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Digitalization – An Inflexion Point for Warehouses

Girish V S, Editor SCMPro

In this age of volatile consumer behavior, warehouses can no longer incrementally improve each
aspect of their operations. The need of the hour is a comprehensive digitalization strategy that will
reinforce warehousing excellence. Warehouses need to move from a back office function to a driver
of customer service. In this article, Girish V S, Editor SCMPro looks at the roadmap to a connected
warehouse. The future is shaping itself. Are we on board?

There is a silent change waiting in the warehouse space – something which has the potential to upend
the way warehouses operate. Something that can change the physical operations for the better. It is
the convergence of the physical warehouse with the cyber world. Our conversations with captains of
industry and consultants about the role of digital technology have an interesting insight - digitalization
is rapidly evolving, from being a driver of marginal efficiency to the core of competitive advantage.
From passive enabler of control to fundamental innovation and disruption. There is a growing
conviction that digitalization can lead to sweeping transformations across all aspects of business,
providing unparalleled opportunities for value creation and capture, while also representing a major
source of risk. It is clear that digitalization will transform warehouse operations. However, there are a
number of challenges to overcome. The rapidly changing customer expectations, lack of requisite
skills, inadequate scope definition, and cultural transformation come to mind. It is time we look at the
strategic implications of digitalization in our warehouses and the individual pieces of the technology
spectrum that define it. Probably evolving into the 4.0 version for warehouses.

The Drivers of Digitalization

As industries across the globe adopt digitalization as a core business enabler, managers fear that they
will lose customers if they miss the bus. The first step is to understand the factors that drive
digitalization. There are three major factors – consumers, business, and technology. Understanding
these factors are critical in sketching the digital roadmap.

Personalization: The drive towards efficiencies pushed firms to undertake mass manufacture – the
aim was to produce identical products in huge numbers to create efficiencies across the supply chain
including the warehouse. Consumer tastes changed – increasing numbers of consumers preferred to
have a customized product. This has given way to mass customization. Organizations meet this by
postponement – the final assembly will be closer to the consumer. Technology plays an important role
as facilitator of the entire customized order fulfillment process – the warehouse has now to double
up as an extended arm of the production process.

Consumer centricity and multi-channel connectivity: Consumer centricity refers to the trend towards
individualization from a business perspective. It means that more markets are becoming buyers’
markets. Firms try to provide multiple touch points to their customers so that they can buy through
whichever channel they prefer. From a warehouse perspective, this means true Omnichannel
capability – the ability to serve multiple channels from the same DC. Unfortunately, Indian industry
still services each channel separately, leading to ridiculous situations wherein the same SKU is in
shortage in one channel and is available at a discount at another.

Changing Business Models: As a logical progression, firms are trying to re-define their product and
service offerings. A changing business model means that a company’s entire underlying business logic
is affected by either an important external developments or an internal decision. This could see
warehouses evolve from storage of materials to data aggregators and providers, offering location
based data to their customers.
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Technology: Nine technologies are converging to create Industry 4.0. - Big Data and Analytics,
Autonomous Robots, Simulation, Horizontal and Vertical System Integration, Industrial Internet Of
Things, Cybersecurity, Cloud, Additive Manufacturing, and Augmented Reality. Industry 4.0 is defined
by state-of-the-art automation of production processes based to the principle of subsidiarity, process
virtualization by optimal information transparency, batch size of one, and the interconnection of
machines, workpieces, and workers. A subset of this is warehouses are expected to become even more
integrated over the value chain, from the production to the consumer.

'Digital warehouse of the future'

Nestlé and XPO Logistics are to work together to create the ‘digital warehouse of the future’, which
will be situated in the UK. The custom-designed distribution center will feature advanced sorting
systems and robotics alongside state-of-the-art automation co-developed with Swisslog Logistics
Automation. Its digital ecosystem will integrate predictive data and intelligent machines to deliver
one of the most advanced distribution management centers in the world, giving consumers faster,
more efficient access to Nestlé brands.

Nestlé Director of Supply Chain David Hix, said: “We are thrilled to be working with XPO Logistics to
build a flagship digital warehouse and technology laboratory at the East Midlands Gateway Logistics
Park. This is a world-first investment for Nestlé that builds on a century and a half of proud history
in this country.
Source: Supply Chain Digital

The First Step - Automation

Indian warehouses are yet to see widespread adoption of automation. Some elements of
mechanization has come into our warehouses. However, when mechanization, intelligence and
decision making come together, we move into the realm of automation.

There is an increasing pressure on warehouses to increase their throughput. Firms seek to reduce the
time from receipt of material to final loading and dispatch. The only sure way to achieve this is
introduction of automation across all levels. A few technologies like pallet or case storage, automated
palletization, and de-palletization should find their way into Indian warehouses. Similarly, automated
equipment for dock unloading and loading can reduce turnaround times. However, this requires
standardized trailers, products and containers, and high throughput to ensure economic viability.
Hindustan Coca Cola Beverages Pvt. Ltd (HCCBPL) has experimented with some of these technologies
at their DCs. For example, India is a nightmare when it comes to standardization for truck sizes.
HCCBPL has created nine common templates for trucks, and the driver chooses the truck configuration
at the loading dock on a Personal Digital Assistant. And the automated loading devices sets itself up.

As product life cycles reduce, warehouses of the future are expected to support a shorter, faster
supply chain, and move products as quickly as possible through their system. In effect, the hallmark
of a good warehouse is their throughput. Probably, we can then call them “throughput centers!” As
through put centers, their focus will be value added services like to cataloging, labelling, kitting, and
repair, final finishing including product assembly, omni-channel capabilities, reverse logistics, and
return handling. As we progress, we will see the requirement for handling multiple product types,
some requiring special handling, within the same premises. This increases the range of products that
handled. On the flip side, it also increases the resources needed to handle them to support the value-
added services.
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The future warehouses need to be flexible to handle seasonal surge and configure themselves to
handle widely differing product types – much like the roadside vendor who switches products sold on
the hand cart based on the seasonal demand – from colors during Holi to mangoes in summer, diyas
during Diwali and Santa caps for Christmas.

Flexibility in warehouses will come at the increased risks of damaged, expired, or misplaced products,
and other inefficiencies. Technologies can help warehouses to meet the new demands, improve
productivity, reduce risk, and increase reliability and productivity.

Keep in mind – automation can handle routine, repetitive tasks easily. However, if the tasks are
dynamic, full automation is not the solution. Humans effectively address seasonal surges, one-off
value-added tasks, and unique, customized products etc.

The Next Step – Becoming Smart

While it may look to be far out into the future, technology will not stop at automation. Automation
provides simple intelligence – for example, switching a product to its desired bin location. To meet the
evolving needs of the consumer and the customer, warehouses need to integrate smart technologies
– interconnected, intelligent, and self-learning. While this may seem farfetched, most pieces of
technology are already in place. Industry 4.0 technologies such as IoT, artificial intelligence,
Augmented Reality, and autonomous vehicles are readily available for warehouses – as standalone
and integrated solutions for true intelligence.

For these technologies to provide real benefits, three factors need to work in tandem - technology
enablement; workflow improvement; and process optimization.

For example, voice picking is an advancement over paper based or hand held devices. The next step is
vision picking – where the staff wears special glasses that will project graphical images over their
vision, providing additional information like object recognition, barcode reading, warehouse
navigation, and integration with the warehouse management system. The next step is augmented
reality (AR) smart glasses. These glasses are in the experimental stage, but it is not yet ready for prime
time in warehouse management and operations.

As robotics improves, we will see better usage in warehouses. Today Amazon Robotics uses butlers to
bring the goods to the human. As technology evolves, we will see robotics penetrating more areas.
One interesting area is in the final packing for e-tailers. Robots will be able to sense the dimensions of
the product to be packed, choose the right box, stuff it, and gift wrap it for added value. This will
increase the warehouse ability to deliver custom wrapped packages.

As pressures of performance increase, and automation comes into the warehouse, we will see the
emergence of a new breed of systems – the Warehouse Execution Systems (WES) – that will interface
with the Warehouse Control Systems that direct the automated solutions and the Warehouse
Management Systems that will provide the data for inventory location and order flows. These systems
will allow both wave management and waveless processing to balance the load across the various
equipments, resources, and zones. In a smart warehouse, information flows will moderate the physical
flow, creating efficiencies and improved productivity.

In the final analysis, a sensors of sensors will continually monitor the working conditions within the
warehouse and manage lighting, ventilation and energy utilization, creating an employee friendly,
sustainable warehouse.
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Robotic Picking
One approach to solve this issue is to use industrial robots. Reliable “bin picking”, however, has
long been considered an almost insurmountable task in intralogistics. Pick-it-Easy Robot developed
by KNAPP is a fresh, new solution for processing orders. The image recognition and processing
software detects the target article in the source container and calculates the grip point on the
article’s surface. The software strategically selects the ideal grip point. The six-axis articulated arm
robot positions the gripper precisely over the grip point. The trim, flexible gripper can pick articles
lying in any position in the source container. Constantly monitored by sensors, the system picks up
the article and transfers it safely into the target container.

From Smart to Connected

A smart warehouse continuously optimizes processes and productivity, and balances work across the
warehouse. The hallmark of a smart warehouse is the connected devices and systems that work within
the four walls. The next step in the digitalization journey is when the warehouse will be integrated
with other elements of the supply chain – including planning and forecasting, inventory management,
network planning, and transportation - providing real time information, and visibility across the chain.
Warehouse operators can leverage smart automation technologies mentioned above to reap
additional benefits, exchanging information from and to the supply chain about warehouse
operations.

A direct benefit of the improved visibility and availability of data is improved demand management
and inventory management – primarily because IoT embedded products provide real time location
and usage information. These data streams can help in multiple departments. They can help
warehouse managers undertake process improvement efforts by tracking bottlenecks.

Connected warehouses have the ability to automatically compare products characteristics of goods
received - quantity, weight, dimensions, and other attributes, with the purchase order, flag off
deviations and notify the factory or supplier. As a follow up, they can update the product masters in
real time based on inputs from the factory or suppliers.

Smart connected warehouses offer the promise of aggregating and exchanging data through the
cloud, enabling real-time sharing of information across the product supply chain. This improves the
accuracy of lead time planning. With blockchain, improved data visibility and activity synchronization,
such as order status updates to logistics providers and customers, can help supply chain stakeholders
better allocate resources to critical tasks, maximizing the efficiency of supply chain.

Depalletizing Robots by Pickit

Many factories and plants today run an automated palletizing robot solution of some kind. However,
classic robotic depalletizing technology is often rigid and time consuming to set-up, while they also
operate 'blind' and cannot cope with shifted goods. Pick-it offers you a world of new possibilities in
the field of palletizing and depalletizing.

Pick-it provides you with a highly flexible solution with their 3D vision technology. Pick-it can handle
various sizes of boxes, crates, barrels, bags at the same time. The FLEX engine will look for geometric
shapes (cylinders, boxes, spheres). The user has to simply choose a shape and set a range of sizes
that want picked.
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Making the Leap

Digitalization is complex, expensive and requires commitment – not just from the top management,
but by every entity in the supply chain. Buying technology is the easiest part. The bigger task is to
dovetail the processes to suit the automation. A major lapse in our thought process is to force
automation to mimic the earlier process. The real benefit of automation will happen if the organization
can change its SOP to the digital world. Not vice versa. This assumes a few basic changes.

Up Skilling and Re-Skilling: while smart automation can help create idiot resilient systems, the digital
world calls for a new range of skills like data scientists, IT engineers, robotics, and operations analysts
within the warehouse. Unfortunately, finding talent for these roles is tough. To compound the
problems, warehouse locations – usually away from urban centers – are a major dampener for
attracting skilled talent. A connected warehouse may not lead to reduction in staffing costs as these
new skill sets come at higher price points. A connected warehouse will require continuous upskilling
for their staff.

The second challenge is to create a digitalization roadmap – one that is sufficiently long term to
strengthen competitive advantage, but still able to create steady improvements. The first task is to
sequence investment in technology, after careful evaluation of the risks it entails. For example, data
security is a major challenge in a connected world. Vulnerabilities can creep in from any source within
the extended supply chain. Cyber security is a day zero necessity.

As warehouses go digital, they need to create a digital governance framework. This should precede
the roadmap. In a world ruled by transparency and triple bottom line, digital governance is the
cornerstone. The digitalization roadmap should lie within the governance framework, not the other
way around.

Digitalization may read like a fanciful idea today. But very soon, it will become the standard. The
bottom line still is – digitalization will turn out to be a necessity – not a luxury in a warehouse.

Blurb

This could see warehouses evolve from storage of materials to data aggregators and providers,
offering location based data to their customers

Blurb

The future warehouses need to be flexible to handle seasonal surge and configure themselves to
handle widely differing product types

Blurb

For these technologies to provide real benefits, three factors need to work in tandem - technology
enablement; workflow improvement; and process optimization

Blurb

Smart connected warehouses offer the promise of aggregating and exchanging data through the
cloud, enabling real-time sharing of information across the product supply chain
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Blurb

A major lapse in our thought process is to force automation to mimic the earlier process.