July 8, 2019
The next generation of warehouse operations can not only deliver new levels of retail profitability, but can stop margin erosion in its tracks. Craig Summers, UK managing director at Manhattan Associates, looks at steps retailers can take to make their warehouse operations succeed.
There is currently a downward pressure on margins, fueled by consumer demand for not only quicker, but more visible e-commerce deliveries and soaring volumes of returns.
Retailers, and their boards, are recognizing that existing warehouse operations are not equipped or able to support the challenges of omnichannel fulfilment. The fix? In order to satisfy the rising expectations of customers and remain profitable, it is essential for retailers to adopt a highly automated warehouse.
We’ve already seen that robotics have a key part to play in improving picking and packing processes, but whereas automation is usually considered the answer, it is merely one part of the wider picture.
It’s time for retailers to ask some difficult questions: how can both store and direct-to-customer fulfilment be support by an efficient warehouse operation? How can they strike a balance between man and machine a challenge currently facing many industries?
Carefully honed “co-bot” processes whereby robotics and workers interact effectively and an appreciation of the value of order streaming to efficiently blend multichannel fulfilment, are two key points to consider.
Below are three steps retailers can take to help make their warehouse operations succeed.
Step one: Assess and question
The last ten years have seen retailers make heroic attempts to fulfil customers’ evolving and ever-increasing expectations across multiple sales channels. But with returns reaching their highest peak and demand for next-day delivery now something retailers can’t choose to ignore, current logistics processes are no longer good enough. Without a change in strategy, the cost of fulfilment will continue to drive margins down considerably.
The huge rise in e-commerce is undeniable, yet despite this, few retailers would consider their warehouse operations to be truly optimized to support current consumer demand. These warehouses were designed to support fulfilment to store, leveraging the “Wave” approach to efficiently pick and pack big batches of predictable demand.
Adding large numbers of highly unpredictable, fast turnaround, individual customer orders into the mix creates a different and challenging warehouse environment.
Many retailers try and meet the delivery pledges they’ve made by adding extra staff into the mix. Unfortunately, this approach is not sustainable: a tough economy means that retailers can’t afford to simply add more staff. When they do, it erodes margins even further.
It’s time to ask some tough questions: How can retailers optimize warehouse operations to support the new fulfilment demands? What approach can they take to manage both store and customer fulfilment, in order to address the seemingly unstoppable margin erosion?
Step two: Embrace the robots
Automation and robotics have been two key areas of focus this year, as retailers become increasingly confident in what technology can offer and how it can best be utilized. From autonomous mobile robots (AMRs) to sorting equipment, conveyors and automated storing and retrieval systems (ASRS), there are any number of options for streamlining operations.
The productivity benefits are certainly compelling: recent research conducted at IDC found that over 70% of the time, commercial service robotic technology delivered double-digit improvements to productivity, efficiency and capacity.
The latest generation of AMRs offers new levels of sophistication, enabling retailers to seamlessly blend man and machine to optimize efficiency. For example, mobile robots with arms can perform picking; robotic arms can be used for sorting; while robots equipped with RFID readers can automate inventory management.
These advances, however, are not designed to replace people. In fact, the most notable step forward is that robotic technology is now designed to work with people, rather than to replace them, to collaborate with the human workforce throughout a warehouse environment. With sensors and vision, as well as artificial intelligence, robotic design enables effective and controlled human interaction ‘co-bot’ working in action.
This new way of considering technology as a collaborator rather than a replacer brings a level of innovation that opens the door to new “co-bot” workflows; offering significant improvements in flexibility and productivity to further reduce warehouse costs and increase margin.
Step three: Consider Wave and Waveless models
When effectively combining man and machine throughout the warehouse, retailers have the opportunity to utilize the most effective way a warehouse operation can handle the new demands created by a blended fulfilment model.
The design of the warehouse operation is impacted, as to fulfil multiple small orders, retailers have added new areas for product packing and dispatch. The way order picks are prioritized within a multichannel warehouse operation also becomes far more challenging and complex.
The Wave approach of bundling a number of orders into one batch that is picked over a longer time scale such as two hours works brilliantly for store fulfilment. The Waveless model, in contrast, manages every order as a discrete allocation of work, enabling fast, responsive fulfilment for small, more urgent orders and it is ideal for direct-to-consumer order fulfilment to meet customer expectations.
For warehouse operations now tasked with meeting these very diverse requirements, how can Wave and Waveless operations be combined, whilst still ensuring critical targets such as hitting a courier pickup window are prioritized?
Using order streaming, retailers can combine Wave and Waveless approaches to maximize both efficiency and staff/robot utilization, reducing costs and therefore delivering greater product margin for sales, whether it’s in-store or direct-to-consumer.
As orders are fulfilled whether by workers, machines or a combination of both retailers can promote a process of continuous improvement by using machine learning. By harnessing “time to pick” data, for example, the system can gain a better understanding of task completion patterns, ensuring the right level of work is allocated to the right resource in the future. Essentially, this puts the warehouse in a process of continual optimization, driving down costs and enabling retailers to incrementally address margin erosion.
Separating the winners and losers
The scrutiny surrounding the profitability of the e-commerce model is set to come under increasing scrutiny, meaning that it is the way in which retailers approach the warehouse could separate the winners and losers.
Whilst automation technologies, including robotics, are incredibly compelling and undoubtedly offer significant opportunities for improvement and efficiency gain, these technologies must be considered as part of the wider strategy and cannot be deployed in isolation.
It’s a story of two parts: creating seamless co-bot workflows will maximize the value of automation, enabling retailers to achieve the aim of doing more with less in the warehouse; but optimizing the environment is also essential in order to support the continually evolving blended fulfilment requirement.
It is entirely possible for retailers to fulfil ever-rising customer expectations without compromising profitability. By starting with a warehouse environment that encourages sophisticated robotics and automation to operate in harmony with humans, and then using the insights gained to continuously drive further efficiencies and improvements, retailers can get ahead of the game.
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