Firms will need greater flexibility and agility in their inventory strategy to become more resilient in a post-Covid world.
In a white paper warehouse consultants Bis Henderson Space said it was “hard to discern much implementation of deep, pre-existing strategy” in companies’ response to the current crisis and this was “strange”.
Steve Purvis, operations director at Bis Henderson Space and author of the report, said: “Covid-19, the associated lockdowns, and the double hit to both supply and demand has challenged supply chains and distribution networks in ways unprecedented in the history of advanced economies. Some have stepped up to the plate in remarkable style, others are scrabbling to find workable solutions, and some of course have simply collapsed.
“Indications are that businesses may well be considering a reversal of thinking on running lean supply chains with low inventory cover. This is likely to lead to increased levels of inventory being held over the long term, with a subsequent upsurge in demand for warehouse space.”
The report said there had been radical changes in warehousing requirements from retailers, manufacturers and shippers against a backdrop of slowing sales and the need to store goods coming in from suppliers, in some sectors, and soaring demand in others such as health and groceries.
“Amid the frenzied acquisition of warehouse space, it is hard to discern much implementation of deep, pre-existing, strategy,” said Purvis.
“And that is strange as, although the combination of depth, reach and scale of the Covid-19 impact is certainly unprecedented, supply chain shocks are very common.”
He added: “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.”
The report said firms should switch from the traditional strategy of maintaining a core capacity of warehousing while paying for expensive emergency space during peaks and accepting there will be periods of under-utilisation.
Instead companies should lower the level of core capacity and accept peaks as a normal way of doing business, making use of a range of resources so “business can be switched in and out of the additional facilities seamlessly, with minimal impact on the costs and efficiencies of the supply chain”.
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