With eCommerce constantly strengthening along with rapid globalization, it has become imperative for retailers and manufacturers to improve their supply chain and logistics to better meet the global demand. While there are multiple ways to streamline warehousing operations that can help you get closer to your customers, smart warehousing is one of the most sustainable and smart (sic) options to do that.
In this article, we have discussed smart warehousing as a concept, its benefits, and the ways to make your warehouse smart or, in other words, get the most out of your warehouse operations with minimum manual efforts.
What is Smart Warehousing?
Smart warehousing essentially means streamlining different warehouse operations in a way to achieve maximum efficiency. This can be done using automation, outsourcing operations to third parties, or using software to handle on-ground operations and tracking the delivery. A smart warehouse increases the productivity of your business and minimizes human work and errors.
It gives you a competitive advantage over other eCommerce sellers by optimizing supply chain and warehouse operations.
Unlike the popular notion, a smart warehouse doesn’t mean a warehouse that is fully automated. It means a “smart” collaboration between humans and the automated machines. In a typical smart warehouse, there may be computerized systems handling inventory, sales, and logistics functions along with humans operating them at maximum capacity.
How is it different from a manual warehouse?
As the name suggests, a manual warehouse is dependent on workers to implement and execute operations like picking products, loading them into carts, and then delivering them to the shipping dock.
Now, in a smart warehouse, these functions are automated. Orders are received automatically and the WMS checks whether the products are in stock. If yes, the pickup lists make their way to the robot carts that place the items into containers and deliver them to workers for the next step. If not, the warehouse management system notifies you to purchase stock accordingly.
Benefits of Smart Warehousing
Having a smart warehouse comes with a lot of perks. And, as opposed to what one might think, it is not that heavy on your pocket. The initial setup might cost a little, but the return on investment makes up for it and stays with your business in the long run. Here are some of the major benefits of owning a smart warehouse.
- Reduced Costs
A smart warehouse is less dependent on human labor. This helps reduce two major costs:
- Labour Cost: On an average, two-third of warehouse operating costs comprise labor costs.
By automating operations, this cost can be brought down significantly.
For example, Alibaba’s smart warehouse deploys robots that have reduced their labor costs by almost 70%.
- Operating Cost: Automation improves performance and productivity, which, in turn, reduces operating costs even further.
How does this help?
The lower cost of warehousing ultimately benefits the end customer as your business is able to offer products with a flexible pricing scheme. In a world so competitive, this certainly helps you increase customer retention. Automating the pick and pack inventory system to a more integrated form of order processing, a warehouse can have an average of 25% gain in overall productivity, 5-30% more efficient use of stock and a 10-20% gain in warehouse space use.
Now the cost of automation against the cost of labor can be a brain scratcher and, of course, have monetary repercussions. Calculating ROI under different different scenarios can help you arrive at a decision. Besides, you don’t have to fully automate the warehouse to make it smart. You can be selective about the operations you want to automate and improve efficiency.
Check out this article on automation vs human labour to get more clarity on this.
- Fast Shipping
Since the warehouse staff is no longer required to pick products and fill orders manually, the order processing time is significantly reduced in a smart warehouse. Moreover, smart warehousing reduces picking errors to approximately zero.
For example, in Amazon’s warehouses, machines do most of the menial monotonous jobs like picking and packing, enabling the online giant to fulfill orders at the earliest.
How does this help?
In eCommerce, consumers consider faster delivery timing as an important factor while making the final buying decision. By ensuring that the product is shipped in the shortest duration possible, your brand can secure customer satisfaction and loyalty.
- Reduced Returns
As mentioned above, a smart warehouse reduces picking errors to almost zero, thereby reducing order returns, since the customer shipment is accurate. While you will still have a few returns but that will not be the case of wrong order shipment. Additionally, a smart warehouse is better equipped for handling returns than a traditional warehouse and processes the returns faster.
How does this help?
Undoubtedly, correct order shipping increases customer satisfaction and can make customers loyal in the long run. Since your business can efficiently handle reverse logistics with smart warehousing, you will be able to offer better return policies and fulfill return orders faster.
According to Invespcro, “67% of online shoppers check a store’s returns policy before purchasing and 92% will buy something again if returns are easy”.
- Increase in Warehouse Space Utilization
Smart warehousing features like automated picking and mobile sorting solutions allow you to have higher racks and narrower aisles in the warehouse making it feasible to store more products in less space.
For example, Ocado, an online British grocery store implemented warehouse automation and saved up significantly on space. They use simple bots for moving and lifting items. They are able to lift boxes higher than what a human is capable of. The warehouse can process over 60,000 orders weekly and is active 24/7.
Image: Ocado’s burning robotic warehouse
How does this help?
Smart warehousing reduces your firm’s overhead costs per unit. The lowered costs indicate that you can either lower the price of the commodity, and increase sales volume, or have a higher profit margin per unit sold. Either way, it will help increase profits and the eventual expansion of the business to other markets.
- Predictive Order Processing
A smart warehouse uses advanced analytics and artificial intelligence extensively. It helps
get deeper insights into order processes and predict future order levels and demands. You can implement predictive analysis right before stock procurement using your cloud-based software.With EasyEcom’s AI-driven inventory planning platform, you can forecast stock requirements by efficiently managing your inventory.
For example, Coca-Cola has AI-powered vending machines that “offer specials, track sales, preempt maintenance and refill needs, and even accept mobile payments”.
How does this help?
Inventory planning is improved by predicting future order levels. In a well-organized warehouse layout, automated picking robots and employees work in sync with predictive models. It results in faster order processing, and thus faster shipping. All these benefits combined help improve the overall customer experience.
Why has warehouse automation become popular in 2021?
Despite the high initial setup cost, warehouse automation is increasing in popularity because of the long-term benefits it offers. As mentioned earlier, the automation cost is a one time thing but the labor and operating costs are recurring and take a lot of maintenance effort.
Let’s take a look at the key reasons for the popularity of warehouse automation.
eCommerce and Rapid Fulfillment
With the steady rise in online shopping, it has become imperative for a business to adopt modern fulfillment and shipping practices.
As you go head-on with this challenge, investing in warehouse automation becomes absolute for attracting and retaining customers. Automated systems that can handle small to large individual orders, as opposed to bulk transportation models, are more beneficial in shaping warehouses of the future.
Wage, Cost, and Flexibility
As mentioned above, one of the major benefits of smart warehousing is the reduction of labor and operating costs.
Investing in warehouse automation is a cost-effective method of replacing labor. The benefits are obvious like:
- Robots don’t require insurance, benefits, or holidays
- Easily handle peak season demand spikes
The advancement in technology involving robots, AI, deep learning, machine learning, etc. has created a plethora of options for warehouse workers to drive growth smartly. There are one too many technological options for different warehousing activities that previously involved hard manual labor. We have discussed the technology options for making a warehouse smart later in the article.
Agility and Resilience
As per the estimates, a large number of retailers and manufacturers will aim to make their supply chain more resilient by sourcing from multiple suppliers, a majority of which will be small local businesses. A local business will have to adapt systems to better meet the standards set by the large retail clients.
According to estate agent Knight Frank’s 2020 report, the UK alone would require 92 million sq. ft of warehouse space by 2024. This means, moving forward, it is imperative to maximize the use of the existing limited spaces cost-effectively. Hence, warehouse automation!
How to make your warehouses smart in 2021?
A warehouse is not conceived smart but converted into one with a number of different options used separately or all together. Today, we gave a plethora of such options that can help you achieve maximum efficiency and productivity with your warehouse operations. Following are some of the most popular ways to go about smart warehousing for your eCommerce business.
Owing to rapidly growing technological advancements, warehouse automation has become all the rage today. Here, we have covered the major technologies which help streamline warehouse operations.
The pandemic has increased online sales and has thus increased the importance of having a resilient global supply chain. For an eCommerce business to be successful in the long run, it is crucial to have an effective pick-pack-ship process of single and small multiples of order items.
Mobile Robots offer the required flexibility, speed, and performance needed for warehouse operations. Mobile Robots along with automated picking solutions reduce both the time required in picking orders and avoiding picking errors. These factors combined improve order shipping.
For example, Magazino’s AMR TORU cubes are capable of both picking and moving goods.
RightHand Robotics picker robot RightPick has a picking rate of 550 per hour.
These advanced robots for warehouses can be expensive and we recommend that you go for them if you operate multiple warehouses with a lot of space and have the kind of money to invest on a large-scale automation. Otherwise, you can always start with smaller automation processes and still make your warehouse smart. We have discussed all the options later in the article.
New generations of robots are easier to install and program and not that heavy on pocket. In 2021 and beyond, the usage of robots and autonomous guided vehicles will be a common practice. Robotics has enabled car bodies to be conveyed on driverless transport systems. In a warehouse system, this can be decoupled from an existing assembly line flow and redirected to another assembly station easily.
Collaborative robots are another strong example of advancement in technology. These robots have integrated sensors, and are able to detect over-current, hence improving the safety of warehouse labor. Moreover, these robots can learn easily by demonstration. Hence, the need for deep knowledge in programming is omitted. The added benefit of them being less expensive than the traditional robots make it a preferable choice for many warehouse managers.
- Automated Guided Vehicles
Like automated mobile robots, automated guided vehicles (AGV) offer the flexibility to automate warehouse operations without making significant changes to the existing warehouse layout. This is the reason why a smart warehouse extensively uses AGV and AMV as opposed to automated storage and retrieval systems (AS/RS). They are less time-consuming and can drastically reduce costs while eliminating the risk involved in the manual movement of goods.
AGVs are used for transportation and handling tasks that were originally done by manual forklifts, conveyors, towing machines, and carts. Warehouse automation trends include retrofitting traditional forklifts and automating them during peak seasons, and using them manually when demands are back to normal.
Drones are multi-purpose devices for a warehouse. They are cost-effective, safe, and fast to increase warehouse efficiency.
Autonomous drones can be used for inventory management, facility management, and security purposes. They can be used for faster inventory scans, help accurately identify inventory in putaway locations, complete cycle counts quickly, etc. Furthermore, drones digital images are processed on a real-time basis to generate a count. This is later compared to the known count in the WMS system.
Sensors can automatically locate inventory and communicate inventory data across the supply chain. Sensors are used for tracking, security, and inventory control. It not only helps in tracking goods at every stage of delivery, but sensors can also monitor the temperature and humidity inside the truck.
The usage of sensors to track down truck drivers’ vitals to reduce supply chain risks will definitely be a growing trend in 2021.
Some robots also have in-built sensors. This helps warehouse operators easily track data and provide necessary feedback to the employees.
Wearables include devices like smartphones, glasses, tablets, and head-mounted systems which enables warehouse employees to get immediate information wherever they are in the warehouse. Wearables can be used in operations like shipping, receiving inventory, inventory management, order picking, routing, and replenishment. Wearables can also assist warehouse managers to keep a track of the employees’ individual performances. Another advantage of using wearables is its ability to monitor employee health.
A prominent example of the real-life usage of the above-mentioned trends is a DHL smart warehouse. DHL uses smart glasses, drones, robots, and autonomous vehicles to optimize its warehouse operations.
Speeding Logistics (Fulfillment via third-parties)
A large number of eCommerce brands are already adopting micro warehousing and it is to remain a growing trend in 2021 and beyond since fast order delivery has become essential for any business to survive. A microwarehouse is a small automated facility in the urban area, near the customer locations. This low-cost, scalable automation enables you to fulfill orders within a matter of hours.
Walmart set up its in-house micro-fulfillment center in its store in Salem, New Hampshire in 2019. The fulfillment center uses Alphabot, an autonomous cart robot platform to stock products that are most popular in online orders among Walmart customers. Instead of customers filling up their carts, they are able to place orders online and Alphabot retrieves their orders and completes the transaction.
Now Walmart is a big name and owns a lot of other similar facilities to make their eCommerce activities more efficient.
There are a lot of other fast-growing brands dedicated to microwarehousing only that have emerged in the past couple of years.
Shipbob, a tech-powered 3PL fulfills orders for DTC eCommerce brands. The brand is an end-to-end fulfillment provider that helps improve delivery time, costs, and overall customer experience.
Automation using Software
- Warehouse Management System (WMS)
Using a Warehouse Management System (WMS) optimizes warehouse operations by providing real-time visibility of important data. This helps identify any deficiencies in the warehouse process and rectify them timely. A lot of eCommerce brands are now opting for a cloud-based WMS since it requires no infrastructure or in-house IT team to maintain it.
A cloud-based WMS offers the following functionalities:
EasyEcom’s state-of-the-art warehouse management system (WMS) enables order routing, splitting, inventory across multiple warehouse locations with advanced shipping rules that empowers your business with increased warehouse productivity and timely delivery to the end consumer.
- Warehouse Integrations
While this concept belongs to the near future, the concept simulation is already in the works. A business with its own smart warehouse where pickers, robots, and other automation tools work seamlessly together will have valuable data on a real-time basis. A warehouse and a fulfillment center are likely to become integrated in the near future giving rise to a smart warehouse and making real-time data sharing possible.
Artificial Intelligence and IoT
Using artificial intelligence (AI) and the Internet of Things (IoT) can automate routine tasks, consolidate information, and provide detailed analytics that can improve operations. AI constantly learns and this enables continuous development and progression of warehouse processes.
Artificial Intelligence can:
- Alert robots to use the most efficient route for storing or picking products
- Determine the appropriate packaging box size based on package type, weight, density, etc.
- Improve warehouse security by identifying internal and external thefts before their occurrence by analyzing and solving areas of risk.
IoT connects all internet-enabled devices, and hence allows for faster communication between technologies. This, in turn, creates a comprehensive system for the entire warehouse. Applications of IoT like wearables and sensors have already been mentioned above. Another strong example of IoT is connecting robots with RFID. This leads to faster identification and picking of products in the warehouse. The robots can later send information to the conveyor, which will program the data into the WMS. The warehouse system then tells warehouse operators or the staff members how to process and pack the items. The WMS is then again connected with the RFID and scans the items leaving the warehouse.
Here is an image for your reference.
DHL Supply Chain launched a smart warehouse in 2019 in Singapore for international food packaging and processing company Tetra Pak. The warehouse uses IoT and data analytics to continuously monitor and maintain the stock of perishable goods. The warehouse supervisors use data to optimize traffic flow and resource planning. The staff stock the goods within thirty minutes of arrival and prepare outgoing deliveries in just over an hour.
Smart warehousing in eCommerce has seen a lot of progress in terms of feasibility and affordability. However, it is still developing as a concept. Now that you are aware of the options that are available for you, start off with the ones that help streamline your basic warehouse operations to meet timely demands and then go from there. If you think we missed something here, do mention it in the comments below.
Are you looking for an omnichannel inventory management solution with integrated B2B order management for your eCommerce business? Drop us a line at [email protected] or directly sign up for a demo here.