With a finite capability to meet the demands of today’s “I want it now” consumers, retailers need to consider what matters most - is it speed, convenience or free delivery?
The rising cost and lack of warehousing space in the UK is a problem. A big problem. And it’s forecast to get worse.
As Kevin Mofid, Head of Industrial research at Savills, commented: ‘The availability of modern and fit for purpose warehouse space has the potential to be a real pinch point for the logistics industry in the coming years’. Availability of vacant units is at an all-time low of 4.4% as online retailers, trying to compete with the likes of Amazon, have snapped up available properties over the last couple of years.
So what can retailers do? In this article, Maginus’ research into warehousing is unpacked, and the potential for a robotic workforce is explored. Let’s dive in.
Pressures set in the last budget to build 240,000 to 300,000 units per year to address the ‘housing crisis’ mean that new house builds take precedence over commercial property. Inevitably this lack of available space has resulted in prices rising (at an average of 4.9%) and restrictions on choice, with some areas of the UK having a vacancy rate of as little as 2.8%.
The Escalating Situation
We all know that Ecommerce sales are continuing to rise, with online sales currently at 18% of all retail sales. As a result, retailers need to analyse their footprint to ensure that their property portfolio enables them to be strategically placed in prime logistical locations.
The fight for prime warehousing space becomes paramount when considering:
Retailers are being increasingly challenged to provide quick, cost effective, secure, and reliable delivery solutions to their customers. If retailers don’t offer competitive options for delivery, they will lose out to their rivals.
Retailers need to store products closer to their end customers, to allow them to be able to offer same-day and next-day delivery.
Retailers need to have warehousing space that allows them to grow their ranges and carry enough stock to satisfy demand. Without the space to grow and carry adequate stock, poor customer satisfaction will lead customers to look elsewhere.
Faster, Smarter, Better
There isn’t a magic fix for this supply and demand crisis. What, then, is realistically achievable to overcome the problem of a lack of warehousing space and rising costs? I believe part of the answer is warehouse automation.
The essential considerations for retailers facing the battle to get their products to customers faster and smarter than ever before is a combination of warehouse location and optimising the space you have within the warehouse estate.
What can retailers do to mitigate the shrinking warehousing landscape?
I believe retailers have two options – firstly, retailers can look at using a number of smaller warehouses, where there’s more availability and less cost. Smaller warehouses require retailers to utilise this space in a more efficient manner and this requires automation.
Alternatively, stay where you are and adapt, maximising your operational efficiencies with automated warehousing.
A Prime Case of Robotics
In 2012, Amazon purchased Kiva Systems at a price tag of $775 million, renaming the company Amazon Robotics in 2015. The Amazon Robotics website states that their drive is towards ‘a smarter, faster, more consistent customer experience’ and they currently have a fleet of more than 100,000 robots in operation around the world to achieve this objective.
I recently toured Amazon’s fulfilment centre in Manchester, which has over 2,500 bots, and I got to see them in action. The bots allow them to utilise a third of the space of a traditional warehouse to fulfil the same amount of orders. That’s an incredible achievement.
The machines are on wheels guided by QR codes upon the floor. They are very simple in design: square, yellow, 16 inches tall and weigh 20 pounds. They operate at 5 mph with the capacity to tow up to 700 pounds.
The bots operate in a caged-off area of 200sqm (approx.), which only trained technicians can enter. The bots operate efficiently in the space and are aware of when they need to be charged and will take themselves off to be charged. They are aware of the other bots around them and will work in synergy, allowing bots picking more urgent orders to be given precedence in selecting products. The bots select cubic towers to take to the picker area and present the picker with the correct side of the cube from which to select the product.
Synergy between technology and the workforce
The introduction of automated warehousing using these bots is a great example of how technology and human workers can work in synergy to benefit both company and workforce.
At Amazon, the aim of introducing the bots was not, as is often reported, to eliminate headcount – in fact, headcount has stayed the same. What has changed is an increase in the level of skilled employees that has been created by the introduction of bots. Amazon’s Dave Clark, SVP Worldwide Operations has said that Amazon ‘wanted the machines to perform the most monotonous tasks, leaving people to do jobs that engage them mentally’.
What was very clear to me as I toured the fulfilment centre in Manchester is how the bots and workers were working in synergy, creating maximum efficiency. The bots allow shelves to be packed compactly together, allowing Amazon to hold triple the stock in the same floor space as a traditional warehouse.
Stock can get to pickers in minimal time, and that, combined with their prime locations, is how Amazon can offer same-day, next-day, and Prime Now (a 2-hour delivery service) delivery. It is certainly an enviable position for them to be in and it is a position that allows them to take a massive chunk of the online market.
The good news is that you don't need to be Amazon to sell like them.
Tomorrow is already here
It’s not just Amazon. Warehousing run by bots is already a reality in many warehouses owned by a variety of companies – and as such, shouldn’t be viewed as a futuristic flight of fancy.
For example, Ocado’s automated warehouse, located in Andover UK, processes up to 65,000 orders per week, using a goods-to-person service, where warehouse workers simply pick goods that have been selected by the bots and then pack them ready for delivery. Alibaba’s automated warehouse in China is another system where bots take goods to workers for picking and posting.
What tactics can be employed?
Building a warehouse running with bots is still expensive, but I’m sure that over the coming years, bots will reduce in costs and will therefore be affordable for smaller companies.
But bots aren’t the only way to use warehouse automation to improve warehouse efficiency. There are many tactical warehousing strategies that can be implemented to optimise efficiencies, save costs, and streamline operations.
From my extensive experience of working with both small and large warehouse operations, I am surprised at how much of the warehouse operation is still manual. I still see a lot of paper-based picking, often including manual sortation of paper orders. Often replenishment is also an area which is manually controlled.
For a relatively modest investment, many warehouse operations could see significant efficiency improvements within their operations. These efficiencies can be gained by introducing some elements of automation. These could include introducing real-time mobile device picking, eliminating the need for paper pick sheets, and also automating the sortation of orders to ensure priority orders are picked first and pickers are using optimised picking routes to minimise time to pick orders.
Mobile device picking can also be used to replenish stock and carry out spot checks on stock as the picker is moving through the warehouse, therefore combining stock checks with picks. Another benefit of this to be able to accurately analyse picker performance.
Another area of automation which can be effective is the use of voice picking technology in order to increase picking efficiencies. Research has indicated that voice technology can ‘improve picking efficiency by 40%’.
Automation of replenishment is also an area which can have significant benefits on warehouse efficiencies. Being able to forecast demand required for replenishment through automated systems results in stock being in the right place at the right time, ensuring the smooth processing of customer orders, which now demand same-day and next-day timescales.
Another area for improvement is looking at the cubic dimensions of the products in an order and the size of the packaging required for each order. Automation can be used to calculate the cubic size of the box required for each order, and integration software to cut the box to the optimal size is available. The cost saving benefits of using the right packaging and associated carriage can deliver significant savings.
I have worked on over 50 ERP implementations in the last 15 years, all of which have included significant warehousing processes. I believe that implementing elements of automation which focus on core business objectives, such as improving warehouse efficiencies and reducing warehouse costs, also have a significant impact on other business areas, such as improved customer experience through exceptional delivery and ensuring the correct products are delivered first time, every time.
In a world where customers are becoming more demanding in terms of service and delivery, introducing elements of warehouse automation can help companies achieve a competitive advantage.
Plan for the Future
Start by utilising technology to improve your customer experience, making the buying experience faster and smarter.
Then take a long, hard look at where your warehousing capacity is now, and where it needs to be, to deliver the service your customers expect. Then analyse your operations and decide if some elements of warehousing automation can help to deliver your business objectives. Introducing bots now might not be the answer – but I think they’ll be with you sooner than you might think!
Key findings from Episerver’s recent survey of 4,500 consumers about their online shopping habits and expectations.
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