4 Reasons for the Warehouse Investment Boom

Right behind the frenzied investment in ChatGPT and related AI is an investment boomlet in distribution center and warehouse automation and robotics. Four convergent trends are at work here.

1. Driven by current economic challenges is the necessity to extract every ounce of ROI from each sale’s dependency on inventory and the infrastructure that supports that inventory. Extracting that value takes visibility, control, and speed to connect demand (sales) to supply for the lowest cost possible.

2. The burning need to drive the sales cycle—grow sales and expand markets. The crossroads of that need run right through the warehouse or DC. Antiquated, manual, slow, or out-of-date ways to move product stalls sales, period. When times are flush, the focus is elsewhere. When times are lean, those failings become clearer and gain importance.

3. Today’s buyers have delivery fulfillment expectations that border on unreasonable. Faster touches cost more. Amazon created this customer expectation as a way to dominate markets. Now, the etailer and others are instituting delivery charges based on order size, offering perks for delayed delivery and a cash bounty if you drop off your returns instead of expecting a pickup.

This same challenge, especially in a down economy, has created a smaller, local and direct-to-consumer warehouse movement requiring investment in new facilities or in retrofitting retail locations abandoned by shoppers.

4. Labor. On-site worker scarcity is still a thing, way past the COVID shutouts. Even if you can find and hire fulfillment workers, wage increases are tracking inflation. That appears to be the new normal if you want to get and keep reliable warehouse workers.

If there is little motivation within the company to raise pay, the government is here to help. Several states are pushing new minimum wage levels, which will raise all boats. Compliance is tightening. New York State, for example, has a new Warehouse Worker Protection Act that takes effect in June 2023. Others may follow. But the net result of having humans in the warehouse is that compliance costs will increase substantially.

If these four reasons sound a bit like trying to stave off the four horsemen of the economic apocalypse, there is a bright side just over the horizon. At some point we will come out of this and enter the economic promised land.

Investment in automation and robotics will deal with those challenges, making our networks fast, efficient, and—most of all—ready to handle an explosion in economic growth.