A New Generation of Technologies for Contract Logistics
By Brendan Ryan, Global Sales Leader in Logistics.
The decision by the UK to leave the European Union, represents a shift to ‘Identity Politics’, a time where people in Britain and elsewhere are trying to decide who they want to be as the forces of change reshape the world. The politics of the Trump administration to bring industry back to North America also impacts global trade and is yet another form of identity politics. The changes rifling through the contract logistics industry from IoT (Internet of Things) and enabling technologies is creating new waves of thinking with service providers trying to determine best solutions that fit their business strategy. We might in turn refer to this as ‘Identity Logistics’.
Identity logistics brings into sharp focus the dichotomy in service providers where larger companies have invested in automation and IoT solutions and smaller companies that do not have the wallet of business or volume profiles are not able to invest in disruptive technologies. Cloud computing has gone mainstream for many enterprises and the IoT is changing how companies do business. The impact of drones and autonomous vehicles, blockchain, augmented and virtual reality, machine learning and artificial intelligence keeps growing.
Smart Warehouses are Becoming a Reality
Today’s warehouse is far more than just a facility in which to store inventory. Leveraging the latest supply chain technology and IoT technology, a ‘Smart Warehouse’ can now serve as a hub to boost efficiency and speed throughout the entire supply chain. In manual warehouses, we grew accustomed to workers moving around the warehouse with RF Scanners. However, in the smart warehouse industrial wireless solutions, devices, sensors and radiofrequency identification (RFID) tags drive production and enable warehouse managers to know the exact location and progress of any product at any time.
Cisco uses smart technology in test programmes to reduce the amount of labelling on packages. Hands-free wearables allow workers to move about and access information and instructions from anywhere in the warehouse.
IKEA is another leading company using IoT robotics to make its warehouse operations more efficient. The data which is captured by the sensors is sent to the warehouse management monitoring team that keeps an eye on all the warehouse operations. Not only does this real-time flow of accurate information increase the overall efficiency, but it also reduces equipment damage, worker injuries, downtime and stock shrinkage.
Customer Technology is Shaping Country Networks
With a massive shipping spend in the region of $12 billion annually, Amazon is an example of a company that proactively integrated its smart warehouse network. These include leased airplanes to freight forwarder licenses, drones to private truck fleets. Machine learning within Amazon has become a ‘new normal’, where artificial intelligence is now considered a component of every form of technology.
Similarly, Alibaba have smart warehouses where robots do 70% of the work. They can carry up to 500 kilograms above them around the warehouse floor. They have special sensors to avoid colliding into each other and they can be summoned using Wi-Fi. When they run out of battery, they can take themselves to a charging station.
Big Data Analytics & Advanced Inventory Management Systems
One of the largest expenses for many organisations is the cost of inventory so many companies embed IoT sensors on parts, packages and equipment to track them throughout their journey and know exactly where they are in the network; in manufacturing, in transit or in the warehouse.
These advanced inventory management technologies are linked in with Big Data Analytics and directly integrate just about every aspect of complex physical inventory into cloud-based platforms and systems. Big Data Analytics manage information outputs from logistics systems and provide increased centralised intelligence and control for organisations with multiple inventory echelons and distribution centres throughout the world.
Blockchain and Cost Transparency
Originally developed to support the Bitcoin digital cryptocurrency, the ability to create deeply-encrypted, immutable records in a highly-secure distributed ledger will become increasingly important to increase trust between collaborating logistics enterprises. Blockchain technology will ultimately create more agile supply chains, close partnership deals, ensure IP protection and ratify material traceability and transparency.
Analysis of Industry Adoption by Vertical
Contract logistics providers have increasingly moved up the value chain of their clients to achieve higher EBIT margins that justify investments in technology. Country and Regional Distribution Centres (RDC) often function as centres of logistics excellence because of the scale and complexity of the value add activities within the warehouse. The smart warehouse, can scale up with increased efficiency without compromising service for launching ‘New Product Introductions’ or for supporting high volume peak periods at quarter end and year end. The manual warehouse carries greater risk particularly when work forces are flexed up and down with part time staff to meet peak volumes.
The Automotive Vertical is a highly competitive and challenging vertical for contract logistics providers. Robotics and automation have been at the heart of car manufacturing for decades and this sector has been an early adopter of new disruptive IoT technologies. The Automotive industry has moved forward considerably since the days of Henry Ford’s famous comment: “You can have any colour as long as it is black!”
The automotive smart factory is lean and is driven by JIT sequenced manufacturing processes with robotics and automation providing consistency in high volume complex operations. The automotive eco-system demands similar solutions in adjoining and offsite smart warehouses. Many of the warehouse operations are on site and include line side feeding of manufacturing cells.
In this environment where factory costs are driven by lean processes and efficiency, contract logistics providers have benefited from strategic investments in programmable logic control (PLC) automations and sensor driven technologies that meet efficiency and productivity targets as well as required safety standards.
The emergence of the driverless cars and trucks has the potential to significantly disrupt the logistics industry whilst improving safety standards of the average consumer. The emergence of the air taxi and e-taxi and the ongoing research by companies such as Airbus, Tesla, Google and Uber may signal the start of the convergence of the aviation and automotive industries. Electrification of parts have the potential to create a more efficient lighter engine and replace the need for hydraulic propulsion.
Meanwhile, Aerospace is becoming a big data player. Incredibly, the information output from the ‘c series’ aircraft, necessary for preventive maintenance and customer intelligence generates the same output as Facebook daily! Data platforms to manage information from flight entertainment and passenger airport activities is seen to be essential for innovation in the industry, confirming the significance of Big Data Analytics.
RDCs are consistently used for forward deployment strategies when OEMs co-locate manufacturing activities with value add logistics services to reduce transportation and inventory carrying costs to improve order lead times and customer satisfaction. Value add activities include, management of both client owned inventory (COI) and vendor owned inventory (VOI), high volume pallet and parcel sortation, in-transit merge, localisation, postponement, E-commerce and final mile delivery solutions including B2B and B2C fulfilment.
Localisation activities include printing of key boards in different languages or assigning country specific cables and plugs to an order. Postponement activities include kitting of sub-assemblies that when complete are added to client specific orders. Customisation activities include gift wrapping of orders or the etching of personalised messages on the main product of the order.
In the Pharma Industry, automation and IoT technologies continue to make a profound impact. The ‘Smart Factory’ with continuous manufacturing, AGVs, robotics, and business intelligence ultimately fulfils its customer orders and channels its products through ‘Smart Warehouses’.
Under the 2017 Supply Chain Security Act, all partners in the pharmaceutical supply chain must now comply with ‘Serialisation’ requirements. Every SKU in a sales order must have its own unique identifier (Country code + Unique reference number) and this unique reference must be captured and recorded as part of the sales order and fulfilment process.
For many years, the wholesale and retail sector of the pharma vertical has been automated. Wholesalers have consolidated operations and have moved to the centralised hub and spoke system. The centralised hub manages high volume orders and with Business Intelligence solutions establishes fulfilment networks to feed the spokes or localised hubs that manage the final mile delivery to retail outlets, hospitals and pharmacies.
Automation using programmable logic control (PLC) software for ‘A Frame’ high volume picking technologies and pick by light solutions with integrated conveyor systems have been long established.
Disintermediation is the process of bypassing distributors and delivering direct to end users. Online ordering and e-commerce solutions are now beginning to take hold in this vertical and once regulations addressing counterfeiting and measures preventing patient self-harm are employed. This allows logistic providers to kit and buildout medical and surgical kits on a JIT basis.
Many companies within the Industrial sector like ABB manufacture robots and provide different automation products, including managed solutions to their respective clients and target markets. Accordingly, like the automotive sector, robots, integrated conveyors and varying degrees of automation driven by IoT and sensor technologies are heavily utilised in their version of the inhouse smart factory. There is less opportunity for automation in subcontracted offsite warehouses where the focus is on managing costs to budget and robotic, conveyor solutions are restricted to safety in manual handling for finished goods.
Fashion and Retail Vertical
The FMCG, Fashion and Retail Industry is demanding and fast but given the product characteristics and standard SKU profiles that are managed in subcontracted warehouses the opportunity to provide value add solutions is limited. Automation can increase the efficiency in picking and shipping of pallets and arguably, business intelligence can help predict fashion trends but beyond volume management, the impact of automation and new evolving IoT technologies is limited.
However, it is the key area driving the growth of e-commerce, particularly for high end products and expensive brands with many customers preferring to shop online and to have their purchases delivered directly to their home or convenient drop off points. Leading contract logistics providers are providing degrees of customisation and they are specialising in value add activities that are scalable and transferable within the e-commerce field.
Given the changes rifling through the Contract Logistics Industry and the proposition of ‘Identity Logistics’ whereby only leading service providers have the financial strength to currently adopt disruptive technologies, it is very likely that one of the greatest challenges that companies face today is managing the pace of change that is coming from intelligent technologies. These technologies are more relevant to some businesses and industry sectors, but overall competitive advantage will be greatly influenced by its adoption because technology is now changing faster than the human ability to adapt to it.