns and supply chain disruptions in Spring 2020, the industry has also enjoyed exponential growth. The future, however, remains challenging for the sector. Despite the optimism, potential stricter lockdowns may spell more disruptions and growth stagnations for the warehouse sector. By staying aware of past trends and future predictions, you can prepare your warehouse for the upcoming year.
Top Warehouse Trends of 2020
Here are some of the trends that affected warehouses and the manufacturing industry in the past turbulent year.
COVID-19-Related Supply Chain Disruptions
Storage and material handling are necessary components of both international and domestic modern supply chains. Warehouses, and their material handling equipment, are involved with getting items from Point A to Point B efficiently and safely.
Warehouses and their equipment were needed more than ever when the COVID-19 crisis hit in March 2020 and both everyday goods and valuable medical equipment were in short supply. However, due to the domino effect of lockdowns, global supply chains were damaged and many shipments were unable to reach warehouses and distribution centers.
Additionally, due to state lockdowns and virus prevention, many warehouse and distribution centers throughout the United States had to either temporarily close or reduce their workforces even further. The result was bottlenecked supplies and exposed weaknesses in the global supply chains.
The disruptions also exposed the U.S. industry’s heavy reliance on Chinese goods for raw materials for manufacturing, which has impacted the warehouse and storage industry. China, being the original source of the virus, was one of the first nations to undergo lockdowns; this made countries dependent on China for raw materials, pharmaceuticals, and other products quickly see how fragile global supply chains are.
Since then, manufacturers and businesses have promoted sourcing diversification and even reshoring efforts to build more resilient supply chains in the case of more conflict. A Gartner survey of 260 global supply chain leaders found that 33% had already moved sourcing and manufacturing out of China or plan to do so by 2023. Regionalized or localized manufacturing will not only be closer to demand but will remove overall network complexity and can ease delays and shortages in episodes of disruptions so goods can get to warehouses undisturbed.
Shifting Consumer Demands & Warehouse Operations
Due to the rapid shift in customer demands and supply shortages, many manufacturers have switched gears entirely throughout 2020 and began distributing everything from toilet paper to face masks. As a result, warehouses have had to adapt. Even companies ranging from Fiat Chrysler to Gucci started manufacturing face masks and PPE in the past year to combat the global shortages. From traditional manufacturers of non-medical industries to tech startups, PPE has been produced in unprecedented amounts to keep up with the demand.
Warehouses have had to adapt to receiving changing items and largely increased shifts in needs. Online groceries and eCommerce surged in demand due to consumers being reluctant to shop in person. The number of households that used online grocers doubled in one month, surging to 40 million in March from 20 million in February with first-time users accounting for forty percent. Meanwhile, online shopping grew exponentially. Sales in the U.S. eCommerce sector were up over 32% from the previous year, as shoppers continue to avoid stores during the pandemic.
The result has put stress on warehouses to meet these needs. For example, facilities for online grocery shopping are different than that of traditional warehouses of non-foodstuffs. Groceries must be properly refrigerated and handled so as not to damage foods, where eCommerce warehouses need to have precise organization so items are packaged and distributed efficiently.
Increased Warehouse Activity
Despite the challenges early on in the pandemic, warehouses are busier than ever as stores struggle to keep up with the demands for groceries, pharmaceutical products, and essential household goods.
Although the American manufacturing industry is still rebounding from the initial economic fallout at the beginning of the COVID-19 pandemic, October 2020 witnessed the United States having the strongest manufacturing activity growth increase in the past two years, indicating overall expansion in the economy. New orders jumped to their highest level in nearly 17 years as spending shifts towards goods such as motor vehicles and food.
The Institute for Supply Management (ISM)’s index on economic activity increased to 59.3 in October 2020, the highest level since November 2018. Any reading above 50 indicates an expansion in manufacturing, which accounts for over 11% of the U.S. economy. Partly responsible for this boom in manufacturing is the boosted demand for goods throughout the pandemic. While many businesses remain partially opened, warehouses must keep busy and move inventory faster to drive additional revenue. As 2020 draws to a close and the economy continues to recover, it’s clear that warehouse, distribution centers, and their material handling equipment, will continue to have a pivotal impact on the country in the months to come.
Expected Warehouse Trends for 2021
As the year draws to a close, where does the manufacturing industry expect to go from here?
Uncertain Future Ahead
Although the statistics from ISM are optimistic about the manufacturing industry, the overall manufacturing output is down. There was a 3.9% decrease in manufacturing production in October 2020 compared to October 2019. While manufacturing - and the warehouse industry - is on the mend, 2021 will experience much of the recovery from the COVID-19 pandemic.
Most of the challenges facing the warehouse and storage industry are uncertain as of now. As COVID-19 cases begin to surge and the threat of a second wave looms, new cases may lead to authorities implementing restrictions once again, further limiting economic activity and crimping day-to-day warehouse operations.
Additionally, a second-wave may cause further shifts in consumer demand as panic buying returns. Face masks and PPE equipment are again in short supply with rising infection cases across the nation. Any future disruptions from lockdowns may result in drawn-out shipping timelines, resulting in warehouses holding inventory on-site longer. The fewer trucks coming in and out to move inventory means products will be delayed getting to the consumers, further prompting shortages. Warehouses will have to keep up with the increasing demand, while also ensuring their employees are staying as safe as possible.
Emphasis on Supply Chain Management & Efficiency
Out of the lessons learned from the past year, the importance of proper supply chain management and warehouse efficiency needs to be emphasized more than anything. Many organizations are pivoting their supply chain strategies to mitigate any more future negative impacts like the COVID-19 pandemic. Instead of relying on low-cost supply chains, such as in foreign products, many businesses are looking to source closer to home.
As organizations redistribute their raw material sourcing, warehouse operations have to be completely optimized for efficiency so goods can be distributed as quickly as possible. With possible shortages on the rise due to increased demand for medical supplies and consumer stockpiling placing strain on essential products and goods, the warehouse industry has to be ready to be as quick as possible to restock store shelves of toilet paper, sanitizers, soaps, and other valuable items.
This productivity won’t likely end with the pandemic either. Research firm Inmar Intelligence found that even when the crisis subsides, more than 50% of shoppers plan to buy more essential goods to stockpile in case of another emergency.
To be fully prepared for the new year, warehouse managers need to ensure a consistent, high level of productivity and efficiency throughout daily operations to be ready for any shifts in consumer demands and supply chain influxes.
Proactively Prepare Your Warehouse for 2021 with SSE
The best way to prepare for 2021 is to make proactive decisions that enhance the safety of your warehouse employees while ensuring efficient and productive operations to stay profitable. With ever-changing times and drying up government aid, it’s crucial to start planning for a new warehouse budget to ensure success in the new quarter. By budgeting and implementing preventative maintenance programs to prevent unsafe practices and further loss of revenue, your warehouse can help mitigate any disruptions that may come your way.
Remember that, despite these uncertain times, you are not alone. The experts at Southern States Enterprises are here to help navigate your warehouse operations through the end of 2020 and prepare your business for success in the new year. If you need any warehouse services, or guidance as you form your warehouse budget, allow us to help. We provide an extensive, comprehensive list of warehouse services that are all performed by our expertly trained technicians. If you’re looking for a warehouse budget that will optimize your operations, contact one of our representatives today and learn more about we can prepare your warehouse operations for success in 2021.
