To meet the complex demands of both the industry and consumers, facilities need to be optimized. Körber set out to learn how successful companies are incorporating facility optimization to conquer supply chain complexity with its Benchmarking Report.
The growth of eCommerce in recent years has turned the supply chain industry on its head, driving the need for facility optimization. There is a large amount of latent potential to combine human skills with automated technology to improve equipment and operational performance by optimizing resources in the warehouse. Technological solutions can help bridge the gap brought on by growing demands of both the industry and consumers.
Emerging eCommerce challenges drive the need for facility optimization
Despite the initial eCommerce boom, COVID-19 accelerated consumer reliance on online shopping and further cemented the trend to continue at a rapid pace. Global e-retail sales in 2020 were over $4.2 trillion, increasing dramatically from $1.3 trillion in 2014. The rise in eCommerce shopping continues to grow year over year, with online sales now forecasted to surpass $6.3 trillion in 2024.
The growth in eCommerce has also impacted product returns. The growing rate of returns – especially in areas like apparel, where consumers cannot try on a garment before purchasing – has added another layer of complexity. Many warehouses and DCs are small-to-medium sized businesses (SMBs) trying to find a level playing field with larger competitors. To do so, they must simultaneously process goods quickly and maintain high quality. This often leads to constraints within their physical operations. By optimizing their facilities with new solutions like voice and AMR, businesses can catch up with the rapid rise in demand brought on from eCommerce.
Benchmarking today’s supply chain
In 2022, Körber launched a research project aiming to understand the underlying factors that drive supply chain complexity. The research project resulted in the identification of six operational areas:
- Agility and Resilience
- Digitization and Process Automation
- End Customer Experience
- Facility Optimization
- Labor Engagement, Safety and Efficiency
In response to these rising complexities, Körber then commissioned its first ever Supply Chain Benchmarking survey. The research was designed to assess current supply chain best practices and establish benchmarks. The results, based on a representative survey among more than 200 companies, shed unparalleled insight into the industry and best practices to improve supply chain operation and performance. Participants were scored and categorized into four maturity levels: leader, advanced, developing and initiating.
Technological solutions can help bridge the gap brought on by growing demands of both the industry and consumers. New warehouses are built with efficiency in mind – however, with new industrial space in short supply, supply chain professionals need to improve existing facilities to achieve maximized efficiency.
Key strategies for facility optimization
The need to optimize warehouse and distribution center (DC) facilities has become more than a competitive advantage – it is a business necessity. Gone are the days when large batches of a product could be moved by a single forklift and loaded onto a delivery truck within minutes. The increasing breadth of product ranges and customer expectations for same- or next-day delivery have become the standard. Businesses need to be able to effectively manage the growing SKU proliferation while processing a rising number of orders.
The businesses we surveyed are all actively engaging in facility optimization. About a third of respondents score as leaders and another third as advanced. Optimizing their facilities are clearly a very high priority.
But what distinguishes leaders from the rest?
In the search to determine what sets facility optimization leaders apart from the rest, we found the implementation of a few key strategies to be the differentiating factor:
Future view with simulation
In the eCommerce era, businesses face major challenges in the dynamic warehouse industry. Optimizing facilities can lead to costly business disruptions with the risk of poor implementation. Warehouse managers need to navigate how to improve productivity and flexibility without disrupting operations in the meantime. With warehouse simulation, the technology can mimic scenarios by creating a digital twin of your operation with the proposed solutions. Using this model, the software tests variables and “what-if” scenarios, allowing an organization to improve warehouse operations through iterative design.
From the Benchmarking survey, the widespread use of simulation software for both greenfield and brownfield projects distinguish facility optimization leaders from the rest. Leaders are using dedicated simulation software while the others are relying heavily on legacy technology (even Microsoft Excel) for simulation. Simulation software is becoming more important in warehousing due to the rise of automation. Leaders benefit from using simulation software because it helps answer end user concerns about the effectiveness of solutions. Even more, it can predict how multiple systems will do working together and helps identify potential bottlenecks.
Flexible automation (voice and AMR)
In the post-pandemic era, various factors from the rise of inflation and interest rates to the falling of wages in a market with little to no barriers to entry are creating economic instability. These factors are forming a volatile economy that is difficult to understand, leading businesses to struggle forecasting for it. The importance of optimized supply chains continues to rise, making the need for new automation to gain flexibility to accommodate these trends more imperative.
Intense international competition and the shortage of labor has forced companies to use systems with higher levels of automation. Autonomous Mobile Robots are driving the trend of accessible automation across many industries. The easy-to-use robotic solutions are able to adapt to companies of all sizes, adjusting for fluctuating demand and filling the labor shortage gap. The ABI Research 2022 Trend Report found that a total of 452,000 mobile robots are expected to be shipped in 2022, a 51 percent increase from 2021.
Another highly efficient solution to optimize the warehouse is voice-directed work. The hands-free nature of voice optimizes traditional paper pick lists or wireless handhelds using Bluetooth headsets to deliver verbal instructions for picking. The productivity improvements don’t end there – in recent years voice vendors have been applying analytics and optimization software to improve speech recognition.
Flexible automation distinguishes leaders from the rest. The survey found that leaders understand voice-directed work significantly improves accuracy and productivity – and is why two-thirds have used voice technology for 2+ years. in contrast, only 14 percent of advanced companies are using voice in their facilities.
End-to-end visibility and lasting productivity improvements of brownfield facilities
End-to-end facility optimization involves having full integration between all functions across the distribution route – from warehouse and yard logistics to transportation and final delivery. Communication and detailed planning has become paramount to making all the cogs turn smoothly across the supply chain, from distribution centers, carriers, brokers, shippers, freight forwarders and customers.
Efficient and optimized facilities are the foundation of a productive supply chain operation. However, many warehouses are considered a brownfield facility: decades old and often underutilized. Many brownfield site’s cannot effectively support today’s fulfillment processes and in result, can benefit the most from facility optimization. There are a number of proven options to help brownfield facilities run at peak performance – from warehouse simulation to voice to autonomous mobile robots (AMRs). Most importantly, these technologies (simulation, Voice, and AMR) can be deployed with little to no infrastructure modification. Thus, enabling brownfield site improvement with less risk than more infrastructure heavy automation options.
A reimagined approach to facility optimization
In other words, everyone across the industry is thinking about facility optimization but leaders are thinking about it differently. Leveraging new technologies has given leaders significant improvements in productivity, efficiency and accuracy.
Want to learn more on what current supply chain facility optimization leaders are doing? Visit our benchmarking practice or download the full Benchmarking report for more details on the survey results.
For further insight on facility optimization based on the Supply Chain Benchmarking survey, download the infographic and facility optimization performance guide.