Evolving Warehouse Operations with Technology

The retail industry has undergone significant changes in the past three years, particularly during April 2020, when the e-commerce sector experienced a decade's worth of growth within eight months. Fulfillment centers were inundated with orders, causing delays in parcel delivery that lasted for days or even weeks. This sudden surge in demand led to a depletion of inventory levels, making it difficult for newcomers in the supply chain business. With pandemic restrictions limiting in-person shopping, physical stores became less important, except for grocery stores. The situation became even more challenging for warehouses as they had to manage the high demand for e-commerce parcel fulfillment while maintaining their service levels for physical stores. This may sound familiar to those who have experienced the retail industry's recent fluctuations.

I was fortunate enough to join Lee Valley Tools right as the pandemic started. We are a Canadian, family-owned specialty retailer based in Ottawa, Ontario, that focuses on woodworking and gardening tools. We believe that the process of creating is just as important as the end result. We have a well-established e-commerce business that is supported by a network of 18 physical stores throughout Canada. Our main facility in Ottawa is responsible for fulfilling most of our e-commerce orders and servicing our physical stores. Additionally, we fulfill e-commerce orders from each of our Canadian stores and from a facility in Reno, Nevada, which services western US orders.

Working with an exceptional leadership team, we quickly adapted to the fast changing landscape, enabling every opportunity we could handle, to support the e-commerce explosion.

We are now entering a new era marked by economic challenges and inflationary pressures, which is beginning to redefine the retail landscape. 

In response to the expected decrease in online shopping following the pandemic, performance-driven retailers have put in great effort to maintain their sales volume. While we benefited from the surge in e-commerce growth, the challenges we faced during that period have taught us that it will be tough to maintain such high online volumes without transforming our warehouse operations. And this is where our journey starts.

The pandemic disrupted the Canadian employment sector, causing a shift away from jobs in hospitality, manufacturing, retail, transportation, and warehousing. Instead, more people moved towards professional services and public administration. Moreover, the number of Canadians retiring annually has more than doubled in the past eight years, resulting in a dwindling labor force to support warehouse operations. Finding seasonal employees to manage the surge in holiday volumes has also become increasingly difficult over the years. As a result, a change in approach is needed to address these challenges.

In 2021, we embarked on a research journey to explore various warehouse technologies. We aimed to find a solution that could handle the current scale of e-commerce volume, optimize storage space, and reduce our reliance on seasonal labor. In addition to meeting our objectives, we recognized that investing in technology should lead to a sustainable enhancement of our foundational warehouse capabilities. We had various options to consider, including robotic delivery systems, collaborative robotics, high-density storage/ automated pick systems, and mini-shuttle systems. We needed to identify the technology that would best align with our objectives and position us for sustained growth in our e-commerce and retail store networks.

“We are now entering a new era marked by economic challenges and inflationary pressures, which is beginning to redefine the retail landscape”

After careful consideration, we decided that a HighDensity Storage/Automated Pick System was the best choice for our objectives, which included scaling pick capacity to support e-commerce and optimizing storage space beyond shelf-based to cube-based storage. Several brands offered this technology, so we proceeded to the next phase of our research, which involved thoroughly understanding each brand's technology. This involved spending seven months analyzing technical specifications, speaking with customers who had already implemented the technology, and visiting live site locations in Canada and the US. We also focused on getting to know the people who represented these brands to determine which one was the right fit for Lee Valley Tools. These valuable lessons helped our team make a partnership decision. As a learning organization, we are always anticipating the future and ready to act quickly when the right opportunities arise.

In May 2022, we decided to partner with AutoStore, a pioneer in cube storage automation. Thanks to their technology, we were able to consolidate our ground-level pick locations from 40,000 square feet down to just 5,900 square feet. This greatly enhanced our pick capacity and allowed us to scale to cover our peak periods without the need to hire a large number of seasonal employees. We were thrilled to have found a technology that met our objectives, and with over 1,150 AutoStore systems in operation, we had the confidence of a safe and sound investment. Furthermore, the savings from not having to recruit seasonal employees could support the investment in technology. As of the time you are reading this, Lee Valley Tools will be well underway with the implementation, with a targeted go-live date of September 2023.