Changes in Warehouse Dynamics Reshaping the Industry

March 14, 2023
By Vinit Pednekar

Warehouse management has changed drastically in the last decade. Globally, this US$600 billion market is projected to reach $900 billion by 2026. North America alone is a $200 billion market that is forecast to grow in coming years.

Whereas warehouses previously were used predominantly for storage, the industry has introduced other value-added services like product labelling, packaging, assembly, kitting and return management.

Warehouse rents are expected to remain elevated in prime locations, due to the increasing space demands from e-commerce sectors seeking to reduce order fulfillment times. Overall, it’s likely rents increase by 5 percent to 8 percent, influenced by input costs for new construction, land scarcity in primary markets, and delays in obtaining licenses for the developers.

Among the trends is sustainability: Many multinational and 3PL providers are exploring multistory developments and other options, like shared facilities with cross-dock configuration, in order to reduce their footprint, costs and greenhouse gas (GHG) emissions.

Greater technology use is another: Many manual processes have been automated and replaced by machines to achieve greater efficiencies and improve productivity, creating a huge technological advancement for warehouse and inventory management.

The introduction of such technologies as RFID tags and the Internet of Things (IoT) for track and trace has improved visibility throughout the supply chain. Robotics, drone technologies and automated material handling vehicles for picking/packing have collectively reduced warehouse processing time, while cloud storage and automated reporting have improved data analysis.

Automation to Shape Near Future

Global material handling is currently an estimated $60 billion market. As this grows to what analysts predict could reach $100 billion by 2026, it’s likely warehouses will expand the use of effective, process-driven technologies.

Supply chain automation will enable companies to easily scale business based on demand needs without a high overhead. This will allow them to utilize and deploy technology for any possible business case with ease. Using IoT, for example, automation can provide for real-time tracking, information on weather conditions, reduced damaged or lost goods, improved forecasting, inventory management and more.

Looking at the fulfilment processes of future warehouses, there will be a lot of warehouse automation using material handling equipment and management systems — the IT tools that control the movement and storage of goods — to reduce driver time and costs. These include:

  • Pallet trucks (forklift, stacker, order picker)
  • Sortation systems (linear and loop sortation)
  • Picking systems (pick to light, voice directed)
  • Interfacility transport systems (carousels, conveyors, automatic truck loading and automated guided vehicles)
  • Storage equipment (automated storage and receivers).

Automated loading has the greatest potential for cutting costs and improving safety in intralogistics operations. ROI is evaluated by calculating the total cost of implementation versus benefits measured in increased productivity and reductions in damages, time and GHG emissions. To put this in perspective, it should take about a year to pay back a $500,000 investment.

Automation Versus Manual Work

Automation will benefit employers significantly as it reduces overhead costs and enables them to easily fill labor gaps. It will also tremendously increase employee productivity, reduce workplace errors, and minimize injuries. 

For some, the downside is that automation may replace certain jobs, if the type of work is redundant and can be automated. For example, many retailers are testing warehouse robots that brings goods in boxes or totes to individual human pickers, who then sort through the items and bag them, so they are ready for delivery to the customer.

Traditionally, supply chains were typically viewed as separate parts of one chain (like warehousing, freight forwarding, or logistics). Now, with blockchain management, technology can give decision-makers an overview of the entire supply chain. As warehouse dynamics continue to evolve, data can flow seamlessly across all parties involved, which will facilitate better planning and use of resources.

(Image credit: Getty Images/Busakorn Pongparnit)

Vinit Pednekar

Vinit Pednekar is materials manager at SLB’s Regional Distribution Service Center in Houston, where he supports the company’s global operations with oversight for 3PL operations and performance management.