Warehouses

The Evolution of Warehouses

With e-commerce sales soaring over the past few years, there have been some major changes in the way people are buying and selling goods. Customers, who can buy virtually anything with a few clicks, have come to expect speed, transparency and flexibility in their online purchases.

Warehouses are no longer standalone buildings used only for the storage of goods. They are increasingly becoming vital organs in the complex organism that is the modern supply chain. This has happened in a large part due to the combination of internet of things (IoT) devices and big data. “You can’t improve something if you can’t measure it” is an old adage, but one that has gained even greater prominence with the proliferation of these technologies. Warehouses have become ideal spaces to make these “measurements” and harvest data as they are the nodal points through which all goods in a supply chain flow.

Inventory management is one of the primary functions in a warehouse, and has been for a long time. Carrying too much inventory uses up precious space, while shortfalls lead to longer delivery times and unhappy customers. Warehouses must therefore minimize their inventories while anticipating any sudden increase in demand. While this objective hasn’t changed, the methods warehouses now use have changed drastically, and so have the results.

The dynamics of demand and supply are constantly in play in warehouses, since they connect producers to buyers. Warehouse management systems, which form the backbone of many warehouses, are programs that can keep track of everything from inventories and orders to the location of goods in the warehouse. By analyzing incoming and outbound goods, warehouse management systems can predict future demand for the goods they hold. This means that warehouses can often identify slow moving goods, shortfalls and even defective items before even their manufacturers can. The warehouse has become an important source of information and producers can base critical decisions about production and investment at their firms on this data.

Customers like to track their orders, have the ability to cancel them midway or return products. Warehouses provide tracking information, and undertake reverse logistics by picking up and processing damaged, defective, outmoded or unwanted products from buyers.

With software doing a lot of work that humans once did, warehouses can use their labor in other places. A host of value-adding processes, like packaging, assembly, product customization, and sometimes even customer collection services, are now being performed at warehouses.

Transportation companies are also relying on warehouses to provide them with data and handle their transportation management. As hubs in the logistical network, warehouses are best placed to analyses the quickest, cheapest way to get the various goods they hold to the various locations they need to be delivered. The ability to track packages and find optimal routes means that warehouses are becoming control centers for third party freight carriers.

Warehouses are also moving towards greater automation. For a long time technology hadn’t caught up to the needs of the warehouse. Older generations of robots and other machines, like conveyor belts, were expensive and very restricted in their functioning. In the last few years, more and more warehouses are using robots to speed up their operations. Robots do not feel hunger, take breaks and are free from human foibles. They can work all day and all night without any overtime, and will never complain about it. Most importantly, robots are much faster than humans and make fewer errors. Autonomous motion robots have changed the way warehouses function, from moving shelving units around to improve warehouse product flow, to helping humans locate and transport items. These robots don’t need any specific instructions from humans and can work from a centralized system that automatically prioritizes and assigns tasks based on orders received.

As technology continues to advance, warehouses will keep changing, while transforming the whole supply chain around them. It is hard to predict what role warehouses will play 25 years from now but as e-commerce sales and omni-channel retail are bound to be even greater than in the past the future looks bright.

 

Warehouses

Minding the Space: Effective Warehouse Cost Reduction Strategies

Minding the Space

Increasing productivity from your layout and storage space can help you reduce warehouse costs. Here are some effective warehouse cost reduction strategies:

Maximize Space Productivity

In many cases, a full warehouse might just imply inadequate shelving. Make sure you use the full height of your warehouse by choosing the right type of racking. Adding a mezzanine or platform shelving is one way to gain vertical space in the warehouse. Aisle space can also be reduced depending on the equipment used. Investing in redesigning your warehouse can repay for itself in a short period of time.

Effective slotting requires that the location for each product should be determined by its size and the product velocity. Fast-selling products, and larger products that may require the use of forklifts, should be kept nearer to packing and freight terminals so as to reduce travel time. Considering the right picking method based on the type of product and the type of orders also reduces travel time. Some of the methods are batch picking, zone picking, pick and pass, pick to cart, etc.

Reducing handling costs

Reduce the number of times a worker is required to handle products. The fewer the touches to a product, the less the cost of shipping an order. Material handling doesn’t create value and every minute saved in picking, moving, sorting or stocking material is a minute that can be put to use elsewhere.

Streamlining operations by using proper slotting practices can reduce handling and significantly bring down the cost of fulfilling an order.

Unloading goods from an incoming truck and loading them directly into outbound trucks, or cross docking, is an effective practice to reduce handling and shipping costs while improving customer service.

Minimize slow-moving Inventory

Examine your product mix to make sure you’re buying in the correct numbers of each item based on its turnover. Warehouse management systems can help determine optimal inventory sizes at any given time and notify you about potential shortfalls or excesses. By keeping inventory levels closely pegged to demand, you can increase the throughput of your warehouse.

Labor

Labor costs are usually the largest expense in the warehouse, and can account for the majority of a warehouse’s total operating costs. Increasing labor efficiency can help speed up picking, packing and overall order processing/turnaround time. Here are some ways to reduce your labor costs:

Training workers

3PLs can expend a significant amount of time and money on recruiting and hiring employees, only to find that turnover rates remain high. Retaining workers in the long term requires some effort in the initial training period. Creating training manuals can save time and make the training period more effective, while also enabling new employees to learn about their specific job, the company and its work culture. Clearly documenting the various functions an employee must perform and specifying the expected output for a given job can help employees better understand what is expected of them.

Effective workforce management

Setting and providing targets to workers is important. Creating quantitative measures can aid in setting individual goals for employees and improve their productivity and accountability. By collecting the actual performance of workers and comparing it to the goals set, you can get a better picture of the various processes taking place. This data can be used to identify areas of high performance and those with comparable inefficiencies. You may even display the data in periodic graphs to show actual versus plan metrics such as total error rate, cost per transaction, reported savings, etc. These provide workers with real-time input as well as motivation.

Doing all this manually can be cumbersome and prone to error. Integrating labor management into a warehouse management system can reduce costs, time and human error related to planning workforce schedules and tracking their actual progress.

Feedback, incentives and reducing attrition

Apart from higher efficiency, setting up goals also allows you to recognize the most productive and trustworthy employees and implement a reward system. As already mentioned before, posting results can provide meaningful feedback to employees and motivate them to meet or exceed expectations. By highlighting individual record holders in various functions, management can create a friendly competition on the warehouse floor. Reward employees by moving them up the ladder. Place people in positions where they have a good chance to succeed. People will work harder, and be more likely to stay on, when they see there is possibility for career growth.

It isn’t only your employees that gain from feedback. By establishing a clear and transparent exit interview process you can gain insights into why people leave. This can help you take steps to reduce turnover.

Predictive Analytics

3PLs: Leveraging Predictive Analytics

The journey of a product from an online shopping cart to a doorstep is complex and requires multiple stages of careful planning and painstaking attention to detail. It can be daunting to manually keep track of inventories, shipping, tracking, delivery and other aspects of the logistics process.

The wealth of data generated by devices such as GPS trackers, scanners and sensors can be leveraged to gain a clearer picture of logistical hurdles and to streamline operations. By analyzing this data 3PLs can automate repetitive tasks, run simulations to test out alternatives and find the most effective ways of doing things. Data can also guide decisions and cut through the growing complexity of supply chains by providing timely and regular updates at every stage of the process – whether is in the warehouse, in transit or during the last mile.

Predictive analytics and data-driven techniques can provide a better understanding of the demand for goods and make inventory management much more efficient. The analysis of data from warehouses and fulfilment centers can help identify seasonality or changes in demand patterns. Predictive algorithms can help determine optimal inventory sizes at any given time and give 3PLs the agility to respond to market conditions quickly.

Businesses that partner with 3PLs can also acquire greater clarity into their own operations. By using the knowledge generated by analytics, decisions regarding investments in manufacturing capacity or expenditure on inputs can be optimized to keep inventory levels closely pegged to demand. This, for example, can prevent potential shortages or reduce expenses businesses may have to incur on excess warehousing.

The growth in e-commerce and omni-channel distribution has put pressure on 3PLs to cut delivery times while also keeping costs at a minimum. As customers have come to expect quicker delivery times, greater flexibility and prompt service, even minor disruptions can have significant consequences. 3PLs must prepare for all eventualities in order to remain competitive; here predictive analytics can help work out the kinks within the process.

Predictive Analytics

Analyses of large amounts of data on different modes of transportation, their costs, distances and travel times can help 3PLs find out how effective each mode of transportation or a combination of them is meeting delivery times. Devices can monitor temperatures to ensure that goods are being stored and shipped under the right conditions, can assess road and traffic conditions to calculate possible delays and observe weather patterns. Predictive algorithms can use all of this data to run various scenarios and sort through millions of options to determine the best route to delivery locations.

Real-time tracking makes the entire supply chain process more transparent. More accurate tracking as well as regular collection of data regarding location and physical conditions can be used to provide customers with more precise information about goods mid-trip.  A clearer picture of last-mile delivery can also prevent and rectify issues such as delays, damage, loss of goods and other logistics issues that may come about at drop-off locations. Greater transparency and keeping open direct channels of correspondence with customers during delays can also improve customer experience and increase retention.

The collection and analysis of data also allows businesses to be more responsive to the requests of their customers or any complaints they may have. Even after the delivery is completed, customers can provide useful information to 3PLs. Defective goods can be identified by analyzing customer behavior following a delivery and an increase in returns or help requests with regard to a certain product, could be a signal to stop shipments of other similar products thereby averting additional issues.

Keeping the customer satisfied is crucial to any business, especially in a hyper-networked world where feedback and online reviews of a few customers can quickly make or break the image of a company.

While costs of data centers and other resources may deter 3PLs from investing in analytics there are clear advantages to it. It can find cheaper and faster transportation, increase the efficiency of inventory management and improve clarity and transparency, not just for the 3PL, but also for its partners and consumers. Additionally, the longer a system runs and the more data it gathers, the more precise its predictions and more useful its prescriptions become. Thus, the benefits of using predictive analytics within the 3PL space are numerous.

3PL

What’s in store for 3PLs in the New Year?

As another year starts it’s a good time not to just reflect on what has taken place over the last year but understand, anticipate, and get excited about what a new year holds. For businesses, it is always a good time to take stock and see what direction to chart. For industries as a whole, there is a combination of both competition but also options for collaborating and discussing new technologies, ways of working and forming ties to create win-win situations. 3PLs are no different and there are a number of directions and trends that they could take over the course of 2019.

Technology

Of course, one of the most important points not for just 3PLs but across businesses is the use and implementation of technology. Here, there are numerous options, which are already being tried and tested and regularly used while others still are being explored.

Automation

Probably one of the most used tech terms today is automation. However, though its use within 3PLs is already being witnessed it appears that more businesses will take a closer and harder look at automation implementation. This doesn’t mean staff layoffs in the face of machines; rather it involves a better way of working to reduce human errors, save time and, essentially, free-up space for humans to be involved in work that matters and delivers value.

Big Data & Analytics

Another buzzword over the last few years, the idea of extracting relevant customer data easily and quickly in order to gain valuable insights is still something most companies are trying to figure out how to do. Given their importance, big data and analytics are poised to receive greater attention in 2019.

As 3PLs thrive on services across the value chain, today’s customers are looking to get the same professional experience across all touch points, channels and platforms. They want consistency and would like to know that their providers clearly understand their needs and requirements, wherever they are.

For internal sales and marketing teams, ensuring analytics can help plot, understand and enable customers to follow them is something most companies are yearning for. In fact, most 3PLs that do not invest at least part of their budgets into analytics will surely feel like they are being left behind.

Sustainability

Sustainability is a subject, which is gain more ground every day and customers are now clearly looking at buying-in to companies that are more sustainable, do more for the environment and take their responsibilities towards the planet much more seriously. This could be through energy-saving products or devices, CSR initiatives, or reducing carbon footprints. 3PLs will look more closely and take serious steps towards sustainable practices in the face of customers whose minds are on saving the planet.

3pls

 

Partnerships & Collaboration

2019 will witness an increase in 3PLs taking on newer partners for specific tasks. This could be within technology through smart systems integration, mobile apps developers or even companies for internal IT restructuring through cloud implementation. Further, as there will also be a push towards increased cyber security, partnerships will be formed to create a specific space to encourage greater IT security across supply chains, logistics and distribution. This will also be coupled with more sharing of information through real-time feeds, device-driven information via the Internet of Things (IoT) as well as through predictive analytics.

Supply Chain Integration

To deliver the best results, all players across the value chain need to be in sync. 2019 will witness more integration through data sharing, insight-driven strategies and possibly, a greater shift towards blockchain technology, to encourage visibility, transparency and accountability by all parties involved. Thus, the greater good purpose is poised to be served and taken into account, especially within an industry that involves such a large number of players at any given time.

Last-mile delivery

An obvious but overlooked concept, which many players don’t always get right, last-mile delivery looks set to become a game-changer for many providers within the new year. Focusing on customers through added efforts, value and taking the extra step will be key in customer retention, loyalty and satisfaction. In many cases, last mile service could make or break companies.

Conclusion

2019, in many cases, could be a big year for 3PL providers. Many companies are looking to revamp their IT infrastructure and embark, continue or fructify their digital transformation journeys. The points above are factors, which could support this path and, for many such players, could even change their entire business structure.

Digital age

Supply Chains In The Digital Age: A Competitive Perspective

A dynamic and fiercely competitive market, along with a not easily tied down and demanding customer, are posing challenges to businesses, including to supply chain vendors and Third Party Logistics Providers (3PLs). A proliferation of channels and customer touch points is another challenge. Many retailers are opting for omni-channel approach.

From their point of view, the customer has become center of all transactions and conversations. Customers are asking for a single view across different channels and touch points, as well a unified and cohesive customer and brand experience. They are asking for single-day delivery, green supply chains, and integrated supply chains.

There are opportunities, created by advancement in information technology in the area of Internet of Things IOT and the amount of data and intelligence that can be are available from information systems, for optimization, better decision making and increased returns and better profitability.

It’s not as if supply chain companies have been slow to join the digital movement. Some have automated certain sections of the supply chain. Robots have begun to be used to perform labor intensive and routine tasks. While this has mostly happened to warehouse and distribution tasks, like order picking and selecting, it has also happened in customer facing tasks such as purchasing, invoicing, accounts payable, and customer service.

Digita Age

So, what exactly does the new digital wave hold out to supply chains as advantages or benefits?

Firstly, digital places certain constraints before it offers benefits. The operations of the entire business, including the supply chain, needs to be connected and integrated.  Next, all the processes or work flows need to be optimized for the supply chain to leverage the advantage of digital, through speed of execution and responsiveness to customer requirements.

Supply chains have traditionally relied on information to be efficient as well as for customer satisfaction – information about expected delivery, information about status, etc. Most of this information traditionally was related to order execution and customer service. However, digital allows supply chains the unprecedented information that helps them to anticipate orders and demands, to purchase and inventorize based on these predicted and anticipated demands. Artificial intelligence allows supply chains to model the order cycles, frequencies of cycles, fulfilment of cycles, seasonal factors, and so on, and to predict and to anticipate emerging demand. This helps them plan, schedule, purchase, store better and thus provide better customer satisfaction. Digital enables supply chains to become proactive and more engaging with customer, rather than the traditional reactive mode of operation.

With the rise of omni-channels, companies usually handle many channel providers. The result is that the supply chain operational space for the company has become fragmented and very unwieldy to manage. Digital offers remarkable capability here, by integrating all the channels and providing the customer and the client with one single view of the supply chain, across channels and touch points. For a supply chain provider, offering this could mean significant competitive advantage over other players, who are still in the traditional mode.

Also, even though retailers have opted for omni-channel retail experience for their customers, the experience for the customer is not a unified one.

Digital offers a truly unified experience that includes:

•      Automation and integration of sales, marketing, business operations and the different locations and people
•      Personalized customer service
•      Real time customer analytics and metrics for decision making
•      Mobile integration
•      Easy intuitive interfaces across web and mobile devices
•      Simplified checkout process and payment

Finally, digital makes the customer truly the center of all operations and decisions.  It could well be the strategic differentiator and competitive advantage that supply chain companies are looking for.

Using Artificial Intelligence in Supply Chains

Advances in storage, computing power, algorithms, and the advent of the Internet to Things (IoT) have given rise to different forms of Artificial Intelligence being applied to address challenges posed by businesses, organizations and customers.

Supply chains are one such area. Supply chains are evolving from linear supply chains to digital supply networks, where numerous automated systems, such as sales, inventory, production and logistics are integrated with each other. This means that logistic systems now have access to much more enterprise data and business and customer patterns such as buying behaviour, seasonal order placement, fast moving stock, average time for delivery according to geography and so on. Business owners potentially, can use make sense of this data and turn into business intelligence i.e. insight that can drive business decisions and actions.

IOT

In the case of supply chains this would mean better anticipation of orders, better planning of logistic, developing ‘cognitive’ capability in logistic systems i.e. a logistics system that can not only detect patterns and make useful knowledge constructs, but also learn from the application of this knowledge and understand business and customer situations better. This could also result in lowering of costs and overheads and improve the agility, responsiveness of logistics, improve turnaround time, and greatly improve customer satisfaction. Already, autonomous vehicles and robots are operational in large supply chains around the world.

 

Without taking advantage of the benefits that technology affords them, supply chains can become inefficient, out-dated and unable to keep up with the pressures of competition and demands of the customer.

A McKinsey study estimates that businesses could earn anything from 1.3 to 2 trillion dollars a year by using artificial intelligence based logistic systems.

Restaurants were the first businesses to embrace AI tools. They began by analysing Point of Sale data. From this data, they were able anticipate and forecast customer demands and plan better for it. This benefit cascaded throughout the supply chain to suppliers, and vendors who delivered quickly and ‘in time’.

Another illustrative example is that of a telecom manufacturer. The manufacturer analysed historical data of its production, sales and logistics and customer feedback, along data about season and weather. With this intelligence it was better able to tell its channel partners what products were available and when they could be delivered, at the earliest. This made for a more integrated and responsive supply chain, translating into better customer satisfaction and improved profitability.

Another area pertaining to supply chain, where Artificial Intelligence proves very useful is when it comes to preventive maintenance of equipment. Data generated by sensors on mission critical equipment along with maintenance reports can be interpreted by artificial intelligence to predict when it would be a good time to do a maintenance ‘check in’ and when it would be a good time to do preventive maintenance and when it would be a good time to repair. Such intelligence has shown to improve the productivity of the equipment and improve maintenance costs by nearly 10%. For mission critical equipment, this could mean significant savings, reduced down time, satisfied customers and even competitive advantage.

Overall the benefits of using Artificial Intelligence in supply chains are many. In the sum, they have the potential to make the supply chain more responsive, more integrated with the demands of the customer and the objectives of the business, and finally more productive and profitable.

4PL

To 3PL or 4PL, that is the question

With changes being witnessed within the supply chain, logistics, and distribution spaces choosing the right provider can be a difficult and cumbersome process for businesses. Owning to technological advancements, increased carrier movements, and heightened delivery models, providers now can take up many different shapes and forms.

For businesses it is imperative to understand their own specific provider needs and requirements as well as what they would like to expect from a provider. Unfortunately, many businesses have experienced problems with their providers and have borne the brunt of these through either financial losses, diminished reputation, or worse, negative customer service levels. With these significant implications in mind, businesses need to first take stock of what they would like their provider to do vis-à-vis the business and what exactly their capabilities are.

This is where the level of the provider comes into play. From 1PL to 4PL (and even beyond) the scope is vast. It is clear that businesses need to carefully understand what each “party” stands for before making any decisions that could significantly impact the entire supply chain management.

1PL – First-Party Logistics

The simplest and most basic logistics enterprise, which moves goods from one location to another.

2PL – Second-Party Logistics

Here, the enterprise directly owns the transportation to move goods from one location to another. An example of this would be “a local farm hiring a 2PL to transport their eggs from the farm to the grocery store.”

4PL

3PL – Third-Party Logistics

3PLs are currently the most common providers within the industry. Though as technology, transport, and innovation increase there is room and scope for much more. Basically, 3PLs manage and oversee major parts of the logistics operation, though in many cases, some parts of the execution are outsourced or given off to subcontractors or external vendors. Here, it is not always clearly marked which parts of the supply chain 3PLs work on directly and which are outsourced but part management and responsibility rests with them. One example could be (using the farm-to-grocery store analogy), “a 3PL may be responsible for packing the eggs in cartons in addition to moving the eggs from the farm to the grocery store.”

4PL – Fourth-Party Logistics

As the levels increase so does the responsibility. The 4PL model gives all of the activities of the logistics to an external party. This includes not only the execution of the supply chain but also responsibility and management. Such providers directly work with the company’s organization and inventory in terms of strategic inputs, long-terms goals, and business operations and functioning.

5PL – Fifth-Party Logistics

5PLs are a direct result of current technological innovations and rely on newer methods to optimize the supply chain. Such providers explore and leverage the use of blockchain technology, RFIDs, AI, Bluetooth, automation among others to create solutions, which are new-age and ahead of the curve. At present such providers are still not the norm and have not entered the mainstream market.

With this in mind it is clear that as provider level progress the amount of responsibility handed over to the logistics provider increases. For the sake of today’s most commonly-used providers – 3PLs and 4PLs – each one has its own distinct advantages and disadvantages.

3PLs

The most common provider level, 3PLs have been tried-and-tested and at present and are the go-to supply chain method. There is just enough role and responsibility for both parties without infringing on each other’s roles. In fact a well-working 3PL can create a seamless, efficient and effective logistics partner. However, businesses need to realize that some direct control will be lost. This means keys areas like customer service and reliability can suffer. Here, customers expecting impeccable service, will raise their voices at businesses, leaving providers largely unscathed. Further, when looking to revamp operations the 3PL model can become difficult when changing providers or looking at taking back some of the work in-house.

4PLs

4PLs are a rung over 3PLs in supply chain management and provide a “control tower view of their supply chains, overseeing the mix of warehouses, shipping companies, freight forwarders and agents.”

The jump from 3PLs to 4PLs stems from the use of the phrase “a single interface” coined by the global consulting firm Accenture. Here, businesses are looking at long-term, strategic, high-performance logistics providers. In many cases, 4PLs do not own specific assets e.g. transportation, warehouse infrastructure, etc. but still manage the entire process. This does not matter to businesses as they rely on a single point of contact with the 4PL provider and communicate directly through a common dashboard (interface). This also frees up time for businesses to work on their core competencies knowing that they don’t have to look into the day-to-day running of their supply chain.

3PL or 4PL?

Depending on the nature of the business both 3PLs and 4PLs have their strengths and weaknesses. 3PLs provide safety and security but the added responsibility of managing the supply chain in-house. 4PLs can take-over the entire logistics function but it can take time, effort and solid financial obligations to ensure the most appropriate provider. However, for more complex supply chain functions or for even bit part or agile functionality there are even niche 3PLs or 4PLs that can be used. Again this can be used as per specific business requirements, their models, financial health, and long-term goals.

What is clear is that finding the right provider is crucial to the success of the business – not just profitability and bottom line – but also customer satisfaction and reputation as well. In today’s highly competitive business environment every decision needs to be made with great care as it could make-or-break a business. It should be ensured that the provider – whether 3PL or 4PL – meets the exact requirements of the business, clearly understands its aims and goals, and can undertake, meet, and exceed expectations across the entire supply chain.