This Month in Modern: Investment will need to stay strong

One safe assessment in the wake of the pandemic is that investment in warehouse/DC software and automation is only going to remain robust through 2020 and beyond. While our annual “Warehouse and Distribution Center (DC) Equipment Survey” was fielded over January and February, our research team contends that the emphasis on faster, more efficient e-commerce fulfillment will only be magnified by the current situation.

“As we adjust to the new normal that’s coming in the near term, it’s clear e-commerce fulfillment will be remain vital,” says editor at large Roberto Michel, who puts context around all of the findings starting on page 26. “That’s why I’m confident that longer term, the survey’s overall direction—healthy investment in warehouse automation and logistics optimization—will hold true.”

Norm Saenz, managing director of supply chain strategy and logistics at consulting firm St. Onge, a partner in our survey, agrees. Over the first few weeks, he was seeing the impact of the pandemic pushing many industries—such as grocery and food distributors as well as medical supply companies—to the limits of their capabilities, while others were experiencing a drastic slowdown in their demand. “Those retailers and others are now, more than ever, relying on e-commerce fulfillment capabilities,” says Saenz. “The surge in pent-up demand is going to have companies looking hard at automation, so they might need less square footage and better control on labor costs.”

According to Don Derewecki, a senior consultant with St. Onge, the concepts that were emerging prior to the pandemic and trending high in our survey are sure to see wider adoption and will continue to accelerate into the future.

“For example, the increased use of ‘cobots’ and autonomous mobile robots to cope with surges will help make businesses less dependent on seasonal and emergency staffing,” says Derewecki. “At that same time, the need for ‘hyperlocal’ micro-fulfillment centers, particularly inside grocery stores to fulfill online orders for either customer pickup at the store or delivery to the customer, will only gain more attention.”

It may be tough to remember how we were all feeling before the virus spread, but few of the key findings may jog your memory. Among the key spending findings was a drop in those saying they were “holding off” on investing. This year, only 8% said they were holding off, compared to 15% last year.

When asked how 2020 spending would compare to 2019, 36% expect an increase in investment while 57% expect it to stay level—pretty much right on track with our 2019 findings when 54% said it would stay the same. One area that’s bound to see an uptick from our survey numbers will be the percentage of those who put 3PLs to work—it stood pat at 16% this year.

“I believe companies may look to hold more inventory,” adds Saenz, “and this would result in companies looking for additional warehouse space and more labor, so they’ll be turning to 3PLs. However, since I believe there’s going to be a lot of companies looking to revitalize their supply chains, each company will have their own journey to define the areas of operation that need to be strengthened.”