Retailer Peak Performance Analysis for 2023

The fast pace of the peak retail season, which typically runs from October to December, makes it difficult for warehouse managers to practice introspection. Simple KPI-based questions can be answered continuously (i.e. Are we achieving an hourly pickup rate to meet our shipping windows?). However, during the peak season, it is more difficult to answer deeper questions about the nature of performance and continuous improvement. For example: Is our desired number of orders picked per hour high enough to satisfy today’s peak season consumers? How have we adapted to e-commerce and its impact on consumer behavior, including increased spending and returns?

Now, with the 2023 peak season in the rearview mirror, I challenge warehousing and logistics leaders to reflect on the difficult issues. Leaders also need to ask themselves how they like modern technologies automation and collaborative robotics can fill order fulfillment gaps created by growing e-commerce.

The rising wave of e-commerce

Statista predicts that global retail sales will exceed $31 trillion next year, with peak season orders accounting for a disproportionate share of that amount. Despite U.S. consumers’ concerns about inflation and high interest rates, spending rose 3.8% in the 2023 peak season over 2022, resulting in total sales of a record $964.4 billion. Experts predict that the number of holiday orders will continue to grow for the foreseeable future.

The number of e-commerce orders will systematically increase. Research by Insider Intelligence suggests that global e-commerce sales will reach $8.034 billion by 2027, an increase of more than 15% from today.

Increasing e-commerce demands are impacting warehouses in many ways. First, e-commerce purchasing patterns are more difficult to predict. So agility to achieve goals is very critical – especially during peak season when such agility is most challenging. Traditionally, warehouses have kept pace with changing demand by maintaining a solid, rotating workforce. However, prolonged labor shortages in warehouses have called into question the effectiveness of this approach. According to industry research, more than a third of retailers have had to go out of business by 2022 due to lack of available labor.

Additionally, online consumers expect retailers to fulfill their orders quickly. Retail giants like Amazon and Walmart popularized two-day shipping, and now consumers have come to expect short delivery times. In fact, this is what 39% of consumers expect free two-day shipping, and 29% say they abandoned their cart because (1) the shipping window was longer than two days and/or (2) it wasn’t free.

For retailers, the significant growth of e-commerce is a double-edged sword. On the one hand, it creates an unprecedented opportunity to grow revenues by dramatically increasing the company’s consumer pool. On the other hand, it may involve logistical challenges. To keep pace, leaders must consider adopting innovative technologies to meet changing consumer expectations and maintain appropriate picking rates during peak seasons, especially as warehouse labor challenges persist.

Robotic automation has changed the game

Warehouse automation – in the form of robotics, artificial intelligence (AI) and advanced sensor technologies – is revolutionizing the way retailers manage inventory, process orders and ship.

The benefits of warehouse automation are obvious. Robots can work day and night to provide throughput, increase productivity and compensate for reduced labor. Meanwhile, advances in sensor technology and artificial intelligence have enabled a new generation of increasingly intelligent and autonomous robots that require less intervention on the warehouse floor. These robots can perform traditionally complex tasks such as order fulfillment, sorting, and depalletizing/palletizing mixed pallets, identifying and accounting for several variables including package type, package size, and unexpected picking patterns.

However, automation remains unreliable. Confirming this fact is crucial to achieving peak rates; otherwise, orders are susceptible to inaccurate fulfillment, resulting in customer annoyance and inefficiency. Leading warehouses have embraced “exceptions” — those moments in the warehouse when something new or unexpected happens — by providing a remote crew chief who can direct or correct the robot in moments. This human-driven approach to automation addresses widespread concerns about the ethics and reliability of automated warehouse robots. What’s more, it highlights something most warehouse managers know: people will always remain the driving force of performance.

An approach based on human involvement proves to be particularly important during the peak season. Warehouse robots can fulfill orders at any time to meet increased demand. Third-party crew chiefs can handle exceptions in seconds. As a result, employees can focus on more complex tasks such as inventory management and logistics. Otherwise, these tasks could get missed, causing confusion and chaos as the new year arrives.

Modern robotics models, including robotics as a service (RaaS), have also made it possible to reduce the costs of robotics automation. Warehouse leaders can scale their operations as needed and adapt to current demand, integrating and decommissioning robots based on seasonality. This approach is particularly profitable for retailers that experience extreme inflows during peak seasons but see much lower sales at other times of the year.

Changing the magazine narrative in 2024

Now is the perfect time for retailers to evaluate how the 2024 holiday season could be their most economical yet. I suggest that leaders start by reviewing last year’s successes.

For example, USPS has demonstrated exemplary flexibility in the face of holiday demand. In 2023, the service accelerated the hiring of 10,000 seasonal workers and installed 150 additional parcel sorting machines. Result? USPS improved its daily capacity, sorting up to 70 million parcels per day. The USPS’ The hiring and automation model is ideal, illustrating the productivity gains that organizations achieve when they choose a joint human-robot approach.

Fluctuating consumer demand, compressed delivery times and labor shortages require a new approach to meeting the peak season. Retailers deciding to increase efficiency should pay attention to the successes of such tycoons as USPS. Doing this today will provide a huge competitive advantage in November 2024.