NOVEMBER/DECEMBER 2020 WAREHOUSING
help a company
ride out any
peaks or troughs
degree of confidence. However
lean or JIT a business is at point
of production, across the supply
chain, buffer stocks are back.
Inevitably, post COVID-19
businesses will be looking to build
far greater resilience into their
supply chains. This will call for
greater flexibility, enhanced agility
and most likely, higher levels of
inventory in the network.
Going forward, companies
need an intelligent strategy for
their warehousing requirements.
They know there will be peaks
and troughs in activity, although
they may vary in the confidence
with which they can predict either
timing or scale. They also know
that to use their own assets to
fully provision against short-term
peak demand is hugely expensive.
Typical Strategy (left)
The typical ‘strategy’ is to identify
a ‘core capacity’, probably
linked in some way to average
throughput over the year. That
will be served from the business’
own assets or through long-term
contracts with 3PLs and might
account for 90% or 95% of annual
activity. Peaks that exceed that
capacity are accommodated
by short-term leasing of
On the face of it,
that may sound like a
But there are several
problems. Firstly, short
leases are expensive; if the
peak is for an event like
Black Friday or Christmas there will be many other
companies looking for space and driving prices up –
and available space may not be in an ideal location
for efficient transport and distribution.
Additionally, ‘core capacity’ may spend much
of the year seriously underused. That not only
represents capital unnecessarily tied up but may
also lead to considerable effort in engaging extra
staff to bring operations up to capacity – before then
bringing in the emergency facility as well.
It is also worth bearing in mind that offloading
the problem onto a 3PL may not solve the issue. The
3PL has quoted for your business based on clear
predictions of volumes and timings. If that suggests,
for example, that there is a three-month period
where ‘your’ distribution centre is half empty, the
3PL will almost certainly have offered that capacity
elsewhere. If an unanticipated ‘emergency’ arises the
3PL may not be able to oblige.
Resilient Strategy (above)
However, there is an alternative strategy. That
is to significantly lower the ‘core capacity’ of the
warehouse, and accept that coping with peaks is far
from an ‘emergency’ but a normal way of operating.
This approach requires access to a range of sites,
suitable in terms of size, location, duration of
availability, access to labour, IT and other facilities.
As situations develop, forecasts firm up and
requirements crystallise, a rolling shortlist of
possible solutions can be maintained. Likely sites
can be inspected in advance and assessed to ensure
that robust processes and continuity are assured.
Continuous assessment and analysis can enable the
early securing of the best facilities at a reasonable
cost – far preferable to those available under an
emergency spot transaction.
And because all this is planned,
business can be switched in and out
of the additional facilities seamlessly,
with minimal impact on the costs and
efficiencies of the supply chain and the
customers it serves.
on the lowest margin, groceries.
Amid the frenzied acquisition
of warehouse space, it is hard to
discern much implementation
of deep, pre-existing, strategy.
This is strange as, although the
depth, reach and scale of the
COVID-19 impact is certainly
unprecedented, supply chain
shocks are very common.
COVID-19 counts as a natural
disaster, but there are others –
regionally, many supply chains
have not fully recovered from
February’s floods. Globally,
the effects of the Japanese
tsunami of 2011 on sectors from
automotive to electronics are well
remembered. It can seem that
‘100-year events’ now happen
that impact on warehousing
requirements have a more human
element. ‘Preparation for Brexit’
has become a regular event,
rather than the one-off that most
businesses anticipated. There
are planned events – for example
stockpiling in advance of moving
or re-equipping a production
site, or to support a new product
launch, and many companies see
predictable activity peaks, such as
in the run up to Christmas.
Yet in a time when almost
every industry claims to be a lean,
‘Just in Time’ operator, many
businesses seem deliberately to
exacerbate the peaks and troughs.
To work, JIT requires either a
steady state, or at least accurate
demand forecasting with a high