Across all nodes of the US supply chain, severe inventory shortages, equipment and capacity strains, and peak volumes have set the stage for a very challenging operating landscape. Continued robust and accelerated e-commerce demand will stretch the supply chain even further and calls for insightful planning.
Despite COVID-19 volatility and a major spike in online purchases, e-commerce demand has now become both permanently present and permanently disruptive.
E-commerce until very recently accounted for just a small fraction of overall US retail sales, but it now exceeds 20 percent of domestic sales, and that percentage continues to climb. In the next five years, US e-commerce sales alone will grow from $790 billion to $1.1 trillion. The corresponding warehouse space needed to house all that inventory will exceed 388 million square feet.
Nimble companies must prepare to meet this heightened demand with agility and an innovative commitment. Inventory planning now takes center stage. Recently, stockpiles of safety stock were building, only to be depleted with a backlog at the ports and distribution networks.
For traditional retailers and pure e-commerce operations, this means pulling that inventory forward to leverage urban fulfillment sites to meet delivery expectations. Planning for those new warehouses must begin now — years ahead of demand — due to delayed construction lead times and record low vacancy rates in all major markets. In addition, the traditional warehousing staffing model has come under increased scrutiny, requiring a greater focus on becoming an employer of choice, increasing the use of automation, and offering competitive compensation.
Supply chain leaders expect the current inventory and shipping bottleneck to last well into 2023. E-commerce demand continues to be foundational, and foresight into new procurement and shipping strategies; new, well-located urban facilities; and contingency planning will be required to support continued growth.