Missing persons: Behind the shift to DC automation

Missing persons: Behind the shift to DC automation

By now, we know that e-commerce is driving change in distribution centers. Our previous blogs on Order Streaming looked at this trend from a fulfillment standpoint. But the emergence of omnichannel commerce has affected warehouses from a labor perspective as well. We’re going to discuss the strong, enduring trends that are affecting the workforce and pushing companies to increasingly lean on robotics and automation.

A shrinking labor pool

The world may be moving toward more and more self-service technology, but when it comes to warehouses the need for workers has never been greater. A booming economy – with record-low overall unemployment rates – challenges companies when it comes to hiring. According to ARC Advisory Group, 50% of all warehouse job openings have five or fewer applicants. And of those applicants, half have no prior experience. It’s clear that standards have been lowered simply to fill roles. All the while, the Bureau of Labor Statistics predicts that warehouse hiring will increase 7% per year for the next 10 years.

Another challenge is retention, particularly when it comes to Millennials. According to a Pew Research poll from April 2016, two-thirds of Millennial workers said they plan on leaving their current organization by 2020. As a result, some employers have tried to get creative offering a “stay bonus” to workers, more time off or flexible hours – all in an effort to decrease turnover.

A boom in DC construction

As the need for people continues, the shortage is magnified with every new warehouse that is built. And there are a lot of warehouses being built. Based on Moody’s Analytics data, 655 million square feet of warehouse space will be added by 2019, which is the second-largest period of warehouse expansion ever. The largest immediately preceded it, with 833 million square feet added from 2014-2016. In total that’s nearly 1.5 billion square feet of DC space built from 2014 to the end of 2019.

So, if there is a labor shortage now, just imagine what it will be like when all the new warehouses are ready to go on line.

Turning to automation

Here’s the situation: more orders are flowing through more warehouses, with tighter delivery windows, and fewer people than ever to do the work. Faced with those realities, companies have no choice but to try and become less dependent on labor by putting a greater focus on robotics. According to a 2018 Manhattan Associates survey of 425 companies around the world, 99% said their organization is already using automation for fulfillment in the warehouse to some extent. And investments in that area continue to increase. It’s clear that machines in the warehouse are going to continue to grow more prevalent.

Next time, we get deeper into our automation discussion with a special guest blogger. IDC’s John Santagate will explain how flexible automation can drive scalability and productivity.

To learn more about how the labor crunch could affect your business, watch our thought leadership video.

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