In today’s environment where disruption is occurring at an accelerated pace across all industries, the pressure is on companies to continually innovate to stay competitive. For many companies, this means adopting new technologies that deliver efficiencies and help meet changing and growing customer needs and expectations.
Unfortunately, many companies learn the hard way that when it comes to supply chain technology, it is not “one size fits all” or “technology for technology’s sake.” Stalled projects, unrealized benefits, disrupted operations, and customer and employee frustration point to the importance of selecting the right kind of emerging technology based on your operating profile and future outlook of your business.
By far, the biggest driver of disruption for companies is e-commerce and the extraordinarily high service expectations it is creating. In fact, a recent report from DHL Supply Chain, “The E-Commerce Supply Chain: Overcoming Growing Pains,” found that pressure to fulfill customer expectations continues to challenge businesses building out e-commerce offerings and the new supply chains they need. Customers expect a great, painless e-commerce purchase experience with an ever-shortening delivery time. We are noticing profile changes in other market verticals as well, as order sizes decrease and service expectations increase.
In response, companies are looking to constantly and quickly evolve their logistics strategies, and introducing and integrating new technologies is a big part of that effort. Technology is now a part of any conversation about expanding or enhancing the supply chain.
At DHL Supply Chain, when we work with clients, one of the first things we do is put together an assessment that looks at their unique business profile. This profile helps drive and inform a number of strategic design decisions, including ones regarding the use of conventional equipment, mechanization or new technologies.
The business profile looks at a number of factors, including storage requirements, the quantity of inventory on-hand, typical order sizes, size and type of items, growth projects, scale of operation, etc.
Having this type of information readily available is a valuable asset and good best practice for any supply chain manager looking to make an informed technology decision. With this information as a guide, there are five questions supply chain managers should ask when considering and evaluating the integration of new technologies into the supply chain.
1. IS THE TECHNOLOGY A FIT WITH YOUR BUSINESS PROFILE?
This question gets to the heart of one of the main issues often encountered in warehouses—the technology is not a good fit for the application or operation. For a successful integration that delivers on measurable, obtainable goals, the technology needs to be compatible with your business profile.
Evaluating the technology within the context of your profile will help you determine the potential value to your business. Further simulation will help you determine the exact type of technology that will work best.
2. WHAT ARE THE KEY DRIVERS: ECONOMICS, SERVICE LEVEL, OR BOTH?
Automation projects do not always have the best return on investment. However, sometimes peak volume and service level requirements require a higher degree of automation to ensure the business can live up to its commitments.
The economic drivers also change from location to location. The first multi-story urban warehouses are now starting to be built in North America. In this case, utilization is a big factor as real estate costs drive vertical vs. horizontal expansion.
3. IS YOUR BUSINESS STABLE OR DO YOU NEED FLEXIBILITY?
For many companies—especially those involved in e-commerce—the question has become, “How much flexibility do we need?” How agile is a technology and will it offer flexibility in terms of company growth and potential product growth plans?
As you grow your supply chain network, you will need the right type of technology that allows you to transform your mixing center into an omni-channel facility (for example), or expand with additional regional locations. Agile technologies that provide flexibility are especially important if you are reengineering your production and supply network to move away from super long-distance supply chains to more “globally localized” supply chains.
4. DO YOU HAVE CLEARLY DEFINED PROCESSES THAT LEND THEMSELVES TO AUTOMATION?
A broken process could quickly derail an automation project. For example, some operations receive the same items in varying pack sizes. Thus a lot of manual processing may be required. Automation doesn’t handle surprises well so it is best to get the processes ironed out prior to implementing an overly technical solution.
If you handle product in larger bulk quantity units, there are also less options for automation and it may make more sense from a cost perspective to continue to move the units conventionally. Conversely, certain profiles have more automation options available. For instance, in smaller unit picking applications, automation may offer more options. Asking this question will also help you determine if existing processes need to be reengineered to ensure a successful technology implementation.
5. WHAT IMPACT WILL THE TECHNOLOGY HAVE ON YOUR WORKFORCE, BOTH DIRECT AND MANAGERIAL?
Any change to your operation will have an effect on your workforce. The key is to identify what that effect might be and proactively work to minimize or eliminate any negative impacts while strengthening positive ones. Workers often initially view new technology as a threat to job security, as in the case of automation. This can be addressed by clearly communicating how the technology will benefit them.
New technology also often requires new processes or training to be developed. It can even impact performance metrics. For instance, new order-picking technology may mean you will need to reevaluate and adjust picking quotas, short-term and long-term. In many cases, integrating new technology into your operations can help with recruiting workers who want to work around cutting edge technologies, such as collaborative robots and smart glasses.
Advanced technologies and platforms are transforming the way products are moved and tracked across the globe today. As supply chain managers look to stay competitive and meet increasing customer demands, technology can often offer an answer. Developing a business profile and using it to ask these five questions can help ensure you integrate the right technology that will allow you to continue to profitably grow your business and continue to meet and exceed customer expectations.
Adrian Kumar is vice president, solutions design, with DHL Supply Chain, North America, part of the Deutsche Post DHL Group and a third-party logistics service provider.