Jarmo Reunanen: Logistics 5 forces of change 5/5: Increased automation

Jarmo ReunanenThe key drivers of change in the logistics market in the near future are digitalisation, strong growth in global trade, leveraging learning software, in-market restructuring and increased automation. This blog is about logistics development through automation. Automation targets have been selected for processing where the market is considered to have the most untapped potential. Warehouse automated warehouse management systems that have been in use for a long time are not discussed here.

According to Scott Deutsch (Ehrhardt & Partners CEO), the nature of e-commerce is changing the requirements of the supply chain so that more automation and robotics is a necessity. Automation can improve efficiency the use of place, reduce staff costs, improve occupational safety and speed inventory turnover, among many other benefits. Two areas of logistics automation have received particular attention. These are delivery to consumers (last mile delivery) and utilization of robotics in warehouses.

Consumer Shipments and automation

For the consumer, shipping represents 53% of the total cost of transportation (Source: “The Last Mile Retails Study 2018”, Localz / EFT). The diagram above shows the major challenges faced by logistics companies in delivering consumer goods - the costs and the importance of the customer service experience are emphasized.

In solving these challenges, most interviews with logistics managers are given the weight:

· The use of vending machines (35% of companies plan to increase their use),

· Direct delivery to consumers (34%); and

· Pickups from service points such as stores (32%).

Utilization of automation is also increasing in live delivery; for example, JD.com, China's 2nd largest e-commerce provider, is already making large-scale drone shipments within a 50-kilometer delivery radius.

E-commerce storage and automation

Generally, the Y generation, millennials, settling in the big cities, represents the most significant e-commerce customer potential for which delivery speed is a significant choice. As a result, a network of distribution points close to consumers has been established to support regional distribution centers. An on-site delivery point for consumer supplies requires on average 2-3 times more warehouse personnel per storage square than a distribution center, highlighting the cost and efficiency challenges mentioned above.

To meet these challenges, 35% of logistics companies plan to substantially increase robotics in their warehouses. Most commonly, solutions are developed that do not replace but complement personnel work. (cobotics)

Such solutions include, but are not limited to:

· Automatic inventory and product data collection

· Robotic delivery of products collected from vending machines to the shipping area

· Cross Docking Transfers from Product to Delivery Area

· Production or assembly line (end of line) pallet shipment to warehouse or dispatch area

In-person automation typically has a good ROI; the post-investment operating costs in relation to manpower may fall by 70% per job. A central role in the repayment process is the Warehouse Management System (WMS), which must be able to combine human work and automation into seamless parts of the same delivery process. The direction can no longer be reversed. With 40,000 warehouse robots in active use in 2016, the number is expected to exceed 600,000 in 2021.

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