Thought Leadership Article

Warehousing 2018: from cost centre to growth centre

Warehousing operations and IT professionals need to respond positively to the significant changes and challenges that will be influencing the industry over the next five years – or face disaster.

At its most basic, warehousing is a simple concept. It’s about storing materials or goods and filling orders from one end of the supply chain to the other. But in the real world of today, tomorrow and especially five years from now, growing complexity means warehousing is evolving to become anything but simple. Today’s warehousing professionals are feeling significant pressures from multiple internal and external sources.

The global recession affected the industry in many ways. In an effort to free up capital, there were major cuts in held inventory, adding capacity was deprioritised and expansion of existing or construction of new warehouses and distribution centres was scaled back or halted altogether. Now, as the economy has begun to grow, warehouse operations are growing again. But as they grow, they are also being transformed by a number of issues that go well beyond simple increases in volume and throughput.

New warehousing realities

Today’s warehouse professionals face a series of significant changes in the ways warehouses, distribution centres and the entire supply chain operate. More facilities and larger spaces demand high-speed mobile communications virtually everywhere on or off the floor. A virtual acrossthe- board customer demand for personalisation is driving an increase in the number of SKUs, leading to increased inventory visibility, accuracy and efficiency needs. New regulations call for more accurate product tracking and tracing. Fuel cost volatility impacts logistics and much more. The growth of omnichannel transactions creates the need for increased inventory control, flexibility and faster, more accurate fulfillment. All these factors contribute to the need to convert warehouses and distribution centres into assets for competitive differentiation.

Top alignment opportunities

Today, the reality in many, if not most, warehouse operations is the existence of separate islands of information. The vision for the future is the linkage, integration and consolidation of the Warehouse Management System (WMS) with Enterprise Resource Planning (ERP), the Yard Management System (YMS) and Transportation Management System (TMS). These linkages help remove inefficient information silos, promoting collaboration and increasing the recognition that changes in one process can and will affect others downstream and upstream. For example, changes in packing and staging can affect load plans, trailer drops, route selection, rates and more. Anticipation of – and response to – these effects is crucial to not only improve warehouse efficiency and productivity, but also to create a more synchronised and agile supply chain.

Ensuring IT and Operations alignment

However, before a company can start planning for the future, the organisation must first identify its current status, honestly answering the question, “where are we now?” Then management must clarify its vision of where the company wants to be in two, three, four and five years, and make the critical decisions of where to invest, and what types of investments should be considered.

To maximise warehouse and DC productivity, operations and IT leaders must be on the same page in terms of technology systems and business processes. Although partial alignment usually exists between IT and operations today, in many instances there is still a basic technology divide. It starts with differences in overall assessment of current capabilities and risk perspectives for the future. Survey results demonstrate that today IT often perceives higher levels of WMS integration with other systems than does operations; in addition, IT projects higher incremental integration rates by 2018 than their operations counterparts. Today’s IT departments also tend to be more aggressive in setting new standards and deploying new tools to reduce technical risk – and to be more accepting of business risk – than operations, which is usually more risk-averse and focused on running the day-to-day operations of the warehouse with minimal technical disruption. Bringing the two departments together to share a common vision is one of the most crucial goals moving ahead in the next five years.

As the industry prepares for the future, it’s vital for IT and operations to be aligned in terms of WMS plans, since these systems are the backbone of the entire warehouse/supply chain operation, and the seed from which all automation plans grow. One thing both departments usually agree on is the need for substantial increases in process automation and mechanisation; another is the critical importance of the WMS.

The batch access battleground

One of the most glaring differences is a divide in the projected use of batch mode access versus real-time access to the WMS and other relevant business systems. This is especially problematic in the cycle counting process. Historically, cycle counting has been much less automated than picking, but that’s about to change. Although both IT and operations agree that cycle counting needs to become more automated, operations predicts a movement away from the computer-on-wheels or handheld batch access model, to providing workers with mobile handheld technology with immediate, direct access to the WMS.

Streamlining to flawless fulfillment

As warehouse professionals are facing increasing pressures to deliver more top- and bottom-line value, they are taking a broader view and re-evaluating their capabilities across all their major warehousing processes. The goal is flawless fulfillment, and it calls for a pragmatic, workflow-driven analysis of how management wants to run the warehouse. The technology keys are increased flexibility, automation, integration and real-time access to the WMS with purpose-built, yet adaptable, solutions that can demonstrate lasting value in the face of changing demands. Order picking and filling remains the top investment priority due to its relatively high costs and greater opportunities for errors. But in today’s warehouse environment, the search for increased efficiency, accuracy and productivity also requires a broader, more holistic workflow and process evaluation.

Inbound handling

Receiving and put-away processes can have a domino effect on virtually every other warehouse process. The harsh reality is, receiving and put-away inefficiencies are a significant cause of potential problems upstream and downstream. In response, today’s warehousing professionals are currently trying to solve a number of significant inbound handling issues.

Pick and fill

The picking and replenishment processes – which can account for up to 70% of operating costs in a warehouse – remain the top priority for warehouse professionals to address with advanced technology solutions. As the industry continues to reduce pick and fill costs and increase worker efficiency and productivity, it is turning to innovative processes, such as task interleaving, and innovative mobile technology, increasingly using wearable, vehiclemounted and handheld devices capable of multimodal operation.

An evolution from cost centre to growth area

What steps should an organisation be considering in response to the major changes that will impact warehousing operations today and in the next five years? The time to start is now, and the best way to begin is by carefully analysing the issues and evaluating the steps to be taken to help warehouses increase productivity while decreasing costs.

As customer satisfaction and supply chain efficiency become more important drivers of warehousing operations, the industry is re-examining its perceptions of the business. Fewer organisations continue to view warehouses and DCs simply as commoditised links between endpoints of the supply chain. Senior business executives across all market segments can no longer afford to simplistically look at warehouses as necessary evils that are fundamentally cost centres.

Increasingly, industry professionals are viewing warehouses and distribution facilities as historically underleveraged centres that can drive competitive differentiation and, by doing so, increase profitable growth. This reshaped vision of warehouse operations as a fundamental driver of top-line and bottomline business value, points the way to achieving the ultimate objective of flawless fulfillment.

Written by: Acknowledgement to Zebra Technologies
Date: 17 February 2016
  • Warehousing in South Africa today – and the near future Worldwide, in the warehousing business, when future operations are discussed, the conversation is likely to be about more automation, greater variety, better systems, more integration, more efficiency and greater flexibility. The dreams, discussions and plans focus on issues such as robotics, the ‘Internet of Things’, tomorrow’s deliveries by drones, 3D printing, multi-channel fulfilment, ecommerce growth, rapid fulfilment and the need to individualise operations.
  • Warehousing 2018: from cost centre to growth centre Warehousing operations and IT professionals need to respond positively to the significant changes and challenges that will be influencing the industry over the next five years – or face disaster.
  • Raising productivity and morale in the warehouse It’s a well-known fact that happy and motivated workers produce better results. A recent study found that happier workers were 12% more productive than their counterparts. It underlines staff morale and wellbeing is not just an HR goal: it’s fundamental to business performance levels.
  • Supply chain orchestration – people are needed to play the music It’s easy to think supply chains consist of co-ordinated processes, enabled by cool IT, through which needed products flow smoothly with occasional storage to the end consumer. Great in theory but it takes the right people doing the right things at the right time to make end customers happy.
  • Africa: the giant IS awakening – seriously September saw the respective international conferences of two major supply chain management industry bodies – that of the International Federation of Freight Forwarders Associations (FIATA, in Taipei) and that of the Chartered Institute of Logistics and Transport (CILT, in Dubai). At both gatherings there was substantial African representation and, at the CILT Convention, Africans were in a clear majority. What does this imply for African businesses?
  • The Moneyball Problem OPSI Systems recently hosted the annual Operations Research Society of South Africa’s (ORSSA) conference, and it served as an illuminating example of the intersection of experience, education and technology.
  • Warehousing in South Africa today – and the near future Worldwide, in the warehousing business, when future operations are discussed, the conversation is likely to be about more automation, greater variety, better systems, more integration, more efficiency and greater flexibility. The dreams, discussions and plans focus on issues such as robotics, the ‘Internet of Things’, tomorrow’s deliveries by drones, 3D printing, multi-channel fulfilment, ecommerce growth, rapid fulfilment and the need to individualise operations.
  • Warehousing 2018: from cost centre to growth centre Warehousing operations and IT professionals need to respond positively to the significant changes and challenges that will be influencing the industry over the next five years – or face disaster.
  • Social supply chains: trend or threat? Buzzwords like social sharing, interconnectedness, engagement, immediacy and transparency have left the confines of social media discussions dominated by marketers and have started scaring professionals across all levels and functions of organisations.
  • Raising productivity and morale in the warehouse It’s a well-known fact that happy and motivated workers produce better results. A recent study found that happier workers were 12% more productive than their counterparts. It underlines staff morale and wellbeing is not just an HR goal: it’s fundamental to business performance levels.
  • Bridging the divide between fleet managers and drivers The relationship between drivers and fleet managers can often be challenging due to high productivity pressures and a lack of understanding regarding each side’s difficulties.
  • CHEP ‘Blue Motion’: gaining instant control of the SC CHEP South Africa’s newly launched ‘Blue Motion’ mobile application will allow wholesalers and retailers greater control over their supply chains. Named for the company’s distinctive blue pallet range, the application provides its customers with a mobile asset management system utilising real-time data, which can be formatted to suit customers’ specific needs.
  • Horses for courses – hub and spoke in rural Africa Moving goods from source to destination through Africa is a multidimensional challenge and one where first-world thinking still trumps appropriate. A change in game needs to happen.
  • Human error and accidents and the role of self-regulation Companies using third party contractors to move their goods are confronted with the challenges of poor economic growth, ever increasing transport costs and high rate of accidents. In an environment with one of the worst accident rates in the world, where accidents cost the economy an estimated R300-billion annually, something different needs to be done, but what?
  • The Analyst Age Data this, data that – data is certainly getting its due, but where do you fit in?
  • Supply chain orchestration – people are needed to play the music It’s easy to think supply chains consist of co-ordinated processes, enabled by cool IT, through which needed products flow smoothly with occasional storage to the end consumer. Great in theory but it takes the right people doing the right things at the right time to make end customers happy.
  • Truck drivers: obsolescence or opportunity? As new technologies shift the dynamics of employment in the supply chain, transport managers will have to gauge where the real benefits lie, and nowhere is this more apparent than future self-driving vehicles.
  • An Imperial solution in Malawi An effective supply chain model established by Imperial Health Sciences to deliver essential medicines to the people of Malawi has successfully achieved this goal, and, in addition, has resulted in the growth and development of a local logistics service provider.
  • Africa: the giant IS awakening – seriously September saw the respective international conferences of two major supply chain management industry bodies – that of the International Federation of Freight Forwarders Associations (FIATA, in Taipei) and that of the Chartered Institute of Logistics and Transport (CILT, in Dubai). At both gatherings there was substantial African representation and, at the CILT Convention, Africans were in a clear majority. What does this imply for African businesses?
  • Powering up your distribution As South Africans struggle with load shedding and Eskom angles for a hefty rate increase, we’ve been learning – with something bordering gleeful resentment – about the intricate details of national power supply.
  • Out … but not forgotten Outsourcing logistics and supply chain functions is commonplace today by manufacturers and shippers – but do customers get the deal they expect or deserve? It depends.
  • Managing change for long-term success The second episode of a three-part serialisation of the supplychainforesight 2015 research report highlights that with new technologies being introduced, and companies competing in an increasingly cutthroat and competitive ecosystem, the ability to make key shifts and transform from within is becoming essential for survival – and for long-term business success.
  • Exciting times – harvesting our youth dividend Legislation and other Government interventions may assist in transforming our society into one in which the limitations on each individual’s success are only self-imposed. A more important element to a nation’s success, however, is that those who have gained experience and expertise take proactive steps in using those assets to invest in society’s future – our young people. We examine the opportunities this represents.
  • The Moneyball Problem OPSI Systems recently hosted the annual Operations Research Society of South Africa’s (ORSSA) conference, and it served as an illuminating example of the intersection of experience, education and technology.