Speed not storage: scalability as you grow
“Scalability is fundamental to success. It's not just about scaling the operations within today's fulfilment centre walls, but about what happens when you want to build one, two or three more fulfilment centres.”
End of an era
“There was a time when nothing mattered more than size for companies planning to add a new facility to their distribution network,” recalls Scott Read, Head of Intralogistics, Siemens UK & Ireland. “Location came a close second but even that didn’t exercise the pull of the ‘big shed’.”
“For companies with warehousing in their corporate DNA, it’s all about storage. Building ‘scalability’ into a new facility means having lots of empty space ready to accommodate new shelving and inventory.”
The good news is that the industry is growing. In fact, according to UK government figures, e-commerce sales in the UK grew from £513.5 billion in 2014 to £586.3 billion in 2017.1
Because growth is being driven by e-commerce, any new business development opportunities come with the challenge of meeting evolving demands from both online retailers and customers.
“In the e-commerce world, competitive advantage is more about speed than storage capacity,” explains Scott. “Many companies are finding that buying into ‘big sheds’ has proved to be more of a financial liability than long-term investment, as vast areas of storage space remain unused.”
Scott believes many companies still clumsily start development projects by looking for the “perfect” building.
“But that will change,” he says. “Companies won’t be able to provide a highly-competitive, super-fast, responsive, omni-channel service from the classic big shed situated somewhere in central England. More importantly, digitalisation will allow companies to understand, deconstruct and realign their operational approach more precisely to meet market and consumer demands.”
“To put it simply, digitalisation will allow companies to see the difference between the service provided by fulfilment centres and general warehousing. When they decide it’s time to grow, digitalisation provides the insights, information and technologies companies need to create agile fulfilment facilities, which can be scaled, quickly and cost-effectively, to meet changing business or consumer needs.”
Tested, validated, optimised
By using real-time information of fulfilment centre operations - rather than historical data and best-guess forecasts - companies can decide on the facility’s size, location and inventory.
While digitalisation offers fulfilment centre operators the chance to overhaul not only their own business but the industry itself, he expects the response to be more cautious than excited.
“This is an industry that looks for proof before investing in anything new. Digital modelling tools, such as digital twins and simulations2, can provide that proof.”
“Every aspect of the process needed to commission, plan and develop a new fulfilment centre, from idea through to start-up, can be carried out, simulated, tested and optimised in the virtual world prior to giving permission for construction to commence.”
Both digital twins and simulations can be used to run “what if?” scenarios that mirror potential real-world situations. The scenarios allow users to test the various outcomes of implementing a particular course of action.
Fast fulfilment, not storage
“We’ve already agreed that fulfilment centres aren’t warehouses,” continues Scott. “So, it makes sense that there’s no longer any need to pay premium prices for a mega-construction located somewhere along the motorway network.”
“The new breed of fulfilment centres can be any size or shape and located as close as possible to the customers they serve. For example, in urban areas with high consumer populations, or more remote locations where 24-hour delivery is still a dream.”
“Remote rural areas would also benefit from a local, satellite fulfilment centre, which would be managed remotely from a larger facility,” continues Scott. “We could even see ‘pop-up’ fulfilment centres operating during peak periods, such as the run-up to Christmas.”
A modular approach
It may be a while before we see a pop-up centre, but the scalable, modular approach that would underpin a quick-build facility is already in use today. Digitalisation provides the tools companies need to build standardised, scalable, functional modules for key fulfilment centre operations.
“A modular approach makes it easier for companies to tailor their service to meet customer needs,” says Scott. “For example, companies can use the information provided by advanced analytics tools to identify regional buying trends and, if appropriate, set up local centres to process orders, and returns, for products that sell well in that area.”
Complete, centralised control
Scott points out that, regardless of how many centres it adds to its network, or how quickly, the company will always be in control.
“We’re not looking at some ‘Wild West’ situation whereby control is sacrificed to a company’s need to expand into new territories or markets. Because they’re all linked on the same digital network, new fulfilment centres can be managed from a central location.”
“Technologies such as sensors and virtual reality will enable managers and technical support staff to ‘see’ what’s going on at an individual machine or centre-wide level. Managers can even ‘walk the floor’ – all in real-time.”
Fulfilling the promise of a digitalised future
The market for fulfilment centre services may still be growing but Scott believes companies shouldn’t become complacent.
“We’re seeing industry leaders in other vertical sectors offering services that were once the preserve of warehousing and fulfilment specialists. There’s also a number of ‘disruptive’ providers, all driven by technology; offering super-fast, responsive, fulfilment services beyond the capabilities of most larger, mass-market providers.”
Change must be a priority. But he is aware that different companies are at very different levels of “digital maturity” and will embrace digitalisation at their own speed.
“Siemens believes in partnership – and a step-by-step road to digitalisation that builds on success. We don’t tell our clients it’s all-or-nothing. We work with them to identify areas where digitalisation will improve performance, productivity and deliver fast ROI. Then, when the project is complete, we take the learnings, and the success, and move on to the next step.”
Subscribe to our Newsletter
Stay up to date at all times: everything you need to know about electrification, automation, and digitalization.