Intralogistics - Digitalisation: Re-balancing the supplier and customer relationship

Not so long ago, fulfilment centre “success” was characterised by accuracy. It was all about getting the right goods into the correct customer's hands. Customers were prepared to wait several days – or longer at peak periods – so long as the goods they received were delivered within the timeframe stipulated by the supplier and were exactly what they’d ordered. Customer expectations changed the minute leading retailers began to offer next and, later, same day delivery as a standard option.

Now, customers still demand accuracy, but they are not willing to defer gratification for any longer than necessary. They want exactly what they’ve ordered, delivered in pristine condition and on time. Give a customer an estimated date and time of delivery and they’ll expect it to be met.

 

And why should they when they know there are suppliers out there promising the closest a customer can get to immediate gratification without having to waste time trudging to a shop!

 

The intralogistics industry can’t complain. After all, it’s the industry that is setting customer expectations.  Or, to be more accurate, a combination of the major players with the budgets to pay for the latest technologies and industry “disruptors” with business strategies based on innovation.

 

Meeting customer expectations is, arguably, the most important factor in determining fulfilment centre success.  That means fulfilment centres must sustain the same level of optimum service whether they’re dealing with a steady, manageable flow of orders or a massive upsurge.

 

Bearing in mind that today’s customers are only truly satisfied when every order is delivered on time, every time, that’s quite a challenge.  While the obvious answer may be to invest in digital technology, automation and other Industry 4.0 tools used by industry leaders, it may be – or seem to be – beyond the capabilities of SMEs without the money, time and skilled resource to invest – or indeed ‘licence’ to innovate – available to bigger and less budget-conscious competitors. 

Happy customers - at any cost?

What happens when a fulfilment centre is faced with increased demand?  When customers are saying, figuratively speaking, “jump”, for many fulfilment centres, there is only one response: “how high?”

 

When orders are pouring in, they’ll make every effort to squeeze input costs to their limits, pile work onto existing staff, or cut into bottom-line profits by taking on the expense of temporary staff. Customers might be temporarily ‘happy’, but at what cost to the business? It’s a reactive and fragmented approach that, ultimately, is unsustainable and causes more longer-term problems than it resolves. And what happens next time there’s a rush?   

“Guesstimating” the future

Given that demand tends to follow a reasonably regular pattern – higher at certain times of the year, lower at others – and even ‘unexpected’ hikes can, to some extent, be predicted, why aren’t fulfilment centres better prepared?
 

They have the basic material they need to fuel and inform forward planning, don’t they? The simple answer is that, in the past, they lacked the tools to transform data into knowledge. Managers worked on “best guesses” based on a plethora of unconnected spreadsheets, historical reports and information that, by the time it was being used, was out-of-date.

Digitalisation: knowledge is power

Digitalisation is the answer. With digitalisation, what used to be static information is transformed into dynamic knowledge that can be factored into planning.
 

Powerful digital tools can be used to capture and convert information on changes in demand and identify trends into predictive and prescriptive analytics. Rather than constantly being buffeted by unforeseen change, fulfilment centre managers and other decision-makers are armed with the knowledge and insights they need to plan a timely, effective and detailed response.   
 

Size and wealth are no longer insurmountable hurdles stopping SMEs from competing with industry leaders. Digital tools, such as predictive analytics and predictive maintenance ensure fulfilment centre companies, and the managers with responsibility for individual centre performance, are as well-informed as any competitor.
 

It may be a cliché but it’s still true to say that with knowledge comes power. In this case, power means operating from a position of strength and always being ready and able to compete.

Fact-based planning

Planning is a complex process in which a wide range of variables must be considered, including all the elements involved in inventory management storage, warehouse layout, automation and personnel. Get one element wrong and the best-laid plans could turn out to be ineffective and expensive. As such, all the time, money and effort spent on new technology or operational redesigns can easily go to waste.

Dynamic simulation

How much better, then, to test plans before putting them into action?  Digital simulation tools – like Siemens’ Tecnomatix – allow you to create virtual plants in which you can run “What if?” scenarios that replicate real-world situations. A simulation takes all the guesswork out of the planning process and allows planning managers to assess the most effective approach in minute detail. In a nutshell, it allows them to put their plans to the test before investing time, money and effort.
 

A digital simulation tool allows managers to make “fact-based” and detailed decisions on:

  •  Capacity requirements for personnel, storage and handling equipment
  •  Storage, including ABC storage, zone storage, dedicated storage, random storage and cross-docking
  •  Order picking, including batching, optimised routing, sorting and consolidation algorithms
  •  The effects of automation, including robots, AGVs, AS/RS and carousel
  •  Planning and control, including schedules, order release and other factors
  •  Inventory management, including ordering policies, cycle counting
  •  Logistics

The end of unplanned downtime?

Downtime can have a disastrous impact on productivity and throughput, especially during peak periods. The problem goes beyond the obvious loss of productivity. Other work in the centre will be affected as managers juggle schedules.   Even when the problems are resolved, staff may have to work overtime just to catch-up. The costs mount as profitability dwindles.
 

Predictive maintenance can help reduce the potential for equipment failure by analysing real-time production and performance data to identify patterns and predict issue before a minor problem turns into downtime.
 

With predictive maintenance, IT and maintenance managers can identify and resolve risks or issues before they turn into the kind of problem that causes expensive downtime.
 

As managers have an accurate and in-depth understanding of everything that’s going on in each piece of equipment, there’s no need for centre operation to be disrupted by regular “just in case” preventative maintenance.

Continuous improvement

While the benefits of digitalisation are clear, we’re talking about an industry that is, generally, still in the embryonic stages of transition.
 

The industry media tends to focus on industry outliers and visions of fully-automated, self-learning mega-warehouses. It’s an all-or-nothing vision of a digital world that, for some, may be inspiring while, for others, may be an expensive and potentially risky digital step too far. Many fulfilment centres are using sophisticated technological equipment, like robotics, while only just getting to grips with connectivity and the Internet of Things (IoT).
 

There are more routes to digitalisation than an all-or-nothing approach to implementing digital technologies – and that is continuous improvement in the right areas.
 

Many companies have addressed the speed issue by introducing automation and robotic applications into fulfilment centre operations. However, when the challenge is as much about being prepared to handle changes in demand as the actual handling, even the fastest automated system is not the solution.
 

Siemens recommends a pragmatic approach in which customers move forward one step at a time, choosing an area of the business in which digital technologies will make a quantifiable improvement to process efficiency and productivity – which is where we come back to the issue of planning ahead to meet demand. Using digital technologies to be more effective in dealing with changes in demand while delivering excellent customer service is a good place to start.

Subscribe to our Newsletter

Stay up to date at all times: everything you need to know about electrification, automation, and digitalization.