Distribution is no longer a backwater of the economy, due in large part to the upheavals brought on by ecommerce. Today’s DCs and fulfillment centers are a major driver of employment growth and a highly visible proving ground for autonomous robots and other next-generation technologies. But there is a technology gap between gleaming new automated facilities and tens of thousands of existing warehouses and distribution centers that pre-date the warehouse building boom of the past 5-10 years. For companies across industries, transforming existing DCs and narrowing this technology gap is key to competitive advantage in a changing economy. Many companies are achieving this transformation by adopting modular, elastic DC technologies – including AI and robotics – that provide continuous warehouse optimization without replacing their current monolithic and static warehouse systems.
Distribution has changed more in the past five years than it did over the previous 20. Amazon and other ecommerce innovators have been the leading agents of disruption. Amazon’s singular focus on ever-faster delivery at all costs has impacted virtually every corner of the distribution sector. Any company shipping physical products today – whether to consumers or to other businesses – needs to meet higher service expectations, including faster order turnaround in the DC.
For existing DCs, ecommerce has also added complexity to their operations. In addition to large distribution orders, many retail and business-to-business facilities are shipping rising volumes of direct-to-consumer orders. At the same time, the building boom in new ecommerce fulfillment centers, including Amazon’s relentless investment in its network, has added pressure on local labor markets where the majority of DCs operate.
The upshot is that many DC operators are faced with increased operational complexity, new service requirements, and heightened labor demand. These changes pose a direct challenge to their traditional operating priorities and technology strategies.
In the past, a DC’s customer requirements, processes, products and other operating parameters evolved, but slowly. The relatively stable environment led to a focus on continuous cost reduction through incremental process improvement. Likewise, most DCs invested in WMS, automation, and infrastructure that were scaled to support predictable peak volumes. Those systems and processes were designed to serve the current business model for 10 years or more. DCs were not built for change. But change today is the norm.
Modular Vs. Monolithic Warehouse Systems
Supply chain and distribution leaders are already adopting new approaches to DC operations and technology to meet the challenges. Instead of once-a-generation WMS and automation system upgrades, they are investing in adaptive technologies and systems. These new technologies are helping operations and engineering teams move beyond continuous improvement to continuous warehouse optimization.
The most high-profile example of this is the growing adoption of autonomous mobile robotics (so-called AMRs) and modular micro-fulfillment systems. While many facilities are also investing in traditional automation, investments in AMRs and other modular systems are growing quickly as a less capital-intensive alternative to large-scale fixed automation.
Among other advantages, modular solutions permit incremental automation and an evolutionary approach (crawl, walk, run), rather than an all-or-nothing proposition. DCs can initially deploy a handful of robots as transporters, or add automated lift trucks for a proportion of inbound full pallet putaway without betting their business on end-to-end automation.
Along the same lines, many DC operators are adding advanced optimization and execution software both to adapt to new process and market demands, and to achieve step-changes in efficiency, throughput and labor productivity. Like modular automation systems, these software solutions incorporate various forms of Artificial Intelligence and Machine Learning to enable more flexibility than monolithic warehouse management systems of the past.
The new software solutions can coexist with WMS and other software and automation systems. They provide intelligence to address new operational challenges without an all-encompassing system replacement, and they are designed to continuously adapt to change. Optimization software can also be a “soft” alternative to investing in more steel (i.e., new automation systems and hardware).
Continuous Warehouse Optimization Opportunities
Some of the areas where modular execution and optimization software is having the biggest immediate impact in the DC are in work planning and workflow balancing; process optimization; and predictive resource management, such as slotting and workforce planning.
Work release and order streaming. Many multi-channel DCs are hamstrung by wave-based work release rules embedded in current WMS and automation systems that are designed for wholesale or distribution orders. Execution and optimization software allow DCs to continuously release work in a streaming, waveless fashion to accommodate ecommerce orders alongside traditional replenishment business. Read more about this hybrid approach here.
Automated workload balancing. Even some automated DCs require a fair amount of manual intervention by experienced managers to coordinate work release and balance workflow across manual and automated activities. Software can automate this decision-making using real-time IoT and operational data, effectively weaving together islands of automation and manual work. AI-based tools add a layer of sophistication to orchestrate and dynamically allocate workers and work as needed to avoid bottlenecks.
Optimizing processes across order types. Many DCs are filling ecommerce orders using processes initially designed for larger wholesale or distribution orders. Most legacy picking systems don’t provide a means to create different processes and optimization rules for different order types. Newer execution software can support alternative picking processes for different order profiles, dynamically optimize picking assignments, and adapt as new requirements emerge. One practical example of dynamic is AI-based batching and pick path optimization to reduce travel.
Inventory and Labor Planning. Inventory slotting and labor management systems are both traditionally based on static models that are highly effective and accurate, but which require significant effort to maintain and adapt to changes in the facility or business. Most mid-sized and smaller DCs never had the engineering resources to implement and maintain these highly engineered systems. Machine Learning-based software address this by creating soft models of the DC that sense and adapt to changes. The software generates predictive insights that improve slotting and labor planning, continuously optimizing a changing DC environment.
The Transformation Imperative
Ecommerce has thrust DCs into the limelight and elevated distribution as a source of potential competitive advantage, or disadvantage. Many operators of established facilities face technological and operational hurdles to meeting the challenges of this new world. Successful companies are taking a new approach to DC operations and technology. They are transforming their warehouses and DCs with modular automation and software solutions that support continuous optimization amid constant change.
Justin Ritter, Vice President of Operations and Customer Success, Lucas Systems. Justin leads the solution design, project engineering, delivery and support teams at Lucas Systems. He has overall responsibility for the successful implementation of Lucas warehouse optimization solutions at warehouses and distribution centers worldwide. Earlier in his career he managed large-scale supply chain projects for manufacturing and distribution organizations in food and beverage, retail, consumer goods, and automotive industries. Justin is a certified Lean Six Sigma Black Belt, and he holds an MBA from the Katz Graduate School of Business at the University of Pittsburgh.
Dan Keller, Senior Consultant, Lucas Systems. Dan has more than 30 years of experience designing and delivering innovative software solutions for warehouses and distribution centers. He was a leading evangelist for voice technology in the late 1990s, and he has been involved in dozens of industry-first implementations of voice and other technologies in industries spanning food and beverage, retail, healthcare, industrial supply, and manufacturing. During his 20-plus years at Lucas he has held roles in sales, marketing, solutions design and delivery. He is also a frequent speaker at supply chain and logistics conferences, including the Warehousing Education and Research Council, the Wine and Spirits Wholesaler’s Association, the Foodservice Distribution Conference, the Healthcare Distributors Management Association, and others.