Logistics The impact of coronavirus on warehousing

Lockdowns may be easing across the globe, but coronavirus will have lasting effects on supply chains and logistics. Warehousing is no exception. Travel restrictions and huge shifts in shopping demands could reshape the sector, accelerating existing trends and driving new ones.

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It doesn’t matter where you look, online shopping statistics are through the roof in recent months. In the UK, it made up 30.7% of all retail spending in April, up more than 50% from the previous year. Every type of store that could sell its products online reported record figures, the government said.

It’s safe to say nobody could foresee the impact coronavirus has had in recent months. Medical supplies and groceries became gold dust, while other ‘non-essential’ items have been largely forgotten. The shift in demand, combined with severe travel restrictions and health precautions, have put an unprecedented strain on warehouses around the world. Operators have been battling to move goods through as quickly as possible, while some products, unwanted or un-shippable, have piled up, taking up valuable space.

A recent white paper by logistics market researcher Ti outlined no fewer than 12 ways that coronavirus will change warehousing. They include new trends, like a shift towards increased inventory holdings, as well as existing ones that have been accelerated by the pandemic, such as an increased need for more flexible, on-demand warehousing.

With coronavirus emphasising the convenience of e-commerce, reliable, rapid and more eco-friendly delivery will become increasingly important. That should drive demand for satellite warehouses and distribution hubs located closer to the majority of customers – in cities. More and more goods will be taken from national distribution centres to urban warehouses, from where they can be dispatched by more sustainably powered vehicles to their end destinations.

Using space more efficiently

Traditionally, of course, warehouses need plenty of space. But in increasingly densely populated city centres, that is costly and tough to find, especially when residential use typically generates more value. For urban warehouses to succeed, they must maximise efficient use of space. That will require higher-density storage solutions, such as narrow-aisle or multi-tier pallet racking. Automated vehicles could help navigate tight floorspaces, with fewer humans involved in moving goods, like the mesmerising warehouse used by British online supermarket Ocado.

One solution is to build upwards. In the land-constrained mega-cities of east Asia, multi-storey warehouses have been used for a number of years. The Goodman Interlink building in Hong Kong, for example, contains 225,000 square metres of warehouse space across 22 floors. Fifteen floors have direct vehicle ramp access, with the other seven serviced by cargo lifts.

There are other factors to consider. Nearby roads need sufficient capacity to handle increased traffic and local residents must be considered in terms of noise and congestion. As last-mile deliveries go increasingly electric, the right infrastructure for e-vehicle charging could be crucial.

Urban warehousing goes global

While they may not be scaling the same heights as Hong Kong anytime soon, multi-storey urban warehouses are now arriving in Europe and the United States. The first of its type in the US was opened in 2019, in Seattle, with Amazon now occupying most of the three-storey building. In New York City, plans are also in place to open a four-floor facility in Brooklyn, which would be within a one-hour drive of 13 million consumers. And in London there are plans to construct a multi-storey warehouse near the city’s Docklands area.

Intriguingly, warehousing is becoming increasingly attractive for investors. Blackstone, a global asset management firm, invested more than $25 billion last year in warehouses in America and Europe. It calls logistics its “highest-conviction global investment theme”. The rise in e-commerce, catapulted by coronavirus, is also encouraging real estate investor Prologis to ramp up its spending in the area. Before the pandemic, about a fifth of its warehouse construction was for e-commerce. Now, the e-commerce share is as high as 40%.

As online shopping becomes increasingly normal, the importance of speed and convenience for retail logistics will only grow. The devastating effects of the pandemic on shops and hotels could free up city space. A new era of urban warehousing could just be beginning.

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