Rethinking Order Fulfillment Automation in the age of rapid changes
It’s clear that the current climate of rapid changes in consumer purchasing behavior and available technology make making the right automation investment decision for your warehouse a tough and risky proposition. The only worse option deciding to stand still, operationally speaking, as business conditions and consumer expectations are changing ever faster. ‘Business as usual’ today should mean outpacing change, or one could find one’s self on the outside looking in very quickly.
For decades, the supply chain was uniform, steady and predictable. Manufacturers produced goods and shipped these in pallet loads to wholesale retailer’s warehouses. There they were received and broken down and re-shipped in mixed pallets to retail stores. Where we the consumer drove to, to select and take the products home.
Figure 1. The traditional supply chain, which existed almost unchanged for decades.
The internet, and internet commerce following on its heels, changed everything. The impact of our change in purchasing behavior on the supply chain - which has really only just begun - hard to overstate.
Today, more than 10% of all retail sales is done online and outpacing brick and mortar retail sales growth by a factor of 7 to 1. Of course, these numbers vary strongly from industry vertical to vertical. Grocery and particularly perishable food shopping is still done mostly in-store, with e-sales less than 5%. On the opposite end of the spectrum are books and electronics, with on-line sales close to 50%.
Manufacturers, retailers, wholesalers, everyone opened their own e-store. Of course e-commerce only retailers popped up, none more dominant than Amazon. Consumer behavior and consumer expectations have changed as a result.
No longer are we the consumer taking care of transporting the goods to our homes after an exhausting day of retail shopping. Instead now all these tiny internet orders need to be shipped to a multitude of locations. What’s more, all these small internet orders need to be filled, and filled efficiently. But virtually no-one is setup to handle this really effectively and efficiently. The exception perhaps being amazon.com, who has even found a way to have its customers pay for shipping and handling with their ‘prime’ offering.
This lack of knowledge of how to deal with internet sales, is a real opportunity for 3PLs to provide unique ‘expertise’ and added value. The lifeline and crutch for those manufacturers and retailers not knowing how to get their goods to the consumer. Which is why we’re seeing a lot of growth and consolidation in that market space.
Adding to dynamic nature of today’s supply chain, is the ever growing flood of new technologies being introduced, and introduced at an accelerating pace at that. Not a month goes by where ‘the next big thing’ in supply chain is being discussed or predicted. Tests being performed with drone deliveries, self-driving trucks. Net-worked and self-learning autonomously operating guided vehicles bringing goods to operators. 3D printing of orders, predictive order algorithms, the list goes on and on. At times it feels like Star Trek is just around the corner.
Brings to mind a quote by Edward Murrow – ‘Anyone who isn’t confused really doesn’t understand the situation.’
Figure 2. Today’s supply chain, which is still developing and in full motion.
Meanwhile reality on the ground today still paints a very different picture, with only 5% of warehouse operations reporting a high level of automation in order fulfillment in a late 2017 Modern Material Handling survey. In that same survey over 40% reportedly were still operating completely manual. But with every day passing these warehouse operations are falling behind and becoming less and less competitive. Automation has the potential to eliminate a lot of cost in a warehouse operation, with 60-70% of warehouse labor tends to be tied up in order fulfillment. Not to mention costs associated with mis-picks.
But while productivity gains are always a goal, given the dynamic nature of the market, true flexibility, scale-ability and configurability of the solutions being evaluated, maybe just as important, if not more so. Can your order fulfillment solution of choice grow and change with your operation? How easily and quickly can it be reconfigured and repurposed when the product portfolio changes? Because it will change, that’s the only certainty there is.
Understanding that the market is still in the midst of fundamental changes, selecting an order fulfillment solution that can change with you is of vital importance.