COVID-19 Immediate Impact on the Fulfillment Industry

The COVID-19 pandemic is sending shockwaves throughout global supply chains, so it’s no surprise to learn that US and Canadian warehousing and fulfillment industry is experiencing significant impact as well. In order to gauge the short-term ramifications of this deadly virus on fulfillment providers throughout the US and Canada, we conducted a poll of the 600+ warehouses in our network. In the poll, we asked these five questions:

1. Are you currently open and shipping orders for customers?
2. Has your overall order volume for all of your customers remained the same, decreased, or increased as a result of the COVID-19 situation?
3. What is your estimated percentage change in overall order shipping volume for all of your customers?
4. If any of your customers’ order volumes have increased, what types of items do they sell?
5. In what other ways is your business being impacted as a result of this crisis?

We thought that it would be helpful to not only provide timely data on the virus’ impact on businesses from the perspective of the fulfillment industry, but also to let fulfillment business owners in this vertical understand how other companies are being impacted during these unprecedented times.

Warehousing and Fulfillment is an Essential Service

One small blessing for the fulfillment industry is that the services these companies perform are considered an essential service in the event of a catastrophe such as COVID-19. Global organizations and even cities such as New York have deemed mailing and shipping and warehouse/distribution and fulfillment as essential. Especially since the world has already adopted online ordering habits over the past decade, it’s not a stretch for consumers to utilize e-commerce channels for purchases during a crisis. During times like these, 3PL warehouses can continue to deliver products to customers who order online, assisting in the social distancing efforts and helping to flatten the curve and contain the spread of the virus.

From shipping basic supplies like food and household products to medical necessities like thermometers and medicine, fulfillment companies are critical in keeping people at home rather than risking infection by venturing out into public areas. Furthermore, population groups that are at extremely high risk due to previous conditions or age or increased susceptibility to catching the coronavirus rely upon products being delivered to their doorstep.

How Many Fulfillment Companies Are Still Shipping Orders Amidst COVID-19

All of the fulfillment companies that responded to our survey indicated that they are still operational and shipping orders – a full 100%. None of our fulfillment centers indicated that they were fully closed. Only 7.7% of respondents indicated that they were operating on a limited basis.

Despite Being an Essential Service, Many Products Aren’t Essential

When asked if the COVID-19 outbreak has increased or decreased overall order shipping volume, only 13% of all respondents indicated that order volume has increased. These companies, perhaps highly leveraged towards customers that ship essential or medical related items, are reaping the benefits of such a strategic mix of clients during a global outbreak of this nature.

But these fulfillment centers that are shipping more orders than normal are definitely a minority. 32% of fulfillment respondents to our survey are shipping the same number of orders as they were before the outbreak struck, and an astonishing 55% of fulfillment companies are shipping fewer orders than normal. Many of the fulfillment warehouses we polled are experiencing significant declines in orders and revenue that are leaving them with very real and lingering questions about the overall impact that this crisis will have on their businesses, despite the fact that they are an “essential service.”

Overall Fulfillment Volumes are Down by 18% on Average

The short-term devastation of the coronavirus is already being seen in the warehousing industry. Of all the fulfillment centers that responded on our survey, the average change (plus or minus) in order shipping volume was a whopping decrease of 18%. Fortunately, many companies noted that shipping volumes were still unchanged, and only a small percentage of fulfillment providers have seen their order volumes increase (as much as 10% to 30%). But for over half of the respondents of our survey, significant decreases in shipping are being seen. For example, the average decline in order volumes for those that reported decreases was about 25%, and the highest decreases reported were up to an astonishing 70-80%.

What Products are in High Demand During the COVID-19 Crisis

When we asked the fulfillment houses in our network about the products that were still shipping in high demand during the last few weeks, many of the answers were expected, with food and medical items showing up most frequently in the survey answers. Some of the most commonly shipped items during this crisis so far include:

• Foods and groceries, especially dry goods like pasta
• Medical and pharmaceutical products (one company even noted ‘medical beds’)
• Personal care and beauty items
• Nutritional supplements
• Emergency deliveries
• Hand sanitizers and disinfectants and cleaners

However, some of the items on the list of products that are flying off the shelves are somewhat surprising, including:

• Exercise equipment
• Packages being sent to attendees of events that have been cancelled
• Samples being sent to customers to cope with the crisis
• Board games and puzzles
• Books and crafts
• Footwear and apparel
• Supplies related to precautionary spacing of workplaces
• Computer components
• Pet supplies and products (one company even noted ‘back yard chicken supplies’)

Due to in-home isolations, consumers are increasingly turning to solutions that will help them exercise at home, including exercise equipment. And with kids at home and many schools opting to try to utilize homeschooling methodologies, we expect that homeschool supplies, books, arts and crafts will continue to be popular during this time. In order to ensure proper use of computers and printers, many consumers could be forced to order computer related supplies for their in-home systems. Of course, pets need to be maintained during this time as well, so pet supplies and products are in high demand as well. Another area that was somewhat surprising was that businesses are sending out samples to help consumers cope with the crisis and perhaps perform some light marketing, and packages are being sent to would-be attendees of events, in hopes that things will pick up swiftly after this crisis is contained.

Impact of COVID-19 on Fulfillment Companies is Far Greater than Sales and Revenue

Perhaps one of the most intimate and impactful ways that this crisis is altering the fulfillment landscape relates to all of the changes that companies are having to make ‘on the fly’ in order to cope with the practical implications of maintaining a healthy workplace – both physically and mentally.

According to one warehouse representative, SOP’s (standard operating procedures) are changing rapidly to cope with COVID-19 and to mitigate risk. Some of the ways that warehousing companies are changing includes:

• Being vigilant about working 6 feet apart and limiting all contact (even going so far as to set up workstations that didn’t otherwise exist before the crisis)
• Diligently enforcing sanitation policies of hand washing and covering mouths when coughing, and erring on the side of caution in terms of sending employees home at the first sign of sickness
• Instituting much stricter policies around interactions with outsiders, including truck drivers and customers
• Allowing some administrative staff to work remotely from home
• Updating policies to be more relaxed and flexible for PTO and employee time off, not only to deal with potential health issues for the employee but also for their families and children
• Alternating shifts and schedules to keep employees fresh and less apt to illness and burnout
• Helping employees get to work, including paying for delivery services to bring employees to work if they’re unable to drive or in cases where they rely upon public transportation

On top of all of the changes, it’s becoming very challenging even finding temporary workers to help fill the gaps where needed, as was noted by a number of our warehouse respondents.

The Mental Aspects of Dealing with COVID-19 in the Fulfillment Industry

Of course, the coronavirus is causing a great deal of anxiety for fulfillment workers and management. Maintaining a positive corporate morale is an extremely important task in a situation where there are so many unknowns. Our survey uncovered in some cases that it is becoming increasingly difficult to keep employees coming to work due to the anxiety and fear that some workers have about potentially catching the coronavirus in the work setting. In other cases, especially part-time employees, workers are flat out not showing up for work or are notifying warehouses that they will not be coming in.

Lots of questions are being asked by clients and staff alike, wondering if shutdowns are on the horizon, if there will be layoffs, or generally how the company will be impacted financially by the outbreak of the virus. Some companies have had to reduce hours already, which makes maintaining a positive company morale even more challenging. And in scenarios where warehouses are continuing at a normal pace or even growing in shipping volume, concerns still loom regarding whether or not their customers will be able to pay their bills. The fear of a cash flow crunch in the near-term is significant among respondents. One common theme among most warehouses in our survey was that the bulk of the growth strategies for the upcoming year will likely have to be significantly adjusted.

Preparing For a Rebound Still Presents Challenges for Fulfillment Centers

Lastly, although there is optimism among the industry about achieving normal operations at some point in the future, there are also some additional hurdles to clear as the economy rebounds. Incoming shipments currently are light or non-existent, and some warehouses aren’t expecting inbound replenishments for a few months. Once new products start to be sent, particularly from overseas manufacturers and suppliers, it could take some time to flush out these receipts and truly replenish stock to meet upcoming demands. While this is a significant challenge to overcome, it’s no doubt a welcomed challenge that the industry is anxiously anticipating.

Warehousing and fulfillment providers most certainly keep our global economy moving. They will continue to work through the challenges of this virus, and will help us not only get through the kinks of replenishing stock once the outbreak curtails, but will continue to fuel the world in the distant future.