Endava : Top Challenges in Warehouse and Distribution Centers

Transportation & Logistics Insights | Brian Estep |
01 March 2022

This Transportation & Logistics (T&L) Insights series is based on research by Levvel, who joined the Endava family in 2021. The team surveyed over 500 US-based companies who procure transportation and logistics services internally and externally to get their views on their challenges, needs, and use of digital technology solutions.

While companies often perceive technology innovation to mean things like high-end robotics, artificial intelligence, and fully autonomous vehicles, there are many elements in the supply chain that can be modernized without requiring great effort or cost, while still providing the competitive edge T&L companies are looking for. In this series, we will present current industry challenges and how digital technology can help reduce friction, enhance efficiency, and provide a better experience for businesses and their customers.

CURRENT CHALLENGES OF WAREHOUSE AND DISTRIBUTION CENTERS

Warehouses and distribution centers (DCs) are facing unprecedented challenges as a result of the pandemic. Meanwhile, consumer demand is growing thanks to e-commerce, leading to backlogs and delays that affect a company's bottom line. But these challenges can be mitigated by using modern technology, and these initiatives don't have to be very expensive or extensive to give a company the upper hand.

According to our survey, the top challenges which warehousing and distribution centers have to hurdle involve:

• Finding and retaining talent
• Demand forecasting
• Inventory management
• Fixed overhead costs
• Operator utilization
• Efficiency
• Item damaging
• Productivity

The biggest challenge involves human capital and retaining staff in an industry where lateral moves are common as workers search for better conditions. As e-commerce grows and more efficiency is expected along the supply chain, it can be difficult to provide a good environment for employees without help from automation. Without automation, the need for human labor only grows.

The second biggest challenge involves inventory, that is, when it's received, how it's stored, and how long it takes to ship it back out. When inventory sits in a warehouse too long, it loses value and has a higher risk of becoming spoiled or damaged. Equally, if there is a low turnover rate in a warehouse or DC, inventory management becomes much harder, especially if there's no digital system in place to track what's being stored, where it's located, and when it arrived.

Our research found that the challenges faced by both management and employees decreased as automation increased. For example, workers become more productive and inventory management more efficient.

So, what's holding companies back from implementing automation solutions?

WHY WAREHOUSES ARE HAVING CHALLENGES

The need for skilled workers and presumed high overhead costs for implementing digital and physical automation are two of the main reasons why companies balk at investing in new technology.

However, financial investment doesn't need to be great to achieve beneficial effects. Even modest improvements, such as implementing electronic Bills of Lading or driver-warehouse communication, can improve efficiency and reduce strain on workers.

While 35% of companies use digital technology such as mobile scanning devices, only 17% use the next most popular automation solution: digital bar codes and radio frequency identification (RFID). There's clearly room for improvement, even for relatively simple upgrades.

AUTOMATION AS A SOLUTION

Automation won't look the same for every warehouse or distribution center. Each facility will have to assess its own needs and pain points and decide if digital automation, such as tracking software, or physical automation, like autonomous mobile robots, is right for them.

Initial automation investments can be small and still pay off in big ways. Even mobile scanning devices to automate inventory can help reduce labor costs, operational costs, and human error while improving customer service, employee satisfaction, and order accuracy.

Read our other Transportation & Logistics Insights articles to learn more about how technology can help alleviate industry challenges.