Supply chains are evolving, and how
Supply chains have evolved and how. automation, ai, blockchain are only some of the novel technologies coming up
In the present day, the supply chain is not just a way to keep track of your product, but also a way to gain an edge on your competitors by building your own brand. Modern supply chains are fast, with most company’s success dependent on their ability to efficiently move parts from around the world to, and throughout, manufacturing facilities. Products move from a raw material state to the end user quicker than they ever have, yet the demand for speed is only increasing.
Consumer expectations for choice and customisation only add to the pressure felt by the supply chain and material handling functions. Products and parts must be located quickly, their progress tracked accurately, and shipped out to the customer on time.
Automation and AI-driven technologies are changing the face of warehousing industry, pushing advanced inventory control high up the industry agenda and sharpening cost-control, space optimisation and competitiveness. Rakesh Sinha, head, global supply chain, manufacturing and IT, Godrej Consumer Products Limited, says, "The level of automation in an industrial environment depends on the cost of capital and the cost of labour. While cost of capital in India is much higher compared to the developed economies, cost of labour is much lower. As a result, India is expected to have much lower level of automation compared to the developed nations."
Material handling automation in warehouses is typically the last one to come on board. Multi-level racks, pallet handling and automated pick-and-place have made inroads in some metro cities but not in smaller towns where rentals are lower and labour is cheaper. However, we have witnessed a shift for supplies to organised retail, which is growing at a faster pace and needs higher warehouse throughput at the customer location. Companies are using palletised deliveries, truck load building as per invoice and Advanced Shipping Notification (ASN) to speed up unloading, he adds.
Over the past few years, the adoption of warehouse automation has been based on a number of factors. There is the growing consumer demand for faster and cheaper online delivery options which has seen many retailers investing in warehouse automation to reduce order processing times and to cope with the increasingly complex network of distribution channels.
There is also the labor shortage due to 3.8% unemployment, which makes it much harder to both recruit and retain a workforce. This worker shortage especially affects those exposed to e-commerce, where demand is more difficult to forecast and the seasonal spikes in demand can be several times higher than the rest of the year. In light of these circumstances, many retailers and manufacturers have implemented automation to alleviate some of these pressures.
Rajeev Chopra, GM strategic sourcing, supply chain & tooling development, TAFE, says, "There is a high need for flexibility in supply chains today. At our own plant and warehouse, there are several modules that are in demand and we need to constantly look at changing models if need be."
As barriers to entry continue to drop, innovation accelerates, and labor gets harder and harder to come by, the number of warehouses and distribution centers (DCs) deploying robotics is climbing to new heights.
According to ABI Research, over 4 million commercial robots will be installed in more than 50,000 warehouses by 2025—up from just 4,000 last year. Driven by the need to find flexible, efficient, and automated e-commerce fulfillment— and solutions that support their customers’ same-day delivery needs—more companies are investing in warehouse robotics as an “attractive and versatile alternative to traditional fixed mechanical automation or manual operations,” ABI reports.
Companies can’t just keep throwing labour at the problem. Their businesses are growing, with e-commerce growing at 10% annually and still only a fraction of the entire retail market. Of course, this trend puts more labour demand on businesses that must hire more workers to support their organic growth. One also have to factor in the seasonal peaks and valleys. Because labour requirements fluctuate from month to month, companies are in a constant cycle of recruiting, training, deploying, laying off, and rehiring.
The real key is allowing workers to pick to multiple robots simultaneously. There’s no reason for a worker to be tethered to a single robot other than that’s the old cart picking model – the way it’s always been done. When a worker uses a traditional cart – or a similarly conceived “followbot” motorised cart – that worker is limited to the orders that fit on a single robot. With the multi-bot approach, a worker is limited only by her own picking skills. She is able to pick to any robot, and that means her pick capacity is not constrained by the capacity of a single robot.
Warehouse and logistics managers are also grappling with a lack of physical space in an environment where such space is both expensive and hard to find. In fact, it’s been nearly 20 years since there was this little amount of industrial and logistics space available in the US, where CBRE says availability dipped to 7% in late-2018. That marks 34 consecutive quarters of declining availability (the longest since CBRE started tracking the data in 1988), in a real estate sector where space absorption is currently outpacing construction by about 57 million square feet.
Senthil Kumar KK, national manager, supply chain transformation, Hindustan Coca-Cola Beverages, says, "A lot of companies are completely out of space. They’re also having a tough time managing their own growth and dealing with omni-channel right now, particularly on the fulfillment side. Finding more space is expensive, and filling those spaces with skilled labor is getting harder and harder. Automation allows the companies to maximise their existing space while leveraging the associated data to make better business decisions. In the e-commerce world, companies wind up with much higher SKU counts and a lot of product and order customisation. For example, consumers want their goods in specific designs and colors, and is what impacts the number of SKUs companies have to deal with. At the same time, higher demands are being placed on DCs as they shift from the traditional distribution model to omni-channel. They’re not picking cases anymore; they’re picking individual SKUs (and more of them, thanks to SKU proliferation) and this is changing the whole intralogistics paradigm for how a DC works including receiving, storing, picking and packing."
Dr Sinha says, "Consolidation of warehouses does require higher warehouse throughputs but the increase has been minimal for FMCG companies. This is because FMCG companies need to respond quickly to changing consumer demand which makes it imperative to locate warehouses closer to markets. Fragmentation in the secondary freight market is another factor which makes secondary freight more expensive than primary on a comparable rupees/kilometre/kilogram basis, leading to shorter last miles. Recently, we have seen an emergence of large logistics hubs and service providers bundling warehousing and transportation services for better efficiencies. Such large hubs use much more automation in their material handling and tracking activities."
GCPL has implemented the Serial Shipping Container Code (SSCC) bar codes on shippers which gives a unique serialised code to each case. It has helped us tremendously in terms of First In First out (FIFO) adherence and reduced obsolescence. It enables us to completely track and trace our products from the factory till distributors.
"We are also using optimisation based heuristic models to define stacking pattern for each SKU, along with redesigning of shippers to allow for higher stacking and minimising floor space usage," he adds.
Supply chain professionals can use blockchain technology to gather and use tracking data in dynamic new ways. For example, entries in a blockchain database could trigger other tasks such as the assignment of the next batch of goods arriving at a port to a certain dock or container area.
Applying blockchain technology to instant settlement of transactions could also reduce friction in commercial financing, which underlies global trade and is currently an area from which many trade disputes arise. Additionally, dispute resolution rules could be agreed upon beforehand and applied instantly on the blockchain when necessary.
The changes to the world economy have only just begun. And supply chain managers stand at the forefront.