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09 Jul

Beyond Covid-19 – Optimising Warehouses and Dark Stores for the New Normal

Beyond COVID19 Optimising Dark Stores

Author: Chris Love

Warehouses and dark stores are set to play an increasingly important role in the acceleration of online shopping and more agile distribution and manufacturing. To capitalise on this shift, businesses must closely link employee numbers and performance with demand. With social change swiftly shaping shopping habits, flexibility has never been more important. We explore how warehouses and dark stores must be supported to make the most of this changing landscape. 

Trends Flooring the Change Accelerator

The slow creep toward online grocery shopping saw a rapid injection of pace with the outbreak of the Covid-19 pandemic. Having taken about a decade for online grocery shopping uptake to hit 7% it took just three months to double to 14% by May 2020.

Grocery stores – like Tesco – that could rapidly expand their online capability beat the discounters – like Aldi – who were starting from scratch. Yes, they rapidly responded by hooking up with Deliveroo and launching a reduced product range for delivery. However, their lack of online capability will have hit them hard.

With shopper’s movements restricted, it’s not just online-enabled grocery that’s seen an uptick. Amazon and other retailers – like bike and fitness equipment and garden retailers – have seen a jump in online purchases.

And there are other trends shaping the landscape too with consumers expecting faster delivery than ever before. A few years and shoppers were delighted to receive their order the next day. Today, anything beyond a day and consumers are disappointed. 

To meet these new expectations, retailers are turning store space into mini warehouses to create much bigger distribution networks from which to pick and pack. And businesses without large stores are creating distribution centres in areas of high-density population. A great example of this is Amazon’s take over of an old retail space in Manhattan. Although space restricts the SKUs to smaller items, Amazon can deliver within the hour because goods are stored close to their final destination. Other firms – like dark store specialists Talabat in the UAE – have taken this a step further with 15-minute deliveries

All this has changed the dynamics in warehouses and dark stores. Pre-Covid-19, the focus had already shifted from bulk picks delivered to supermarkets to individual picks delivered direct to a consumer or collection point. But the rapid increase in the number of people shopping online means higher volumes of goods coming in, being picked and going out. Many retailers have compared the pressure on their systems as similar to the volumes they experience at Christmas. This acceleration of the online shopping trend means a new landscape for warehouses and dark stores operators to navigate.

The Impact on Supply Chain Workforces

Regardless of their size or number of SKUs, warehouses and dark stores are increasingly reliant on effective workforce and warehouse management supported by integrated technology. There are two major aspects to effective workforce management – forecasting and employee performance. 

Effectively forecasting products and people

Meeting consumer demands relies on three factors: accurately predicting demand, supplying the right products in good time and having enough people to fulfil orders.

With more change ahead – think Brexit and the potential for multiple waves of Covid-19 – organisations must be able to meet future changes head on. Already highly controlled places of work, it’s likely that there will be further legislation post-Brexit and post-Covid. Warehouses and dark stores will need to flex their workforce to peaks and troughs in demand while ensuring their workers’ health and safety. This could mean: 

  • opening the warehouse for longer
  • establishing 24-hour shift patterns
  • ensuring sufficient social distancing between employees
  • controlling numbers are in specific part of the warehouse or dark store

Although your business can’t predict these demands exactly, you can take steps to ensure you’re agile enough to react to the requirements that emerge. Without impacting service for customers or placing undue pressure on your workforce. 

Another way to ensure you match worker numbers with customer demand is by using a more flexible workforce. From agency staff to gig workers, people are increasingly seeking different working patterns to fit around other jobs or responsibilities. 

In our work with retailers, warehouses and manufacturers, we’re seeing more businesses employ a core of full-time staff supplemented with flexible workers. This allows the organisations to flex up and down as required while minimising expensive overtime payments. 

Businesses that are poised to manage more complex workforces so they can react and capitalise on increased demand will have agile technology in place. Systems that link supply and demand with workforce management, at scale across an entire organisational estate.  

Employee performance

With wafer thin profits in the online delivery space, employee performance plays a major role in controlling costs and maintaining margins. Businesses must be able to: 

  • Set and measure the right pick and accuracy rates
  • Evaluate employee engagement 
  • Set suitable targets for and gauge employee retention

These are all key to ensuring a high-performance workforce. 

And these factors are even more important in warehouses and dark stores which are not perhaps the nicest working environments. It’s part of the reason why so many eastern european workers have been drafted in to fill workforces. But with Brexit, and the likelihood of restricted movement, businesses might need to attract and retain a new, UK-based workforce. Which will make motivating factors – like respect, trust, flexibility and a sense that they’re valued – even more important to the effective management of this reluctant workforce. 

Does Automation Offer a Better Solution?

Another long-term emerging tech trend that’s been accelerated by Covid-19 has been the use of automation and robotics in warehouses and dark stores. With humans impacted by lockdowns, illness and restrictions on the freedom of movement, robots that can work 24-hours a day and never get ill look like an even better option.

Until you consider how difficult robotics make rapid scale-ups. Take Ocado. A lot of their warehouses are automated and were already operating close to or at capacity pre-pandemic. As they admitted themselves, this made doubling their online volumes in the space of a few weeks an impossible task. In comparison, Tesco, which uses people to fulfil orders, rapidly scaled up and became the first online grocer to fulfil one million orders in a week by hiring 16,000 more humans. 

So, how can businesses get the best of both worlds?  The solution could be similar to the way businesses are supplementing a core of full-time employees with a flexible workforce. Could we see operations organised in such a way that robotics and automation carry out certain tasks and capacity is flexed using people?

With an acceleration of the move to online shopping, bigger pick and pack volumes, spikes in demand, ongoing shifting consumer expectation and more social and economic change on the horizon businesses need to be poised to react. The key to capitalising on these opportunities is agility. And the only way to achieve this is through technology.

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