ITMATTERS [ INSIGHT ]
by Bryan Cooper Director of Industry Solutions, Cleo sales@cleo.com | 815-282-7695
Warehouses Need Ecosystem Integration to Ensure Supply Chain Survival
As the dust settles after the pandemic ecommerce boom, the warehouse industry is returning to a new normal. Consumer activity over the past few years catapulted warehouse construction into overdrive to accommodate increased consumer spending. Now, the warehouse industry is adjusting to a new pace of slower demand.
to improve its relationship with stakeholders across the supply chain to reduce wasted resources and underutilized assets. Warehousing facilities that struggle to survive this slump of activity as the economy adjusts to normalized levels of consumer spending will need to reevaluate their usage of key technologies and business-to-business integration software to ensure they are optimizing their services and working in tandem with additional stakeholders throughout the supply chain. By improving communication and integration among wholesalers, manufacturers, third-party logistics companies and transportation enterprises, warehouses can ensure their survival in the greater supply chain. ELEMENTS OF ECOSYSTEM INTEGRATION To remain competitive and keep up with the advancing technology of additional supply chain stakeholders, warehouse enterprises must increase automation, improve inventory visibility, optimize purchasing and boost profitability. They can achieve this through an ecosystem integration approach comprised of the following three strategic elements:
downstream ripple effects, increasing overall costs throughout the supply chain. Not only will these trends affect the warehousing industry, but also the greater supply chain and logistics landscape as a whole. These potential challenges present an opportunity for the warehouse industry to reevaluate the need for continued investment in large warehousing facilities. The trends indicated above point to an increased need for software integration and automation to optimize operations, reduce reliance on manual labor and ironically, potentially decrease the long-term demand for centralized warehousing. Already, companies are using this opportunity to consolidate warehousing space and upgrade to newer buildings which can accommodate more automation and require less labor. As warehouse capacity increases and large vacancies remain across the industry, warehousing will need
The latest data reveals that warehouse vacancies have reached a record high, almost double those of pre-pandemic values. Meanwhile, industrial property construction starts have experienced the largest drop in year-over-year growth since 2009 and the annual change in warehouse employment has reached its lowest level in over a decade. These economic indicators suggest there is a significant shift underway in the warehousing landscape, which stands to impact greater supply chain operations. FLUCTUATIONS REVEAL CHALLENGES The challenges created by these economic trends have the potential to create significant financial strain, as vacancies impact profits and increase expenses. Increased vacancies can lead to greater competition among tenants, which could drive down rental rates. Additionally, the lack of efficiency in warehouse management could create
26 Inbound Logistics • August 2024
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