In early April I had the opportunity to visit Promat 2019 in Chicago. Promat is North America’s largest materials handling equipment and systems exhibition, featuring over 950 exhibitors and 150 educational seminars.
What is happening in the Northern Hemisphere from a material handling and logistics perspective?
In this article, I will give you a glimpse of some of the distribution centre (DC) trends and technologies that Australian firms should be aware of.
The rise of digital supply chain and digital consciousness
The Deloitte Report indicates that firms are adopting digital supply chain innovations at a fast rate:
- Cloud computing: 56% of firms surveyed are adopting, with growth expected to 79% over the next two years.
- Inventory and network optimisation is forecast to reach 75% adoption over the next two years, and 90% over the next five years.
- Predictive analytics is expected to reach an adoption rate of 87% of firms.
- Sensors and automatic identification adoption 86% of firms.
- Industrial IoT (internet of Things) 80% of firms.
- Wearable and mobile technology 73% of firms.
- Blockchain and artificial intelligence, while at low adoption rates currently, are expected to reach 62% in the next five years.
The top two challenges facing DC operators
- Hiring qualified workers.
- Customer demand for lower delivered costs.
Labour shortages of qualified workers is of growing significance in the USA. This may be hard to understand in a nation with over 330 million people, yet it’s top of the list in the Deloitte survey. What is driving this? Sadly, young Americans do not aspire to work in warehouses, even when jobs are available, and pay is reasonable. This is exacerbated by the Trump Administration’s reduction in immigration, so with cuts to imported labour, workers are indeed scarce.
“Organisations are encouraged to consider their own strategy for digital adoption.”
Consequently, firms are refraining from investment decisions based largely on labour savings. They are focusing on customer delivery, best use of footprint, and smart ways to obviate labour shortages. At Promat, it was clear that the answer lies in robotics, autonomous vehicles and drones as the displays of each were prolific. With a steep curve of American adoption over the last two years, driving factors are:
- The cost per unit for such equipment has decreased.
- Reliability has increased.
- Robots are fast evolving into ‘Cobots’ or collaborative (human friendly) robots.
Cobots
Cobots can work alongside human beings, and can see, slow down or speed up depending on the proximity of people. They can also be interrupted or paused in their work by human intervention, before continuing their tasks when ordered to resume. In future, we can expect to see a combination of cobots and humans in order picking situations working alongside each other. For example, equipment such as Goods to Person systems, are turning into Goods to Cobot systems.
What is interesting is that the control of automation is demanding a new breed of skilled labour with digital, data analytics and artificial intelligence skills (more about this below).
Autonomous vehicles
Autonomous vehicles are being used with excellent safety features that allow them to work alongside human operators. Advances in digital control systems provide for both cobots and autonomous vehicles, to be dynamically operated according to order urgency and priority. This feature is hard to achieve with fixed infrastructure such as zone route and batch picking systems, but with free-path autonomous vehicles, they can be programmed to receive urgent orders, jump the queue and pick items immediately. In terms of navigation, if they encounter objects or humans in their path, they can recalibrate alternative routes around the facility (as per GPS) so that they continue their tasks.
Drones
Despite what you may have heard, drones are not being used very much for ‘last mile’ customer delivery, as there are navigational issues that have not been resolved. Yet they have found their way into DC for a different purpose. Tracking inventory! They are being used to perform cycle counting of palletised stock. They fly down aisles of racking at predetermined times, taking readings of barcodes on racking and checking that pallets are in the correct pallet locations. Data from the drones is fed to back to ERP systems for updating of inventory records. In some warehouses multiple drones are being used for this purpose.
Fixed infrastructure – or not
Robots, cobots and autonomous vehicles are causing many companies to reassess the implementation of fixed warehouse infrastructure such as conveyors, goods to person and sortation systems, particularly as the former are cheaper to install, run and maintain. The implication of this is that for conventional warehouses, with basic materials handling equipment, operators can scale up their operation by adding robots at lower capital investment than fixed equipment.
Blockchain
Blockchain is increasingly being used in supply chains. As a distributed digital ledger, it is providing a new architecture for business and logistics transactions. Whilst it is seen as transformative, the take-up will take time to move off TCP/IP communications protocols. However, forecasts predict that in ten years, approximately 10% of US gross domestic product will be in blockchain. This rate will most likely be emulated in Australia.
Developing NextGen supply chain technologies
As mentioned earlier, labour shortages in the USA are rife. These are causing companies to review how they can retain and attract people who have digital skills. Evidence shows that introduction of NextGen supply chain technologies can be scary for existing employees, therefore US firms are now setting strategy around successfully adopting digital technologies and capabilities. In this regard a kind of ‘reverse mentoring’ process is in place whereby seasoned supply chain professionals are being paired with younger professionals who have grown up with digital technologies. In short, the wisdom of elders is being combined with tech savvy youngsters, to determine how best to apply emerging technologies.
Digital adoption strategy for the NextGen supply chain
The Deloitte report postulates that American firms need to intentionally work on a four-stage digital adoption strategy to effectively deal with the NextGen supply chain and use of artificial intelligence (AI).
Stage 1: Digital Connectivity. Process of collecting, cleansing and organising data from multiple supply chain sources.
Stage 2: Automation. Using automated systems, robotics and augmented technologies to perform repetitive supply chain tasks.
Stage 3: Advanced Analytics. Using digital information for the purpose of inventory and optimisation, predictive and prescriptive analytics.
Stage 4: Artificial Intelligence. Decision making by machine learning, using technologies to copy or expand human activities to reason and interact with the environment. At this stage, automation will be characterised by robots and cobots, learning as they work, with intelligence to accept data while working, instead of adhering to a fixed program.
Outlook for Australian firms
The future looks bright for suppliers and users of robots, cobots and autonomous vehicles, particularly in small and medium enterprises, which do not have the financial capacity of larger firms.
Organisations are encouraged to consider their own strategy for digital adoption. Especially if they wish to explore operational benefits of robots, cobots and autonomous vehicles. As we have seen in the past, Australia is only a little way behind America with US trends flowing down under.
So, the learning from Promat is that enterprises should plan for digital adoption, and investigate new ways of materials handling, in the wake of increasing competition, customer demands and potential labour shortages. Ignoring these factors could be at the enterprise’s peril.
Mal is manager, consulting with the Logistics Bureau, where he works with local and international organisations to guide them in specification preparation, establishment and review of outsourcing contracts. He holds qualifications in engineering, business operations and logistics. For more information contact Mal on 0412 271 503 or email mwalker@logisticsbureau.com.