NRF Forecasts Record Increases in 2021 Retail Sales. Are DCs Ready?

Earlier this year, the National Retail Federation (NRF) released its 2021 retail sales forecast. NRF expects retail sales to rise between 6.5 percent and 8.2 percent over 2020, which equates to a $4.33 trillion uptick. This prediction hinges on the success of COVID-19 vaccinations and the re-opening of the economy, but should it play out, would mark the highest annual retail sales growth since 2004.

It would also represent an inflection point for distribution centers (DCs) already struggling to keep pace. The pandemic-related e-commerce boom that started in 2020 tested supply chain capabilities with previously unseen levels of demand, stretching DC capabilities to their limits.

The belief by many in the industry is that 2021 is going to be a nightmare for DCs. There continue to be many kinks in the supply chain, particularly for internationally sourced goods, raw material shortages, assorted port issues, and even container shortages.

These challenges will demand decisive responses.

Many retailers will be building buffer inventory for goods well in advance of peak sales periods to smooth out supply interruptions, driving more demand for warehousing in an already tight market. For DCs, what was once considered futureproofing the DC is no longer a luxury, but a necessity. That hypothetical future point arrived quicker than anticipated, and DCs must adapt.

Smart retailers are optimizing their distribution operations with various forms of technology. Voice automation, augmented reality and supply chain analytics are a few of the technologies that some retailers have deployed to help ensure a successful and flawless customer experience.

Voice automation consistently helps warehouses operate 30 percent more efficiently and provides picking accuracy exceeding 99.99 percent. Voice technology is proven to optimize workflows and employee performance for all DC functions. From receiving and put away to packing and loading shipments for delivery (and all processes in between), voice-enabled workflows remove time and errors from warehouse activities. Not only must retailers ensure that supply chains can execute shipments on time and accurately, but they must also be able to ensure fast and convenient returns processing.

Another benefit of voice automation software is how it helps companies manage labor challenges. With ongoing issues related to the labor shortage, and fierce competition among companies for hourly rates, deploying cutting-edge technology that helps improve worker performance has become a factor in finding and retaining talent. The form-factor of today’s mobile devices being deployed in some DCs are similar to the devices that are used in everyday life. This helps workers become familiarized more quickly with the technology so they can be productive even faster.

It’s important to remember that dynamic fulfillment requires a discipline around people, processes, technology and data. The sheer number of moving parts require organizations to use systems that can look ahead — e.g., if tariffs are changing, container charges are fluctuating, raw material costs going up or down, incoming weather patterns, changing shopping patterns among consumers, and so on — to provide actionable information to keep the supply chain moving.

Companies can no longer run their DCs as they traditionally have. They must continuously look ahead and adjust. Supply chain analytics are particularly adept at helping DC operations react to changing conditions quickly and adjust staffing as necessary.

Retailers require supply chain analytics solutions that aggregate and analyze internal and external data sources and present real-time and historical information, predict future events, and help users navigate the right course of action to immediately resolve problems that may surface.

An additional 6.5 percent to 8.2 percent growth on top of already historically high demand is an intimidating prospect. However, it also presents an incredible opportunity for growth. Organizations that deploy advanced technology solutions to optimize the DC can harness the potential of this hypergrowth environment and achieve significant positive results.

Retailers need to put their distribution operations in the best position to succeed and meet demand effectively. If there are areas that require attention, now is the time to address them before the holiday shopping season is upon us once again.

Keith Phillips is president and CEO of Voxware, a leading provider of voice-based warehouse automation software and supply chain analytics solutions.