CrossDock | January 2023

Warehouse demand decline, Walmart-Salesforce partnership, Amazon worker injuries

January 2023

Welcome to the January issue of CrossDock, our monthly newsletter that provides you with the most recent stories and insights on the warehousing, logistics, and e-commerce sectors.

Issues with rising inflation and tighter budgets, coupled with continued shipping challenges, paved the way for the retail trends for 2023.

Even though inflation rocketed up to 7.1% this year, overall, the holiday season of 2022 turned out to be better than expected for e-commerce retailers.

The impact of low holiday sales resulted in inventory accumulation which led the retailers to push for additional discounts for clearing the stocks. Amidst the low holiday sales, online sales grew 10.6% in multiple facets compared to the last year. 

This edition will unfold how retailers and carrier partners keep up with the holiday trends while meeting customer demand.

Despite the shipping challenges due to the pandemic's proliferation, carrier partners like FedEx and UPS continue to be at the lead for on-time deliveries. On the other hand, the slowing warehouse demand seems to be advantageous for businesses looking for new properties. 

Below are the top stories from January 2023:

  1. Warehouse demand in the US continues to decline steadily
  2. UPS once again has the highest peak season on-time rate in 2022: Shipmatrix
  3. Walmart will offer fulfillment tech, and delivery services to retailers on Salesforce Commercial Cloud
  4. Holiday retail sales declined, but e-commerce tends to boom
  5. OSHA report cites Amazon for subpar measures to avoid worker injuries

Warehouse demand in the US continues to decline steadily

Due to inflation and an unstable economic situation, warehouse demand declined as businesses scaled down their capital expansion plans.

Reasons for Decline in Warehouse Demand

  • Businesses have started to reduce their reliance on warehouse leasing to reduce fulfillment costs as consumers tighten their spending budgets.
  • The quarterly total has decreased by 28.2% from Q3 as new lease activity has continued to drop due to tight market conditions. 

Effect on Warehouse Employment

In December, warehouse employment dropped by 3.7% from its peak in July. For instance, Amazon has scrapped expansion plans and laid off employees.

Impact on Real Estate Market

The slowing demand could be advantageous for companies looking for new properties. Rent growth has dropped, as prices of warehouse spaces spiked by 0.9% in Q4 vs. 4% in Q3.

In addition to decreasing rent, more remarkable development will increase access to modern facilities that satisfy more contemporary requirements.

As per CBRE, more than 75% of the warehouse inventory is over 20 years old.

UPS once again has the highest peak season on-time rate in 2022: Shipmatrix

During the peak season of 2022, UPS maintained its lead while FedEx reported a significant improvement in on-time deliveries.

For UPS, FedEx, and the Postal Service, the on-time performance rate during the 2021 peak season was 96.9%, 88.2%, and 96.5%, respectively.

Successful Peak Season of UPS

A spokesperson from UPS mentioned that the company has been able to reach its peak i.e., delivering 97.5% of parcels on time because of

  • its close collaboration with the customer,
  • investments in an additional capacity,
  • volume control coming to the network. 

Peak Season of FedEx

FedEx CEO Raj Subramaniam stated that the company's Ground unit delivered 95.2 % of holiday shipments on time to more places than competitors.

As per Shipmatrix, the Ground service has returned to its pre-pandemic levels. The reasons are continuous improvements to route optimization and package handler scheduling technologies.

Peak Season of Postal Service

Despite the seasonal surge in volumes, Postal Service has delivered 94.3% of parcels on time while maintaining an average of 2.5 days/ shipment delivery

Walmart will offer fulfillment tech and delivery services to retailers on Salesforce Commercial Cloud

Walmart is collaborating with Salesforce to provide merchants with store fulfillment technology and local delivery services.

About the Partnership

This collaboration will assist retailers in handling the entire local fulfillment and same-day delivery. 

Additionally, it gives retailers access to more economical fulfillment capabilities that they couldn't have created independently.

Given that Commerce Cloud powers dozens of different websites, the accessibility made possible by the Salesforce partnership is positioned to drive the activities of GoLocal and Commerce Technologies.

The end goal of this partnership is to provide same-day delivery to customers by Walmart GoLocal.

Ways Walmart is combating supply chain congestion

  • During the pandemic, Walmart exercised its robust technical and logistical expertise to address supply chain bottlenecks and limited delivery capacity.
  • By leveraging this advantage, Walmart has launched two business ventures - GoLocal (2021) and Commerce Technologies (2022).

Fulfillment Service of GoLocal

  • The white-label service of GoLocal surpassed more than 1 million deliveries last August. 
  • Harsit Patel, VP of Walmart GoLocal, stated that the success of same-day delivery depends on how the retailers will utilize the platform to achieve this.

Fulfillment Service of Store Assist

  • Since July 2019, Walmart has fulfilled 830 million orders across its 4,700 sites with the aid of Store Assist.
  • It transforms any store into a fulfillment center to serve more customers by leveraging a site’s footprint.

Holiday retail sales declined, but e-commerce tends to boom

Retailers saw a steep decline in holiday sales for 2022, but e-commerce is proliferating.

DHL is investing heavily in the e-commerce sector of North America since it is growing in multiple facets.

E-commerce growth

DHL has witnessed exponential growth in categories like manufacturing, engineering, food, automotive, high-end consumer goods, etc.

Online sales showed the highest year-on-year gains in this peak season, growing by 9.5% despite sluggish holiday sales compared to last year.

Impact of low holiday sales on retailers

As per DHL, the slow decline in the core retail consumers is responsible for stockpiles for the merchants.

Retailers are pushing more discounts to eliminate their inventory post the holiday season.

Reason for low holiday sales

  • Inflation is the most prevalent reason behind the frugal spending of consumers during the holiday season.
  • Retail sales decreased by 1.1% in December, more than the 1% forecast. It reflects the lower consumer demand throughout the peak season.

Market Forecast

  • DHL hopes there will be a turning point in the supply chain, with freight rates reducing in the mid or late Q2 of 2023.
  • The diminishing costs of fuel and ocean containers will reduce the price of different products. As a result, consumer spending will increase like in the last two years.

OSHA Report cites Amazon for subpar measures to avoid worker injuries

OSHA cited Amazon for failing to maintain safety in its warehouses and the $60,269 penalty the company is already facing in an ongoing investigation.

Investigation of OSHA

  • OSHA found that Amazon warehouse associates are prone to lower back injuries and musculoskeletal disorders like foot fractures, face smashing, etc. It happens because the associates frequently have to lift heavy packages and work long hours.
  • Inspection from New Windsor claims that the employees are exposed to various ergonomic hazards due to the package stowing process.

How Amazon can improve workplace safety

  • OSHA suggested that Amazon may eliminate the totes stored at floor level and automate all or part of the procedure, which will reduce the injury risk.
  • To reduce the ergonomic hazards during the package stowing process, machines should be used for automating the processes, as recommended by OSHA.
  • Amazon must focus on hazard identification and assessment and take the necessary steps to ensure workplace safety and lessen worker injuries in its warehouses.

Amazon’s Statement

Amazon claims they reduced injury rates by 15% between 2019 and 2021. The business also states that most employees feel Amazon’s workplace is safe.