Industry experts are tipping warehousing and logistics as one of the sectors to see higher automation levels and AI over the next decade. McKinsey, for example, predicts around 57% of existing warehousing and logistics functions will be automated and handled by a variety of robots and machines. If much higher automation investment beckons then that means smarter, faster conveyors will form the backbone of warehouse and distribution centres, and the drive behind more speed is customer expectations driven by the inexorable rise of etailing. But there are always risks to any automation and they can be hugely costly. What, for example, would a sudden slowdown in product throughputs do to projected ROIs on the expensive investment? Equally worrying, perhaps, would be the cost of holding high levels of inventory, much of which might have to be written off. So what, then, can be done to mitigate the risks?
The first step would be to bring in one of the leading automation suppliers that offers a wide choice of equipment, their own broad range of software and a long track record of good, integration skills. The safe route for many would be to adopt automation in stages through a mix of manual and automated systems, something that conveyor specialist, Vanderlande, calls Smart Item Robotics (SIR) in which robots work alongside human counterparts, in an integrated workforce.
The degree of automation success will partly depend on the nature of the warehouse or distribution centre and how replenishment of stock is governed, in other words what drives the re-supply decisions. This can be a highly complex issue involving IT as much as handling hardware, like the use of stock forecasting programs, especially those geared to real-time forecasts based on imminent weather changes that can be so critical for the food and drinks sector. Some distribution operators, however, may choose a mix of stockforecasting programs and a buy one, replenish one stock item as the drivers for stock replenishment.
But why is getting a firm grip on inventories so important and relevant to automation where conveyors of all sorts do most of the ‘walking’? We hear much talk of labour and energy being the biggest costs in warehouses, overlooking the fact, perhaps, that the cost of holding vast amounts of stocks can overshadow all other warehouse costs combined.
This points to the need to ensure that distribution centres, especially those supplying shops, should become transit sheds, where almost all the stocks pass in and out every 24 hours. This, of course, is not a problem for the parcel or courier companies but it can be very much so for retailers reliant on their own warehouses and DCs. This exposes the Achilles’ heel of Britain’s biggest grocery retailers that will allow the Davids to slay or cripple the Goliaths.
Some 30 years ago this writer visited the Danish food retailer, Netto, whose 120 shops were EPOSconnected to their only nationwide DC. Shop replenishment was based on the aggregated daily sales being transmitted overnight for their DC to pick and replenish for the next morning delivery. That meant that 90% of all goods passed in and out of the DC every 24 hours, with the key help of a fast sortation conveyor. That business model was later brought to Britain by Aldi and Lidl and while their models were based on far fewer SKUs than Britain’s grocery giants they were almost all fast movers and those that became slow were dumped and so stock keeping costs were minimised.
Britain’s retail landscape has fundamentally changed so that price is now king. The right kind of logistics, allied to a savvy business model has played a key role in that.