Warehouses
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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.

 

Digital age
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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.

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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.

Business of 3pl
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Aligning your Business with 3PL

In today’s competitive, tight, and cut-throat business environment, many companies depend on third party logistics (3PL) for their supply chain management in order to reduce costs, improve efficiencies, and ensure smooth operations of their distribution and fulfilment service requirements.

To deliver value and thrive within a difficult market, 3PL providers need to align closely with their parent businesses in terms of mission, vision, and goals.  As the relationship is so significant, most big businesses have well-defined 3PL processes, systems, quality standards, performance, criteria, and best practices already in place and regularly keep a close eye on operations.

In fact, most business are keen to look to partner with vendors who will align and integrate with their own processes and practices. Thus, in a totally aligned relationship, the supply chain “shadows” the processes of the parent company and replicates the parent company’s processes, adheres to their standards, mimics their operating models and becomes an “extension” of the parent company. It is even true to say that they may become fully embedded into the parent company and a “well-coordinated arm” of the parent company.

As this relationship requires careful selection many parent companies have strict and stringent supply chain selection criteria, which they use to screen their supply chain partners. In some cases companies may also train supply chain providers in their best practices and operating procedures to ensure that the vendors understand their business priorities and their own way of operating.

Some companies also craft a strategic plan for the alignment and for the relationship, describing the capabilities that they wish their partner supply chain to develop at different stages of the relationship. These capabilities could be operational, technological, or behavioural.

In order to maintain a sound relationship it can help to carefully define the work flows at the parent-supply chain interface as well as specific goals, outcomes, and expectations. It may also be beneficial to define the responsibilities of the parent company and that of the vendor that may include responsibilities for effort, for job, for the entire system, and for business outcomes.

Wroking in business of 3pl

Sharing performance benchmarks and baselines with the supply chain vendor and of clear unambiguous expectations can also help both parties understand what is expected in terms of performance.

Aligning may also entail integration with a company’s web servers, applications and electronic data interchange standards. This allows for seamless information flow and exchange and utilisation of information between the parent’s business and the supply chain.

Such an integration would allow a 3PL partner to use this information to track and trace shipments and direct this information to the parent company’s website; thus, providing customers with the vital information they need as well as helping to improve customer satisfaction.

Of course, there is the obvious check on physical integration, which ensures that the 3PL has the capabilities to manage the business in questions. Here, some internal questions to be answered could include: “What modes of transportation and what services will you [the business or parent company] need?” “What volumes do you plan to ship and where?” “Do you have specific security or visibility requirements?” and “Are your shipments time-sensitive?” Though these are basic questions given the nature of the business they will be able to filter many potential 3PL providers, which may not be suitable.

Also, the 3PL should be capable of matching the specific needs of the business. Many providers have a variety of strengths and weakness and it is imperative that those most closely aligned to the business’s requirements are at the forefront of its strengths. If the business relies on door-to-door deliveries, intra-warehouse, or last-mile, it is important to understand that the 3PL is on par with this and its strength lie in a particular area.

Additionally, it may be necessary to check on the number of modes the 3PL provider actually has and utilises. The four common modes – rail, road, sea, and air – may be a given on paper by a 3PL but it is wise to ensure that the inter modal services being offered have the right size or fleet as well as hands-on experience to be properly handled.

Further, businesses must undertake thorough research about possible 3PLs prior to confirmation. Reputation, reliability, and responsiveness are key, especially in the logistics and supply chain arena. Also, businesses may opt to review use cases or examples within various scenarios to confirm the handling of specific situations by 3PLs. There must also be a cultural fit and the agreed recognition and understanding of the appropriate protocol, procedures, and hierarchy cannot be understated.

Finally, though clearly a given many businesses fail to check a 3PL’s customer service record. Given the scope for disruptions across the supply chain, the crisis management capabilities or the reputation of the company needs to be maintained and carefully managed. To this end it is paramount that the 3PL knows the plan of action, can ensure regular flow of goods or services, and does not lose control during a crisis.

As businesses rely more heavily on 3PLs getting the right fit to align with both business needs and present-day demands is not an easy feat. Many partnerships have failed, especially when a business has recently moved from one party to another. In this regard and given the high demands on the relationship, both parties need to be on the “same page” prior to any business commitments.

With reduced costs and improved customer service being key in the high-contested logistics marketplace, both businesses and 3PLs require a synergy that can be secure, reliable, and potentially long term. There must be clear and concise dialogue prior to and during all negotiations in order to determine the most apt working relationship once a final agreement has been determined as any hurdles or obstacles cannot be easily overcome “on the field”.

It is evident that today’s customers are fickle, brand agnostic, and ruthless, especially with a mobile in hand and social media apps awaiting comments, tweets or posts. Businesses and 3PLs must work together to create a harmonious working environment for each other as well as for their collective customers.

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Use 3PL services for a growing business

More and more businesses are using third-party logistics service providers. Building an in-house supply chain is expensive, slow and a learning process riddled with mistakes. On the other hand, outsourcing the supply chain is efficient, quick and adaptable. The benefits of using 3PL are more than just reduced initial capital outflow or getting expertise. With ever-increasing competition, businesses need to focus more and more on their core activity and reduce or divert resources from non-core activities while extracting the best out of them. Managing supply chain is one such activity that can be efficiently outsourced. In fact outsourcing such non-core activity can be strategically beneficial in the long run for a business. Here are a few advantages that a growing business can get from outsourcing its logistics.

 

Scalability – Building a supply chain requires time and investment. Underutilized supply chain represents locked capital which is bad for a growing business. On the other hand, peak utilization limits the growth that operations can achieve. However, with outsourcing, the supply chain capacity can quickly increased or reduced without much impact on scale. Quick scalability is one of the biggest advantages an outsourced supply chain can offer to a growing business. Third-party providers are geared to scale their operations depending on their client’s requirements. They invest their capital in spare capacity and clients don’t need to make any capital investment. Further, if the scale of operations reduces for a client, the extra capacity is simply sold to another customer with no impact on the first client.

 

Optimization – Logistics is frequently about optimization of the resources such as packaging, transportation, route and delivery time for most efficient use of resources with minimum time. This planning and coordination requires special skills that are expensive and hard to find. Further using the skilled and costly planners only for one business may not be the cost-efficient. 3PLs bring in planning and optimization as their core skill. They plan for most optimal warehouse locations, delivery modes and routes and club cargo from multiple clients to bring the costs down. High priority deliveries are also clubbed together to bring down their costs (as compared to individual high priority delivery). This degree of optimization is difficult to achieve for a small business without significant investment and dedication of resources, which can burn quite a hole in the pocket, as the company grows.

 

Constant innovation – Supply chain requires continuous innovation in terms of packaging, equipment, processes and even transportation vehicles. For example, newer material for pallets keeps making them stronger and lighter, new methods of merchandise scanning makes tracking more efficient, more modern robots make stacking and picking of products much faster and more comfortable. Similarly, new transport vehicles (newer trucks) keep reducing the cost of transportation. The problem is that all such innovation requires an upfront investment and business cannot make any new investment until ROI from the previous investment is realized. But with higher utilization, 3PL have faster ROI cycles and can bring in capital-intensive innovation much quicker. Besides logistics being their core business, 3PLs thrive on constant innovation in supply chain to reduce costs and improve service.

 

Quick movement between supplier – While it is a good idea to maintain long relationships, business realities sometimes require to change the vendors. This need for change could be for many reasons such as better rates, larger scale of operations, wider network spread, or simply a kind of service that is not being offered by current supplier (even today many 3PL suppliers do not offer cold storage chains). As the business grows, the supply chain requirements will also change. The scale of material handling will increase. The variety of products being sold will also increase, and this will need different logistics skills. In house logistics department will need time to change and may even put up resistance to change. Improving the skill set of the whole department is not possible in a matter of few days (or even few weeks). But changing supplier is just a matter of negotiation (apart from identification of-course). The business operations are not vastly disrupted while the change of supplier happens. As is well known, changing or upgrading a department of the business is extremely slow and tiresome process, but changing a vendor is easier.

 

Lowering of Costs – Development of supply chain needs space, warehouses, packing machines, moving and stacking machines and vehicles (as large as up to trucks and lorries) making them capital intensive investments. Also, logistic operations are equally expensive, if not more. Many times, the supply chain capacity is not fully utilized leading to a high wastage of money. The 3PL absorbs the capital investment and can depreciate the equipment much faster owing to its higher utilization. The capital cycle (for supply chain) is much more efficient for 3PL as compared to in-house supply chain investment. There is no doubt that unless the volumes are huge, 3PL makes a lot more sense regarding costs and investment for any business.

Further, as the product moves through regions, various agencies or external companies come in picture. A product moving across the border will interact with customs, excise, clearance house, export regulators. Businesses need working relationships with all of them for its cargo to move quickly and efficiently through these agencies. Developing and maintaining these relationships needs resources which cost money. As business volumes grow, the interactions with agencies also increase and need more resources. A 3PL maintains these relationships for its customers so that the businesses do not have to it themselves, and they do it more efficiently.

 

Developing supply chain is a slow and costly process and often requires changes that are expensive. As the business grows, the inefficiencies of the supply chain start to glare out. The growth phase is precisely the time when companies need an efficient supply chain. An outsourced, third party supply chain will not only eliminate the inefficiencies, but it will also bring in innovation to handle the large volumes of growing business, that may provide the edge, that a growing business needs.

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Revamping Supply Chain Setups with Big Data Analytics

Supply chain management requires enterprises to deal with diverse data sets. Be it truckloads of structured data or even unstructured bits of information, supply chains have long been driven by quantifiable indicators and statistics. However, the revolutionized industry urges organizations to inculcate real-time analytics which in turn brings them a step closer to the concept of Big Data.

Adopting Big Data Analytics: An Innovative Start or A Lingering Issue?

Implementing Big Data within a supply chain schema isn’t expected to bear fruits overnight. The application requires an influx of data forces, mass validations and development systems for deriving vital insights regarding situations, products and other metrics involved. This, being a multi-faceted approach, requires customers and professionals to be patient. Therefore, it wouldn’t be wrong to assume that Big Data Analytics has arrived but companies are still falling behind when Big Data insights are being looked at.

In simpler words, the modern day application of Big Data analytics— targeting supply chain management— requires a deeper and surely a clearer sense of approach.  It isn’t surprising to see that many companies have been slightly skeptical when it comes to implementing Big Data analytics within the supply chain hierarchy as compared to other working areas like manufacturing and marketing. Although, analytics is innovative to work with, the apprehensions are still hindering seamless adoptions.

Driving Efficiencies Home

There are several factors pertaining to supply chain management which require immediate attention.  Be it the vehicle conditions, machineries associated with a setup or even inventory solutions— there are a host of structured intricacies to deal with.

The presumably successful application of Big Data has been quite significant in driving better sales as many enterprises have already embraced the concept— wholeheartedly.

Let us quickly analyze a few aspects that concern supply chain management and the improvements bestowed upon— courtesy Big Data analytics:

  • Handling Unstructured Data Sets— The likes of transportation logistics, inventory management and even warehouse management hardly offer structured data. Having Big Data analytics at the helm allows companies to use clocked digital cameras for monitoring changes, stock levels and a host of other requirements which are unstructured in nature.
  • Dealing with Forecasting— Flexibilities offered by Big Data analytics work perfectly when it comes to supply chain forecasting. The existing camera data can be paired with diverse algorithms and used for predicting stock management scenarios. This technology is suitable for distribution centers and warehouses where resupplies need to be essentially predicted— sans human interactions.

Pillars of Big Data Analytics

Analytics synonymous to Big Data needs to have two focal points— making it usable and scalable at the same time. Being ‘Predictive’ is the first pillar of Big Data science which tells enterprises about the course of action. Now with the data sets available, the analytics needs to be ‘Prescriptive’ as well— further determining the modus operandi associated with a specific supply chain metric.

Needless to say, every supply chain setup is better off with Big Data analytics in place and it’s time enterprises start identifying the true potential of this technology which has already been hailed by the customers.

Dealing with Unstructured Data

While analytics caters perfectly to structured data sets with defined fields, it is challenging to pair up Big Data insights with unstructured bits of information. One such example would be monitoring shelf space in real time. This is one aspect of supply chain management that doesn’t come with a predefined layout. Shelf space might vary with time and the only way analytics would work is by implementing sensors for detecting logos and brand names— based on visibility.

Unstructured data shall only make sense if collected in an innovative manner. The idea here is to gauge the sales systems for points of resonance.  With the influx of Big Data logic, supply chain managers have started looking at the underrated data elements— including the likes of forecasting, social media and weather. These elements have a massive impact on sales and the inclusion of analytics is expected to leverage them in the best possible manner.

As with every aspect of industrial proceedings, Big Data is slowly but steadily making inroads into the world of supply chain and logistics. Moreover, even enterprises are finding this technology easy to use with the sudden surge in the volume of unstructured data sets— clubbed with the usual levels of traditional data analysis. Big Data usage minimizes human indulgence and readily focuses on the broader time frame in hand.

Overall, it’s all about using data sets smartly and only Big Data analytics can help enterprises achieve the same.