Automate, customise and fragment – the new supply chain
| 21 June 2018
In a world where a new generation of consumers and businesses increasingly “want it all and want it now” the need to harness automation and get closer to the point of consumption is key to keeping ahead of the pack, says CBRE’s Head of Supply Chain Advisory for the Pacific region, Christine Miller.
Ms Miller was in Auckland this month to discuss trends affecting supply chain management including the role of automation, fragmentation of the supply chain and how customised consumption has the potential to affect logistics and supply chain.
Getting tech to work for you
For the majority of New Zealand businesses in the manufacturing, warehousing and logistics space, the world of a fully robotic warehouse is still a way off preferring instead a dependable labour force of humans rather than machines.
The shift is happening though according to Ms Miller who sees numerous examples in the Australian market, where intelligent automation is being put to great use.
“A clear benefit from intelligent automation is the increased throughput of product providing for larger volumes and more efficient per unit costs. Not limited by shift cycles, fully automated solutions can run 24/7, and we’re finding some of our clients are even finding additional capacity in their automation beyond manufacturers specifications so there’s an aspect of machine learning too.”
It’s not all about advances in distribution with the rapid rise of artificial intelligence coupled with cloud-based data analysis tools, businesses now can manage inventory regardless where they are in supply chain. Stock-takes are increasingly becoming a thing of the past when it comes to inventory management.
Automation also extends to the transport part of the supply chain equation, and with autonomous, self-driving vehicles there’s going to be more flexibility and opportunities with freight.
Miller points to a situation in the USA where Uber Freight is already experimenting in this space with trials underway in Arizona currently for autonomous trucks cargo delivers.
“When it comes to self-driving vehicles everyone thinks of Jetsons and small vehicles darting around in the CBD, the relevance for logistics though is that it becomes more of a hub and spoke operation. You have humans delivering to key distribution centres in urban areas and then self-driving trucks carry out the long-haul transport. This means a better of quality of life for truck drivers, cost implications and potential flexibility of delivery times.”
For now, Miller says it’s more about being aware of where automation is heading rather than becoming a super user overnight.
“It’s a very relevant time for businesses to explore the possibilities and opportunities automation and new technology can bring.A staged approach makes sense and there are plenty of ways to trial aspects of new technology.Voice commands for picking operations is already used in the New Zealand market.There is the potential now with build on that by adding smart glasses which are being trialled in Singapore helping to speed up the picking process and further reduce errors.”
It’s worth asking how that might provide time and cost efficiencies to your logistics tasks and then looking at the bigger picture of supply chain processes.”
Impact on property choices
As with most aspects of supply chain management any business decision relating to automation shouldn’t be made in isolation, says Miller and a critical factor to consider is what sort of property or facility is required to support new automated processes.
“Naturally automation comes with a higher CAPEX, while this provides savings on the operations and distribution side, the investment may mean having to look for other areas to save costs, such as upstream operations and potential network property locations.
“Facilities that run automated solutions have specific requirements.The concrete slab has to be of a certain grade with the right power provision and data connectivity. Gone are the days where a logistics warehouse is four walls and tin roof.”
It is in this space where Miller says the advisory expertise of CBRE in supply chain and property comes into play.
“Land values play a critical role in the evaluation as the motivation to automate is stronger in areas of high land value as it provides the ability to shrink the footprint of a large scale manual facility to a smaller warehouse land footprint with a hi bay automatic storage and retrieval system. It’s about seeing how automation can work for you in the context of your total supply chain and then understanding the knock-on influences on property decisions.”
Dealing with customised consumption
In keeping with the age-old laws of demand and supply, consumption and consumer behaviour will always have a critical impact on supply chain. It is how this impact is being felt that is changing however. Whereas previously it was more an equation about volume and throughput Miller says increasingly though things have got a lot more complicated.
“As part of the more demanding expectation of consumers, there’s more highly personalised and customised products which comes with a specific process to manage inventory to provide customised product to consumer.As an example, The Tesla sales model means no longer going to a big block of land with a lot inventory and pick the car you are going to buy, it is now a case of a small showroom with 2-3 models and from there you choose your colour, stereo, etc.
“The supply chain impact is all in how you deal with getting customised product to the customer within an acceptable delivery time.Tesla managed to create many orders for cars, it was their back-end supply chain that let them down with significant delays affecting their bottom line and reputation. It may be minimal now but as demand for customised consumption grows we need to take into account how this will impact on industrial infrastructure, where to hold inventory, where to produce and where to have the final distribution points.”
Fragmentation to get A to B more quickly
While e-commerce is rapidly rising, customers are becoming less tolerant of service deviations and delivery times by the day.
Miller says this is a factor in the B2B sector as much in the B2C arena.Businesses now have shorter tolerances for delivery from suppliers which is putting acute focus on identifying efficiencies and becomes a service centric business case.
“With transport and distribution making up as much as 50% of total supply chain costs, greater examination of locations and distribution networks is critical. Fragmentation of network and facilities can be a key way to get product closer to the point of consumption.We are increasingly seeing businesses who previously used one distribution centre are now looking at several regional ones.In the Australian market this is being driven by speed to market and the need to improve and meet demanding customer service delivery levels.
“It’s being seen as a change to the supply chain process to ‘a pull network rather than a ‘push network. Toilet paper as a product for instance, has traditionally been pushed out to supermarket distribution centres. As retail rent goes up for supermarkets and the cost squeeze goes on they look for the size of the back room to reduce.This puts the onus back on the product manufacturer to figure how and where to keep inventory and how to deliver it there quicker.”
Claus Brewer, NZ Director of Industrial and Logistics says whether its automation, more demanding consumer behaviour or the role of fragmented networks, a more strategic view of these decisions and their direct relation to property is a key part of the supply chain management process.
“There’s so much more to consider now and it requires an honest appraisal of business growth forecasts to align property needs. This combined with the availability of quality facility options, means that whereas a couple of years ago we would recommend to clients to allow a 15-18-month period to move premises, this is now more like two years.”
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