Retailers determining how to increase efficiency should heed the success of powerhouses like USPS. Doing so today will create an immense competitive advantage come November 2024.
The brisk speed of retailers’ peak season, which usually extends from October until December, makes it challenging for warehouse managers to practice introspection. Simple KPI-derived questions may be answered continuously (i.e., Are we hitting rate for orders picked per hour to meet our shipping windows?). However, more profound questions about the nature of efficiency and ongoing improvements are more difficult to address during peak season. For example: Is our desired rate of orders picked per hour high enough to satisfy modern consumers during peak season? How have we adapted to e-commerce and its impact on consumer behavior, including increased spending and returns?
Now that peak season 2023 is in the rearview mirror, I urge warehousing and logistics leaders to reflect on difficult questions. Leaders must also inquire how modern technologies like automation and collaborative robotics can bridge the fulfillment gaps created by rising e-commerce.
Statista predicts that worldwide retail sales will exceed $31 trillion next year — and peak season orders will account for a disproportionate part of that amount. Despite U.S. consumers’ concerns regarding inflation and high-interest rates, the 2023 peak season witnessed a 3.8% increase in spending over 2022, totaling a record $964.4 billion in sales. Experts predict that holiday order volumes will continue climbing for the foreseeable future.
E-commerce orders will increase in tandem. Research from Insider Intelligence suggests global e-commerce sales will total $8.034 billion by 2027, a more than 15% increase from today.
Increasing e-commerce demands impact warehouses in numerous ways. First, e-commerce buying patterns are more difficult to predict. Ergo, agility in fulfillment is highly critical — especially during peak season when such agility is most challenging. Traditionally, warehouses have kept pace with variable demand by maintaining a robust, revolving labor force. However, extended warehouse labor shortages have challenged the efficacy of this approach. According to industry research, as of 2022, over one-third of retailers have had to forgo business due to a lack of available labor.
Furthermore, online consumers expect retailers to fulfill their orders expeditiously. Retail giants like Amazon and Walmart have popularized two-day shipping, and now, consumers have developed a keen expectation for short delivery windows. In fact, 39% of consumers expect free two-day shipping, and 29% say they’ve abandoned a cart because (1) a shipping window was longer than two days and/or (2) not free.
For retailers, the substantial growth of e-commerce is a double-edged sword. On one hand, it presents an unprecedented opportunity for revenue growth by drastically expanding a company’s pool of consumers. However, on the other hand, it can introduce logistical challenges. To keep pace, leaders must consider adopting innovative technologies to meet evolving consumer expectations and maintain adequate pick rates during peak seasons, especially as warehousing labor concerns continue.
Warehouse automation — in the form of robotics, artificial intelligence (AI) and advanced sensor technologies — is revolutionizing how retailers handle inventory, process orders and fulfill shipments.
The benefits of warehouse automation are manifest. Robots can work day and night to fulfill throughput, increasing productivity and compensating for a diminished labor force. Meanwhile, advances in sensor technology and AI have enabled a new generation of increasingly intelligent and autonomous robots that require less intervention on the warehouse floor. These robots can tackle traditionally complex tasks like order fulfillment, sortation and mixed pallet depalletization/palletization, identifying and accounting for several variables including package type, case size and unexpected pick patterns.
However, automation remains fallible. Acknowledging this fact is critical to meeting peak rates; otherwise, orders are susceptible to inaccurate fulfillment, causing customer annoyance and inefficiency. Leading warehouses have accounted for “exceptions” — those moments on the warehouse floor where something new or unexpected occurs — by providing a remote crew chief to direct or correct a robot within moments. This human-in-the-loop approach to automation addresses prevailing concerns about the ethics and reliability of automated warehouse robots. Furthermore, it emphasizes something that most warehouse leaders know to be true: Humans will indefinitely remain the driving force of efficiency.
A human-in-the-loop approach proves especially critical during peak season. Warehouse robots can fulfill orders at all hours to meet increased demand. Third-party crew chiefs can handle exceptions within seconds. As a result, employees can focus on more high-level tasks like inventory management and logistics. These tasks might otherwise fall by the wayside, creating disarray and chaos as a new year unfolds.
Modern robotics models, including robotics as a service (RaaS), have also enabled cost efficiency in robotics automation. Warehouse leaders can scale their operations as needed and align with current demand, integrating and decommissioning robots based on seasonality. This approach is particularly viable for retailers that see extreme influxes during peak season but experience markedly fewer sales during other times of the year.
Now is the perfect time for retailers to assess how the 2024 holiday season can be their most economical yet. I suggest leaders start by reviewing last year’s success stories.
For example, USPS demonstrated exemplary agility in the face of holiday demand. In 2023, the service expedited the hiring of 10,000 seasonal workers and installed 150 additional package sorting machines. The result? USPS improved its daily capacity, sorting up to 70 million packages per day. The USPS’ hiring and automation model is ideal, exemplifying the efficiency gains enjoyed by organizations opting for a joint human-robotic approach.
Fluctuating consumer demand, curtailed shipping timelines and labor shortages necessitate a renewed approach to peak season fulfillment. Retailers determining how to increase efficiency should heed the success of powerhouses like USPS. Doing so today will create an immense competitive advantage come November 2024.
