Warehouse logistics are complicated. They include different handling systems and manage various items, sortation points, and - sometimes - reverse logistics daily. Traditionally, each warehouse held a fairly rigid and strict structure for operation – and this was considered the only way a warehouse could be designed.
Today, the situation has changed due to e-commerce: orders are much more volatile and much less predictable. The changing expectations and actions of buyers put warehouse operators and business leaders in a difficult situation; the intralogistical setup that they are used to may struggle to manage fluctuating demands and unexpected surges.
As a result of this change in demand, warehouse systems need to be more flexible and able to adapt to changing and unpredictable patterns. By creating a flexible handling system that can handle volatility, warehouses can save money, optimise their investments, and be ready to cope not just with the present – but also with the ever-changing face of the future
It used to be that the timings of busy periods were predictable – the year would start off slowly for outbound parcels with a predictable returns flow, and there were regular and expected peaks due to holidays or annual events. While these regular peaks remain, there are now unexpected surges in addition to them.
The first of these is often seen as the result of sales or marketing – if a fashion company executes an extremely successful campaign, for example for jeans, then there can be a sudden surge in jeans that warehouses could not have predicted. The difficulty can be exacerbated when other companies pick up on the trend and create their own campaigns for jeans – leading to a huge spike in sales for certain jeans at a traditionally quiet time. Consumer behaviour has never been more impulsive in such large numbers.
Caption: Meltwater analysis of Stanley tumbler conversation from January 15, 2023, through January 15, 2024, shows how social media mentions spike sales.
The second cause of peaks comes from viral moments. Due to online virality, an unexpected moment or piece of content can lead to a surge in a product that suddenly becomes extremely popular. As with sales campaigns, this is unpredictable and operations teams are often siloed away from go-to-market activities. This type of spike can be even more problematic for warehouses to deal with, because the sudden sharp increase also often quickly fades away – meaning warehouse companies scramble to ensure they are meeting demand and are then left with bulk items that are no longer wanted and must be stored somehow.
Rigid material handling systems that form the foundation of many warehouse logistics were not designed to work with volatile workflows such as this, and if they cannot successfully adapt to these challenges, the consequences can include lengthening workflows, higher error rates and even losing out on business to competitors. Adapting workflows to a more flexible model can be helpful for warehouses that are noticing the pressure of volatile periods.
One of the difficulties that warehouses are finding is that their conventional automated material handling systems are created to very specific details. Not only are they uniquely designed for each warehouse to fit their size, layout, capacity and workflows, but they are also considered a large investment.
These systems work in a manner similar to a one way motorway – which was ideal at the time they were designed, but means that they are not necessarily suited to unexpected needs. As a result, they do not scale well, and volatility can lead to overloaded systems that cause operational bottlenecks, longer – and expensive – employee working hours, and a possibility of human errors.
Due to the time and money it costs to source a new system, it can be difficult to know how to ensure success with an older one. The key is to use the hardware as the base and adapt the work around it to match the flexibility needed at any given time. For example, this could look like the traditional automated conveyer still being the centre of the warehouse, but using robots to pick up boxes, as it’s much easier scale these quickly.
System modularity is how operational scalability becomes accessible in warehouses, as different elements or modules can be added on or adapted as necessary. Scalability does not always require robots, however. Fixed automation can scale in a variety of ways, for example by adding discharges to sorters, or adapting chutes to redirect items so they can accumulate elsewhere when surges occur. Similarly, using a pouch system can provide an in-system buffer to store items which is helpful for managing reverse logistics in a limited space.
Alongside adapting the tasks that happen around the system hardware, adapting the software is another way in which warehouses can better manage volatile spikes. Traditionally, software connected to automated systems has been programmed to one template – which perfectly fit the necessary and predictable needs of the company at the time.
Making small edits to this software can be a way to cope with unpredictable changes in orders, for example so that an item goes to a different sorter or shipping area when there is a spike in orders. The software could also be set up so that there are multiple programmed templates, meaning there is a regular setup – for example, where 80% of the goods go to the store and 20% go straight to delivery – and then a surge setup, which might see 60% of the goods going to the store and 40% for delivery.
Whatever the numbers look like, the ability to make edits to the software can allow companies to quickly switch the template when there is demand. As a result, they can work effectively despite an increase in orders – and rapidly adjust again when the surge is over.
One of the difficulties with volatility is how to plan for it – while systems need to be flexible, it’s a tough decision to consider just how flexible they need to be. At the heart of the covid lockdown, systems needed to have much more capacity, but the volume of online orders was never going to stand at that rate once the world got back to normal.
It can be challenging for companies who want to have a flexible system to understand how to do this without spending money on automation that will not receive full utilisation. The nature of a spike is that it does not last forever, so companies may be wondering how they can plan to manage volatility while ensuring they are not overspending.
When investing, it’s necessary to consider the amount of flexibility that the warehouse needs. For a futureproof solution, it’s useful to consider how much more capacity is needed based on the data. Understanding the actual need for system throughput is essential and often, the cost difference between purchasing something that provides 10% and 20% extra is minimal.
While taking the investment decision, it’s also worth considering the cost to the company that comes from being unable to deal with volatile spikes. Where rigid systems lead to difficulties, this has a knock on effect of costly underperformance, deliveries being slower, workers being more fatigued, more errors being made, and shipments arriving too late – all of which impact the customer experience. All these things cost the company, even if it is not shown as directly in the budget.
For insights into whether this is an issue, look at the data in the KPIs. When a warehouse is struggling, the KPIs are not being met, which means it might be the time to take a financial step towards adapting the system to make it more flexible. For example, if the time to fulfill is normally at three days and it is taking longer, then it is an indicator the system cannot cope with the volume. Whatever individual KPIs are, the data around them will give indicators about where there are difficulties and these are an important point to address.
Warehouses need to be flexible to cope with demand surges, and the best way to do this is to ensure that material handling capacity expansions work flexibly around the original systems.
Considering both hardware and software is important, as they both offer ways to adapt a system to ensure it is still the centre of operations, but can be scaled up or down according to need without there being a significant impact on the company.
Whether it’s adding more robots, increasing manual help, changing sortation options or investing in a software with multiple sort templates, flexibility should be at the heart of the decision.
While it is unclear which new trends will take the internet by storm in the next years, or which products will suddenly and unexpectedly become must-buys, it is clear that the warehouses that will successfully ride the waves of volatility are the ones who have adapted their central automated distribution system with scalable modularity. The flexibility this brings will allow them to smoothly handle these surges and be unswayed by unpredictable events in the future.
