According to the CBRE’s latest report, ecommerce sales increased by 140% over the last five years and will continue to grow by another $1.5 trillion over the next five years.
This will drive the need for an additional 330 million square feet of warehousing and distribution space in the US.
Rising material and construction costs, and dwindling supplies of prime industrial land, create logistical hurdles for developing new sites that meet the needs of stakeholders and consumers.
As noted by Prologis, engineering these sites to incorporate the latest technologies allows companies to maximize their cubic space, efficiencies, and profitability.
Increased Presence in Digital Spaces
While the ongoing pandemic didn’t cause the shift toward ecommerce, it did speed up the trend toward online shopping that was already in progress. Lockdowns and shutdowns drove consumers to online markets for both work and leisure, increasing their comfort in digital spaces. That their favorite online store was only a click away brought to ecommerce many people who would never have used it and caused many more to rely on ecommerce more than they had before.
In the coming years for the US, this shift toward ecommerce will create a need for an additional 330 million square feet of well-located warehousing space. Globally, 1.5 billion square feet of warehousing space will be needed. Of that, to meet the increased demand for perishable goods, 100 million square feet will be for cold storage.
The Needs of an Ecommerce Warehouse
Ecommerce retailers need 1.2 million square feet of warehousing space per billion dollars in sales – triple the amount required by traditional retailers.
This is partly because ecommerce retailers carry more SKUs than brick-and-mortar stores and also because of the kind of work that happens in an ecommerce warehouse.
Like warehouses for traditional retailers, ecommerce distribution means receiving, slotting, picking, and packing goods.
Unlike traditional warehouses, the majority of goods picked, packed, and shipped from a warehouse aren’t pallet loads but are individual items or a few mixed-and-matched pieces. On top of that, ecommerce warehouses also have to handle returns.
This means not only that ecommerce warehouses need more space, but also that the systems and processes in that space have to be well designed. Controlling the flow of thousands of goods, tracking them throughout the warehouse, and ensuring they are shipped to the right people at the right times takes a thoughtfully engineered system that incorporates sophisticated technology.
The Surprising Inefficiency of Just-In-Time Logistics
Before the pandemic exposed weaknesses in the Just-In-Time (JIT) logistics model, the goal of warehouse management was to warehouse as few goods as possible. Warehousing costs were a waste that needed to be minimized in favor of speedy, efficient order processing.
One takeaway the industry gleaned from the pandemic is that warehousing is more than a necessary cost of doing business – it’s insurance against demand shocks and limited supplies.
To minimize the future risk of sudden spikes in demand seen early in the pandemic, retailers will increase their inventory levels by 5-10%, and will demand their vendors do the same. This inventory will be kept on-shore, close to the expected end users, to mitigate against the challenges caused by the closings of ports and borders.
The Inflection Point Between Costs and Location
As the fulfillment industry adjusted to its increased need for space in the first half of 2021, construction costs rose by 25%, and rent by nearly 10%. This has driven the costs and challenges associated with prime industrial real estate to an inflection point.
In the past, building in urban areas helped reduce the cost of transportation and delivery – but in today’s market, those savings are offset by the rising cost of land, pushback by municipalities against industrial development, and regulatory challenges, among other issues.
The labor pools that were once ensured by building close to densely populated areas have also grown less certain as the US Department of Labor continues to report high unemployment numbers. The increased needs prospective employees cite include higher wages, increased safety, and more flexible hours.
Today, businesses are offsetting these increased costs and uncertainties by looking farther from urban areas as viable construction sites, and by relying more heavily on automation and robotics to supplement the workforce and create a safer working environment.
At the same time, supply chain managers are looking at how existing infrastructure can be repurposed to meet the needs of the changing market. Companies like Walmart, Target, and Home Depot are converting retail space into micro-fulfillment centers. Amazon is purchasing closed shopping malls for the same reason. And multiple startups are looking at small corner stores as possible micro- and nano-fulfillment centers.
To make these conversions, companies use cutting-edge engineering and robotics technologies to maximize their cubic space and streamline the flow of goods through that space.
Modular, scalable solutions have enabled these companies to convert different sized areas of a storefront – from part of an entrance to entire buildings – into ecommerce hubs.
Meeting the Changing Needs
To meet the changing needs in the fulfillment industry, warehouses are looking for innovative automated solutions to both streamline processes and better enable their workforce.
Industry 4.0 relies on digitization, big data, networking, and machine learning to create “smart” facilities and integrate robotics in the most beneficial ways possible.
In warehouses and distribution centers, the linchpin of a successful automation integration is the Warehouse Management System (WMS). A robust WMS tracks inventory, maximizes cubic space, and networks with all the physical automation in the building. It can better streamline every aspect of a warehouse, including scheduling, receiving, put away, picking, and shipping.
A robust WMS allows for the integration of the kind of robotic solutions that are modular enough to be engineered into micro-fulfillment centers, scalable enough to work even in the largest warehouses, and versatile enough to handle a variety of tasks and environments.
The increasing versatility and effectiveness of warehouse robotics is driving the industry to triple-digit increases, driving the industry to a projected $6.86 billion by 2025.
Autonomous Mobile Robots (AMRs) have proven to be one of the most reliable and versatile automated solutions in recent years. In any facility – whether new construction or a site that’s already up and running – AMRs can be engineered to serve as the primary means of moving goods, increasing safety protocols, and streamlining product flow through the facility.
AMRs haven’t replaced conveyors, but they do have some key benefits – they’re more easily integrated into existing facilities, and don’t block aisles that could otherwise be used for traffic. Forklift AMRs in particular have proven to be one of the most effective means of boosting productivity in facilities that use multi-level storage.
While AMRs are becoming the go-to means of moving goods throughout a facility, just as impressive are the complementary equipment and solutions that maximize a facility’s storage density and retrieval speeds and accuracy: Automated Storage and Retrieval Systems (AS/RSs), Vertical Lift Modules (VLMs), Carousel Picking Systems (CPSs), robotic shuttles, and more.
These are designed for well-defined zones, ranging in size. They can handle everything from individual pieces to pallet loads and large and bulky items and make possible the goods-to-person picking that enables same-day shipping and delivery.
Automation has proven to be the way for fulfillment companies to stay competitive and profitable in a global market. The challenge for businesses is developing partnerships with experienced systems integrators who can help identify the right automation to meet their specific needs and effectively implement that automation.
At Alta Robotics, we’re Moving What Matters Most.