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Micro Fulfilment Center: The Future of Retail

How do you think the consumers will shop in 2030? Today, there is a greater demand for transparency and increased personalization from grocery shopping. This helps consumers to make informed choices to support their dietary needs, values, occasional requirements and health goals. This rapid shift in consumer demand, combined with emerging technologies, will lead to a ‘supermarket of the future’ (Micro Fulfilment) with an immensely improved omni-channel experience and efficient operating model.

Automation is one of the crucial element of the Supermarket of future. It reduces costs and frees up staff so that they can focus on enhancing the shopping experience for the customers. Currently, the brick and mortar business provides customers with an experience of high-quality fresh produce, delicious food with an attractive gastro ambience and not to forget, satiating social interaction. Smart merchandising solutions will make the retail shopping space more attractive to the customers while exponentially eliminating wastage.

Innovation in the future supermarket will come with new opportunities for merchandising and impact on the 4Ps (price, product, place, and promotion). One way to achieve this is by offering an end-to-end eGrocery solutions, using hyper-local automation to lower the cost-to-serve in online fulfilment. Keeping consumers’ demand in focus for omnichannel grocery, a transition from defensive posture on eGrocery towards a profitable solution has become essential to minimise the losses of the currently inefficient eGrocery segment.

The primary challenges of eGrocery segment that the Micro fulfilment centre commits to solve are picking time and last-mile delivery. Conventionally, it takes about 60 minutes for picking an eGrocery order which makes the segment an unprofitable burden for many grocers. The micro-fulfilment centres cut picking time down to about six minutes. These micro-fulfilment centres can be installed in the existing setup of supermarkets, enabling a hyper-local option that eventually reduces the cost of last-mile delivery.

At Addverb, we are keen to contribute in this journey with you as a retailer by providing robotics and automation solutions in these mini-sized fulfilment centres to churn out order baskets for the e-grocery customer using minimal space and manpower. This contributes towards a transparent, visible and seamless fulfilment experience for the retailer as well as the customer. From in-store pick, dark stores, semi-automated fulfilment, micro fulfilment centres to full scale automated warehouses, the rush is on to figure out a way to lower grocery fulfilment cost. As usual, there is no single solution from which the problem can be approached in a correct way. Retailers will have to create flexibility in their solutions that will eventually meet customers’ demand and that too at profit. Some factors such as urban vs suburban, delivery vs pick-up, scheduled vs immediate can help to create this flexibility in the hands of retailers.

These are some of the nuances with which you would want your technology partners to look at the problem statement of micro fulfilment.

When it comes to any automation, ROI is a conversation worth probing. From a grocery perspective, the cost to build a supermarket today involves the cost of the land, building, infrastructure and workforce which contributes to around 60% of the cost of goods sold on year on year basis. On the other hand, it is estimated that the cost of building a micro fulfilment centre would cost less than half of that for the same amount of sales for the retailer. This makes the concept a lot more viable, thereby reducing the cost to serve considerably. Moreover, if planned with the right set of data with your MFC specialist, as a retailer, it is estimated that the inventory turn around will be 3 times more than a typical retail store making the required impact on ROI.

Today consumers are interested in the convenience that online grocery business creates and the market is responding positively towards that by migrating to fast service. Micro fulfilment Center provides retail operators to satiate that consumer requirement and that too efficiently, at a low and profitable cost.

While the pricing of online grocery is always the decision of retailer, the micro fulfilment centre is so cost-efficient that it allows retailers to sell products via an online medium to its customers without any additional fees.

Hence, some advantages of Micro fulfilment centre can be summarized as follows:

  • Reduced last-mile delivery costs: The cost of transporting and hence reduced delivery time due to migration of warehouse closer to the customer, decreasing the overhead costs.
  • Easy Deployment: The deployment time to implement micro fulfilment centres is a lot lesser due to pre-engineered approach for automation, making go-to-market strategy a lot faster.
  • Re-use of existing store footprints: It reduces the need to build new warehouses for your growing online sales channel and instead use the existing supply chain assets.

It is evident that the future of retail is here, and it is for us to embrace it!

 

Rise of Mega Distribution Centers and its impact on Logistics

Factors driving the emergence of Mega Distribution Centers

A modern supply chain facility has no leeway to miss out on paying close attention to all the different elements in order to stay competitive and reap benefits. Companies may have to rethink and replan their strategies for designing their inbound (Raw Material – RM) and outbound (Finished Goods –  FG) in their Distribution Centers to stay nimble but yet be in a position to respond to black swan events a la corona virus – COVID 19. On the one hand, companies have far too long focussed on Just in Time (JIT) principle of managing their inventory, they will now, on the other hand, be forced to devise strategies to be able to bear short to medium term shocks that would impair their supply chain security.

Companies must be wiser after every calamity and should put robust infrastructure and processes in place to deal with shocks.  As the legendary business leader Jack Welch said, “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” It is therefore important for businesses to be ahead of the curve when it comes to business strategies. Mega Distribution Centers with commensurate logistics are a class that belongs to those businesses being ahead of the curve.

Logistics and Infrastructure

While designing the best fit solution for Mega Distribution Centers, logistics and its related infrastructure form a critical pillar in the structure. The task of distribution with matching logistics could be simplified to mean products having to move from point A to point B which is the right location in the most efficient way. This again means it needs to be transported to the right location, at the right time, in the right condition, for the right price. Distribution centers should be designed with a focus on meeting all the objectives mentioned just now.

According to a research paper on Mega DCs “Factors determining distribution structure decisions in logistics” authored by Alexader T C Onstein, et al, we come across different structures as shown in figure below:

“Decentralised” distribution structures include multiple DC locations in a so-called multiechelon system (layout 4 &6 in the above image).  A “multi-country system” includes an international DC and a number of regional or local DCs.

It is evident that the nature of distribution that a business opts will drive the logistics and transportation infrastructure to meet its demands.

It is imperative for companies to drive efficiencies by digging deeper into the levers to work on, to gain advantage. Ideally an analytics approach will be needed to decide about determining these levers. Many businesses have identified it would be cost effective to have fewer larger facilities than multiple smaller ones.

Even in these Mega DCs, one should de-risk the operations from many external angles that may hamper operations in unforeseen exigencies such as fire, snow, etc. Therefore, a campus style approach where a Mega Distribution Centers could be one with a cluster of a few medium-sized buildings that total the typical area to qualify to be a Mega DC. These buildings could safely be separated by roads for mitigating the effects of fire. Of course, it is important to run a cost benefit analysis from all angles, initial investment, operational expenses and such. Operational expenses could offset the benefit of a cluster of buildings making up a Mega DC as the material handling and automation systems may add to unreasonable cost. *

What Goes into a Mega Distribution Center

Mega distribution Center, by its very nature is the Mothership and should satisfy a variety of needs. Therefore, it is a multifaceted and multitasking entity that is designed to perform end-to-end logistics demand for any business. It should have the following attributes:

  1. A large facility typically of an area around 400,000 Sq.ft. would qualify as a mega DC.
  2. Designed to suit large inbound and outbound traffic at high throughput
  3. Have very good locational advantage and be capable of handling heavy truck traffic continuously
  4. Must lend itself well to be connected to mini and mega markets to meet the demands. This will in turn make the mega DC a viable proposition
  5. Fully automated material handling system, storage and retrieval system linked with business ERP system on a real-time basis

All the above attributes will essentially mean having multiple subsystems that handle material movement within the premises in a seamlessly integrated manner.

Technology and Solutions to be built into a Mega DC

Mega DCs normally operate 24*7 and hence are ideal candidates for automation due to the continuity of service and running multiple tasks simultaneously for meeting high volume of operations.

A good approach would be to break the domains down to:

  • Business need in general
  • Structure of the mega DC – Does it serve as a Mother DC feeding cross-dock DCs to serve the needs of a mini distribution centre
  • Transportation
  • Geography – Locational aspects

Technology and automated material handling solutions are commonplace these days. They help in meeting all the demands – ease of operation, higher productivity per person deployed, unparalleled operational safety and the consistently very high throughputs and accuracy. A carefully designed combination of infrastructure, automated material handling solutions and location will deliver a good value proposition to a business in smart supply chains.

It is precisely in these areas Addverb Technologies, with its domain expertise of both technology and business processes will provide a full bouquet of products and solutions to meet the digitization program of a business to modernise its warehouses and supply chains.

Adoption of technology will result in operational improvements of a warehouse, but the key differentiator is in choosing technology wisely, and here Addverb’s portfolio comes with a promise of delivering results beyond compare.

Role of WMS in boosting supply chain efficiency

The primary function of a warehouse management system (WMS) is to monitor the transfer and storage of goods within a warehouse and to process the associated transactions, including shipping, receiving, picking and put-away. WMS is a database-driven computer program that helps boost warehouse productivity by controlling cutaways and keeping inventory accuracy by documenting warehouse transactions. WMS also helps stock guide and optimize based on real-time details on bin utilization status.

How WMS can enhance supply chain management

A supply chain involves the flow of goods and services, right from the raw materials to production work-in-progress, and until the delivery to the customer. In this chain, warehouse is an integral part that ensures operations to happen effectively from suppliers to the immediate customers. A free-flowing logistics supply chain is nearly impossible without a powerful warehouse management system, as it removes all the irregularities, delayed sourcing, inventory management, and many other factors hindering the chain.

  1. Provide a Centralized platform

A WMS software offers a streamlined platform to track, monitor, and manage all the functions across the supply chain and logistics. Departments such as storage, shipping, and distribution are all connected under one software, thus helping overcome the information gap and friction among vendors. This guarantees a continuous flow of goods, helping the businesses to grow exponentially.

  1. Inbound & Outbound Process Optimization

A resourceful WMS is equipped with tools that can help plan and develop process automation, establish high-performance indicators, and align the ongoing processes to gather real-time information. WMS software can help determine the effective use of labour and space to minimize the wastage of resources in the supply chain. This software helps in location management by identifying the best location to keep certain goods or products in a warehouse, thus bringing optimal workflow in a warehouse.

  1. Cut-down expenses of operation

A well-designed WMS software allows suppliers to plan more frequent cycle counts (either of single or multiple goods), which gives them consistency in business and accelerate shipments in order to meet customer demands. WMS also helps the warehouse to run more smoothly with limited human monitoring and giving directions in the supply chain operations. Overall, this not only increases the volume of delivery but also reduces time and cost.

  1. Accurate Inventory visibility

In a warehouse, keeping track of the exact level of inventory is very crucial. WMS steps in to collect all the relevant data through serial number tagging, barcoding, and RFID tagging of the available stock. Once the data is collected, it is transmitted to the central database for further processing that happens in real-time. The database then helps provide useful reports as per the requirement about the status of goods in the warehouse. This increased identification of goods improves forecasting and smart analytics helps businesses to predict the customer demand for a product, especially during specific times of the year – such as holidays. This helps a warehouse to stock enough goods and ensure meeting customer satisfaction.

  1. Transparent Reporting Tool

One of the major benefits of WMS in supply chain and logistics is its ability to detect issues sooner and respond to them immediately. When one of the suppliers is unable to fulfil orders on time, WMS informs all the related users in the chain, immediately after the information gets updated in the system. This helps business receive enough time to find an alternate vendor, without affecting the customer experience.

Thus overall, a well-equipped warehouse management system has a very positive boost on the supply chain logistics of a business. It improves the consistency of product quality, increases customer satisfaction and leads to a brand name of trusted player in the market. However, a business must keep in mind that WMS is not a quick-fix solution, rather, a long-term tool that will help manage the warehouse inventory based on collected data. A business that is ready to invest in WMS must be certain of its streamlining goals and the upcoming business benefits. Such systems not only require capital investment, but also running costs, and equal enthusiasm and involvement from the warehouse team for its smooth operation.

Digital Twin in warehouses – advantages, applications & end user impact

The logistics industry has undergone continual advancements in the last decade and eventually created various opportunities for supply chain professionals. Technology opens up new possibilities and hence companies acing technology in the supply chain arena have found innovative ways to embark on a journey to unmatched efficiency and utmost customer satisfaction. But one of the most riveting technology in this space comes in the form of digital twin technology.

Digital Twin technology in the warehouse operates via feeding the data into aa virtual system. Combining this data with the Internet of things (IoT) bridges the physical warehouse with a unique virtual representation that monitors which exactly replicates the actual warehouse operations and further used to simulate the actual setup. It helps to make better decisions in real-time and facilitates clarity of communication among supervisors and managers due to information symmetry. It has resulted in the reduced go-to-market time by using virtual simulation of warehouse operations.

Unraveling the History

As a concept, digital twin became popular in 2002 but it was first used by NASA as a way to operate and repair their systems, located far away roaming in the galaxy. It proved out to be much productive in controlling and mirroring the systems after sending them out of earth’s biosphere. Now, armed with machine learning, artificial intelligence, and IoT data and devices, digital twins have evolved to an entirely new level of potential.

Application: Disrupting the status quo

Digital twins in the warehouse are creating an opportunity for companies to reimagine and re-examine their layouts and operations. When companies design the exact digital model of their physical layouts, it unlocks the way to experiment with multiple permutations & combinations and simulate to come up with different scenarios. It is operationally cost-effective as the results of the new design can be witnessed without risking the actual current operations. For example, Addverb uses this technology to simulate the warehouse layout designs via virtual 3D modeling, while proposing a solution to the customer and the results of the suggested design can be evidenced in the digital format. This allows the customer to do a cost-benefit analysis and throughput testing. This will help in keeping a track of the impact of the new solution on the current level of operation basis a data-driven decision. In the end, this will give companies the tools to create improved physical warehouse layouts while increasing the productivity of the workers. It helps the supervisors and managers to use real-time operational data to make informed decisions to reduce congestion, improve resource planning, and allocate workload.

What does the Industry say?

The project demonstrated so far based on digital twins helped in the development of risk-free approaches for testing in an agile way with a whole suite of technology to back them up. Industry researchers expect the market for the digital twins to grow 38% up to become US $26 billion by 2025.

Giants in the space of Industrial automation such as GE and Siemens are harnessing the possibilities of this technology for product development and management with new insights.

How does it matter?

The conventional modeling of machines and parts do not take into consideration the way in which parts wear out and replaced or how often the owners make modifications to them as per their requirement. With the advent of the digital twins, any changes made with the physical objects will also be reflected in the digital model of the object, changing the entire process drastically, something which was a mere imagination until now.

Instead of expensive and time-consuming experiments, the changes and new proposals can be incorporated in the virtual model and analysis can be done on the efficacy of the solution. Specifically to the warehouse, digital twin facilitates end-to-end traceability of assets, pallets, and packages to ensure operational efficiencies in logistical operations.

Digital twin technology has the potential to transform the logistics industry that can aid decision making while allowing a better perception of the future evolution of the operations. This technology will eventually lead to expedite the implementation of Industry 4.0 across the globe and this reign is in the hands of the logistic professionals to adopt the technology in their own operations.

Direct to Customer vs Reaching Customer via DCs

Reaching your customer- The 2020 way!

Companies are looking at new ways to reach out to customers that will give them a chance to stay engaged direct to customers. This gives them a unique touchpoint almost akin to grasping the customers’ hand to feel the pulse. What better way than getting a touchpoint to improve the customer experience. Thanks to digital technologies and modern material handling techniques, companies can safely implement strategies that give its end customers a good feel of the order handling process of their suppliers. A good mix of hardware and software working in harmony and interfacing with the business ERP system can ensure efficient order handling processes via Distribution Centers that could benefit all the players in a supply chain – manufacturers, wholesalers, retailers and end users.

Evolution of Digital Supply chain Networks

In the modern supply chain networks where strategies are continuously emerging and evolving all players must show willingness and agility to adopt newer techniques and solutions to deliver value not just to themselves but also to its customers. Currently companies that provide smart solutions to overcome the last mile delivery issues will gain in the battlefield of supply chains. Latest trends point to emerging practice of Direct to Customer (D2C) over reaching customer via Distribution Centers (DC2C). One must keep in mind that this strategy is not just about eliminating a middle layer in the supply chain. As opposed to this, it is to gain efficiencies just by adopting automation and technology to eliminate a dispensable layer. Economies of scale is a driver to adopt this strategy and hence large players benefit from this.

A centralised warehouse that caters to one or more of the following needs and that implements techniques and solutions using modern digitization technologies will help companies realize this ambition:

  1. Enough area for storage of a wide variety of products and SKUs.
  2. A good location that provides access to transportation of inbound and outbound deliveries
  3. Reasonable proximity to marketplace
  4. A good potential to adopt digitization technologies to automate the processes and systems with benefit from ROI

Of course, while adopting modern technologies and strategies to drive higher supply chain efficiencies benefit from ROI is a sine qua non while making investment decisions.

Benefits of D2C

Why would a company choose to deliver direct rather than through third-party distributors? The answer lies in gaining direct access to end-users that are its customers. This is especially true for large FMCG players that cry for gaining better insights into its customers’ behavior and use patterns. Companies will benefit by gaining first-hand information and data about their customers thus enabling them to better serve its customers. Data ownership, its use, and security must be respected according to local practices and regulations.

A strategy to deliver direct will demand smart warehousing and logistics solutions that may call for dramatic retooling of operational expertise – from customer service and experience to returns management, direct merchandising, direct delivery, and, of course, warehousing and logistics. Any strategy should result in financial gains as well as an edge over the competition for a business enterprise.

Implementing a D2C model calls for significant changes in the following areas of their warehousing infrastructure – Intralogistics which is the art of managing the flow of materials, products and information within the walls of a warehouse; picking; sorting; storage and retrieval. A well-designed solution combined with the efficient layout in design and technology will result in improved ROI as compared to a force-fitted solution. Hence enough ideation and planning should form an essential part of any strategy to implement digitized and automated supply chain in a Direct to Customer program.

Technology and Solutions portfolio

One of the key elements of successfully adopting this strategy is to leverage the advanced solutions that deliver efficiency, flexibility, scalability, and safety.

Some of the most automated products & solutions that a completely automated warehouse comprises:

  • Mobile robots and driverless forklifts for material movement in a Distribution Centers
  • Picking solutions using pick to light, pick by voice and pick by vision technologies
  • Dense storage of SKUs using Carton shuttle or pallet shuttle shelving systems
  • ASRS solutions using shuttle based and/or crane-based systems
  • Order Sortation using Sorting robots
  • Powerful software systems to manage all the operations like WES, WMS, and WCS

It is precisely in these areas Addverb Technologies, with its domain expertise of both technology and business processes will provide a full bouquet of products and solutions to meet the digitization program of business to modernize their warehouses and supply chains.

Adoption of technology will result in operational improvements of a warehouse, but the key differentiator is in choosing technology wisely, and here Addverb’s portfolio comes with a promise of delivering results beyond compare. By working with solution providers with a deep understanding of technology and business processes companies can realize their grand vision of D2C and gain competitive advantage.