Oct 16, 2020

Smart Warehouses the Heart of the Digital Supply Chain

This article was originally published on Bangkok Post.

The retail industry has undergone a massive transformation over the last few years. With high levels of smartphone ownership and mobile penetration, consumer behaviour is trending toward omnichannel marketing and online purchases. Indeed, eMarketer had previously projected e-commerce growth in Asia Pacific to surge by 25% and reach US$2.27 trillion in 2020.

Though this affects brick-and-mortar retailers the most, other industries and organisations will have to adapt their capabilities to cope. Specifically, the increase in goods going direct to customers calls for significant changes to the underlying supply chain, as well as how businesses manage their logistics and distribution.

Take the warehouse as an example: A regional hub that keeps supermarkets stocked operates very differently from a fulfilment centre shipping directly to homes. Indeed, business-to-business and business-to-consumer (B2B and B2C) are traditionally handled as two distinct types of operations, but as demand shifts from pallet loads to individual items, warehouse operators must start thinking of how best to support both activities under the same roof.

Doing both B2B and B2C deliveries from a single facility offers multiple advantages, from the ability to utilise the same workforce, reducing transport cost and shortening delivery times. This is especially noticeable in regions with deficient road networks or high congestion, and results can be lower fulfilment costs.

Moreover, such flexibility also positions operators to support new and growing business models such as drop-shipping or third-party logistics (3PL).

Meanwhile, the shutdowns and global business disruptions of 2020 have accelerated the urgency for a broader supply chain overhaul. From crucial assembly-line components produced only in shuttered factories to delays in essential pharmaceuticals, delays have roiled global supply chains globally and disrupted intricate networks.

The responsibilities of warehouse operators have evolved substantially from product storage and now contribute to the overall total cost of managing a supply chain. This includes supporting economies of purchasing, uninterrupted production, and even facilitating time-based supply chain strategies.

In a nutshell, the warehouse can make a bad situation worse, or substantially alleviate and cushion the impact of untimely disruptions.

In Southeast Asia, most warehouses already have some system in place to manage their supply chain. From Excel spreadsheets to in-house enterprise resource planning (ERP) applications, these standalone warehouse systems might work quite well for B2B-only scenarios. Unfortunately, they are typically labour-intensive and offer limited visibility of the real-time movement of goods.

On top of that, they are simply unable to deliver the capabilities that help businesses keep abreast of the evolving supply chain. Given that e-commerce will keep growing, the onus on warehouse operators is to invest for the future — or risk being left behind.

A meaningful upgrade must begin with moving ERP and warehouse management system (WMS) solutions to the cloud, allowing for rapid scalability and much shorter implementation times. Crucially, cloud systems allow in-house IT teams to stay lean as partners take care of its operation and maintenance.

With a new system in place, the road ahead is clear for a shift from manual processes such as stock taking, to optimisation of space usage and labour requirements. Labour agility is particularly important as new hygiene measures are implemented in workplaces and social distancing measures remain in force.

With greater automation, businesses are also better protected against labour disruptions stemming from potential lockdowns that may prevent employees from coming to work.

The top concern around digitising warehouse operations undoubtedly involves having an adequately skilled workforce to manage the new systems. While the complexity of the modern warehouse will benefit from tertiary education, the average educational level of warehouse workers in Southeast Asia is lower than in places such as the United States or Europe.

Fortunately, these skill gaps can be addressed with appropriate ERP system customisations based on the preferred level of automation. Organisations that are new to digitisation can opt to incorporate fewer features initially while workers learn the system. Moreover, modern digital ERP and WMS solutions are highly intuitive and pose a lower barrier to smartphone-savvy workers.

The cloud also facilitates rapid deployment of new systems, with no concerns around acquiring new server systems or future infrastructure upgrading. Solutions are developed for the industry vertical, with minor tweaks for company-specific processes. As an added advantage, businesses get to move away from proprietary systems to a common framework based on industry best practices.

Of course, the situation on the ground is often more complicated. From the snarling jams of downtown Bangkok, the multiple days to reach a remote, rural part of Myanmar, or the challenge of covering thousands of islands in Indonesia, effectively managing the last mile of the supply chain can be daunting.

Yet with the right ERP and supporting logistics systems in place, future capabilities such as artificial intelligence (AI), support for IoT and robotics can be implemented far more quickly, painlessly and efficiently.

Image via Bangkok Post

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