Put planning at the heart of your supply chain, said our experts in an earlier blog post on integrated supply chain, as that’s where supply chain excellence begins. Still, outstanding warehousing might be just as important. Still thinking of warehouses as dusty storage spaces, essentially cost centres that rarely add value? Think again. Put your warehouse(s) at the heart of your supply chain and manage them right and they’ll help you lead the pack. Advanced warehousing enables competitive differentiation as warehouses can actively contribute to your success and profitable growth.
Consumers expecting next- or same-day home delivery, a growing demand for customized products, which make pick sizes shrink, a volatile market, political instability, soaring energy costs, constant supply chain disruptions: should we enlist more reasons to explain why warehousing is more challenging than ever?
“At the same time, warehousing has become more strategic than ever,” says Dimitris Livanos, Logistics Expert consultant at Ordina: “Companies that manage their warehouses well, got inventory, storage, orders, handling and shipping under control. Such well-run warehouses ensure that goods are delivered quickly and in excellent condition. In this way, they can help a business excel in customer service levels. On top of that, smart warehouse management helps boost efficiency and cut costs. So, warehouses do play a crucial role in the success of any supply chain and, hence, any business.”
Well-run warehouses ensure that goods are delivered quickly and in excellent condition. In this way, they can help a business excel in customer service levels.
Costly storage space, labor shortages
That was the opportunity for warehousing. What about the threat? “A supply chain is only as strong as its weakest link and not seldomly, the warehouse is that weak link,” says Jan Simons, Ordina’s Head of Industry. “When that link breaks, it can lead to issues in the entire chain of supply chain processes.”
To add nuance to his claim, Jan highlights that running a warehouse may well be the most complex – and most costly – process in the entire supply chain: “Warehouses combine a lot of expensive elements that are tough to change. Rental or purchase costs for the buildings have skyrocketed and once your warehouse is settled, you won’t move or expand it in an instant as warehouse spaces are tight, expensive, hard to find and even harder to move. Limiting the stock to save on warehouse space, however, is not that easy in today’s volatile market. More than that, warehousing is very labor-intensive. Labor is a huge operational cost and it is damned hard to attract and retain warehouse workers.”
Of course, reducing the stock levels has become a complex equation and more challenging than ever in the pursuit of supply chain resilience and effective cost management. The prevailing atmosphere of uncertainty, triggered by global disruptions and geopolitical tensions, has further accelerated the challenge. This has forced companies in some cases to reevaluate the effectiveness of the traditional Just in Time-JIT methods, redesigning or reinventing their JIT networks and practices and some others shifting to Just in Case-JIC and hybrid models. There is not a single solution that fits all the problems, but it requires careful study and consideration. In this context, warehousing is a vital link of today’s supply chains and serves as a solutions’ enabler.
Time to step up the technology stack
When it comes to equipment and systems, the technology has long been lagging behind in warehouses, Dimitris adds: “Many companies are still running legacy solutions and working in silos. The resulting lack of visibility and collaboration across the Supply Chain leads to major inefficiencies, like the bullwhip effect.”
Like we explained earlier, resilience is key to counter disruptions in the supply chain, as is strategic collaboration both within the company and with third parties. The same goes for warehousing. The good news: there is a wide range of technologies available to help businesses optimize their warehousing processes.
Never underestimate the power of the bullwhip
The bullwhip effect, which is a pretty common phenomenon in supply chain, is the distortion of demand that occurs as forecasts move from the retailer up to the manufacturer. Demand forecast update, price fluctuations, order batching, rationing and gaming and lack of information sharing and collaboration are among the factors that can amplify this effect.
Dimitris gives an example “If a retailer experiences a sudden spike in demand, he’ll order more of that particular product to keep his shelves stocked. Further up in the supply chain, the distributor will order more units to the manufacturer, who’ll start producing larger batches. If demand falls, everyone will be stuck with costly, unsold inventory. Remember the toilet paper saga at the start of the corona pandemic? That was the bullwhip effect.”
Technology? Ask the PLs!
Dimitris: “Until recently, automation and robotics were the privilege of manufacturing, but that has changed Warehouses can now also benefit from advanced systems and sophisticated technologies for both process and physical automation. In both categories AI, machine learning and IoT are gaining inroads and their impact will be huge.
The growing number of companies that provide Logistics and Supply Chain services – 3PL, 4PL and 5PL – are setting the tone when it comes to technology. They make ample use of solutions to collect data and draw insights from these data to enhance planning, forecasting and services. And as they work for and with different customers, they know all about integration and collaboration. They can serve as an example on how to transform warehouses through technology.”
Stick to your niche – the rise of PLs
When talking warehousing, there’s no denying the rise of supply chain specialists:
3PLs provide logistics services including warehousing and transportation
4PLs act more strategically aiming to manage their clients’ supply chain
5PLs aim to control and coordinate the integrated supply chain, from the beginning to the end, leveraging advanced technologies
3 big warehouse challenges – and how technology can help
From Warehouse Management (WMS), Execution (WES) and Resource Planning and Optimization systems to fleets of robots: delving into all the possible warehouse technologies would take us too far in this article. Still, we chose three of the challenges we mentioned earlier and show how technology can help:
Optimize warehouse space - Automated storage and retrieval solutions (AS/RS) help you make the best use of your warehouse’s space. Automated Guided Vehicles (AGVs) store pallets and other containers in the best possible location. Warehouse Management Systems (WMS) and AI make it easier to efficiently manage inventory, so that you can maximize warehouse space.
Raise productivity and make the best use of your of warehouse workers - Optimize workforce planning and scheduling with Warehouse Resource planning and optimization solutions. Trust Robotic Process Automation (RPA) to do high volume, repetitive tasks and let automated picking tools or machine learning enhance picking. To move goods in the warehouse, you can call in the help of Goods-to-person technologies (robots or conveyor belts, automatic storage and retrieval systems).
Boost end-to-end visibility - The key to facing every warehouse challenge? Boost visibility – so that you can respond quickly to changes, raise efficiency and take smarter decisions. A Warehouse Management System (WMS) bundles all of your data and helps you to track and manage every warehouse operational process in real time. Want to step that up? A Supply Chain Control Tower provides valuable insights to help you manage orders, performance, labor, etc.
Catapulting APS’s warehousing to the 21st century
Improved visibility: that is the major advantage of the warehouse management system that Ordina recently implemented at battery producer APS in Poland, as part of an enterprise-wide digital transformation project.
“After a serious reorganization, they wanted to integrate three different sites and step up their operations,” Jan explains. “Their warehousing processes were mostly manual, siloed and very complex as they are using the toll manufacturing model. They needed a complete makeover.”
Ordina implemented a WMS – in no time! -, which has greatly improved visibility. “While their stock is now managed by different parties in different countries, everyone has a perfect overview of where the goods are located, what the status of the stock is, where additional production is needed or from what location deliveries need to be made. The entire production planning, including personnel, can also be linked to inventory management. And cost control is much easier.”
“This is just the start,” says Jan. “We’ve laid the foundations and it’ll be easy to add robotics, AI, machine learning or other technology in the future in order to further optimize their processes. Their warehouse is now fully futureproof.”
The road to your futureproof warehouse: 4 tips
Think big, start small. It sounds like a cliché but it’s so true when talking about warehouse optimization, says Dimitris: “You don’t need to completely overhaul your warehouse in a big bang to make it smarter and more efficient. In most cases, there is plenty of room for improvement in the existing warehouses. Look at it as a journey.
Dimitris shares 4 useful tips
Review your existing warehouse operations and look for ways to improve and standardize them. It is key that every employee handles operational processes in the same way. Document your processes to ensure consistency over time.
Create a warehousing strategy that takes into account the requirements of your customers and the particularities of your business. Get inspiration from your competitors and partners as well as strategies and practices followed in similar or other industries
Evaluate the available technologies and systems and select the best solutions that best fit your requirements and add value to your business. Don’t embrace technology for the sake of technology but first think what is best for your processes and business.
Create a roadmap that defines the actions, steps and resources you need as you progress towards the futureproof warehouse that you envision.
You don’t need to completely overhaul your warehouse in a big bang to make it smarter and more efficient. Look at it as a journey.
Tip 5: never forget the people
Last but not least: never forget the people. Involve the management and other teams in your journey. Look for collaboration with the entire supply chain ecosystem, inside and outside your company and, most importantly, make sure the warehouse operators are engaged too.
“Futureproofing a warehouse requires a change mindset – and that’s never easy to achieve. In the end, however, we are sure it will be worth it. Also for the operators. While they may see the growing automation as a threat, it will unburden them from heavy or tedious, repetitive tasks and make their jobs more fun,” says Dimitris. “So, more than helping boost service levels, efficiency and visibility and cut costs, warehouse automation will also help companies win in the war for motivated, skilled people.”