Is the security industry ready for the growing bullwhip effect? 

America warehouses are running out of room, and it’s about to get worse. Industrial vacancy is at a 27-year low. As retailers and logistics operators struggle to find space, industry experts are ringing the alarm bells and warning about the ongoing “bullwhip effect” causing massive volatility in inventory levels and volatile supply chain disruptions.

While the storage crisis intensifies, warehouse crime is on the rise, with six in ten (60%) SMEs in the U.S. reporting stolen shipments over the past year, with 75% of thefts resulting in losses of up to $20k. With more than half of cargo thefts occurring at warehouses (55%) and in trucks/trailers (52%), only 39% of SMEs impacted by cargo theft invested in securing these types of large assets.

In this environment, physical security professionals must monitor the growing warehouse situation and provide practical solutions.

Key Questions:

  • What is the bullwhip effect? 
  • How can warehouses improve their security?
  • Is the security industry ready? 

What is the bullwhip effect?

According to supply chain experts, the bullwhip effect is a “supply chain phenomenon describing how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer, and raw material supplier levels.”

Essentially here’s how it happened: companies panic-ordered goods to keep shelves full while demand was high, and a downturn in demand picked up steam mainly due to recision fear while shipments were still arriving from Asia, increasing the likelihood of the bullwhip effect.

The result of the bullwhip effect can be seen in the graph below:

Graph with warehouse market data.

How can warehouses improve their security?

Experienced warehouse managers know very well about the safety and security challenges that exist within their facilities. However, other issues frequently take precedence over building security. While protecting employee safety is crucial, warehouses would benefit by taking a step back and evaluating their physical security posture. 

Logistics real-estate leader, Prologis anticipates that the growth in inventories could lead to a need for another 500 million square feet of warehouse space. Additionally, more than half of cargo theft (55%) occurs at the warehouse. With so much on the line, it’s critical for warehouse owners, directors, and managers to perform regular physical security audits and review their security systems, practices, and procedures. 

Warehouse security camera.

While there is no standard way of conducting a warehouse physical security audit, there are best practices and common challenges that should be considered. A physical security assessment is a great way for warehouses to establish their risk level and explore strategies to mitigate potential threats.

Key areas to review include: 

  • Perimeter Security-Many physical security professionals emphasize the importance of a warehouse’s perimeter security. Warehouses with large quantities of goods, need effective perimeter protection to address the threat of criminal activities. 
  • Security Awareness-Having an integrated video surveillance system is critical, but promoting security awareness by posting clear signage and keeping loading docks clear to maximize visibility are also important. 
  • Safety Awareness-Regardless of what specific risks a facility faces, regular maintenance is critical. Small issues like leaks, exposed wires, or rusting metal supports can worsen to become substantial hazards.
  • Access Control-Access control can allow warehouses to have much better efficiency, security, and protection from internal and external issues. Loading docks should use reliable, well-maintained garage door systems. These doors can crush objects beneath them if they fail, so take their condition seriously.

Warehouse physical security is a broad term with many variables. An effective physical security plan will include considerations of facility application, facility location, site security, and known local threats as well as potential climate issues. Balancing security with image, including both site and internal blast design, is paramount to a plan tailored to specific needs and circumstances.

Is the security industry ready?  

Warehouse supply chain security systems.

The security industry is both proactive and reactive when it comes to responding to a crisis. Proactive because we like to think that we are always anticipating needs and challenges to prepare our clients to adapt and overcome. On the flip side, if we monitor developments and maintain good communication with our clients, we can efficiently react to situations to help our clients adapt and overcome. 

Is the security industry ready to help warehouses navigate the bullwhip effect? Well, it depends on who you ask because many security integrators deal with the same challenges their clients face. 

According to Joshua Freeman, VP of Supply Chain Management at HID Global, the security industry is “affected by the same supply chain challenges plaguing everyone. Semiconductor shortages are especially problematic across all security solutions and are expected to extend well into 2022, and potentially early 2023.”

Despite its supply chain issues, the security sector is well-positioned to help the business community through these difficult times. While the pandemic destroyed some sectors of the economy, it also compelled security directors, integrators, and operators to adapt to a new operating environment that focuses on systems integration, effective coordination, and client collaboration. 

Final thoughts

Since security systems in today’s warehouses range from advanced perimeter intrusion detection systems to the use of real-time video surveillance, it’s best to consult with an integrator that is aware of the current warehouse security challenges and knows how to deliver holistic physical security solutions.

It’s difficult to predict the future, but one thing we know for sure is the most efficient warehouses will be the ones that leverage technology to protect their operations and thrive!

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