Smart Warehouses — A Comprehensive Guide to Get Started

Automation has always been a well-loved aspect of SciFi movies. People do enjoy envisioning futuristic technologies as part of their lives.

But, what was a futuristic concept in SciFi movies a few decades ago is a reality in our day-to-day lives. Beyond the glamour, automation is playing an important role in making our lives easier and efficient.

As much as automation grabs the attention when it comes to, say, automobiles or construction, automation in the world of warehousing isn’t thought to be as glamorous. However, supply chain experts acknowledge that automation in warehousing is truly a game-changer, with the worldwide sales of warehouse automation technologies poised to reach a market value of $22 billion by the end of 2021, according to Omdia.

What is Smart Warehousing?

Simply put, a Smart Warehouse is one where there are a set of interconnected technologies that are heavily based on automation or artificial intelligence. It is essentially an extension of ‘Industry 4.0’ for warehousing, or ‘Warehouse 4.0’.

Smart Warehousing has transitioned from being a buzzword to being a necessary step for supply chains, due to an increased demand for priority shipping and made-to-order products, which can be attributed to the rise of eCommerce.

Supply Chains need to be prepared to cater to this large and ever-growing consumer demand. This demand can only be catered to if the supply chain processes, or in this case, warehousing processes are advanced enough to match the efficiency required.

An ideal Smart Warehouse has end-to-end ‘smart’ automation, right from a sophisticated Smart Warehouse Management System (WMS) to Automated Truck Loading Systems (ATLS). This saves a lot of time and money and can increase the accuracy of operations throughout the whole lifecycle. While WMS seems like an obvious starting point, many warehouses don’t move beyond a smart WMS.

It is not just limited to increased operational efficiency. Even the decision-making can be handed over to automated systems. For example, whenever a batch of inventory is dispatched into a warehouse, the WMS can make a decision as to where the pallet should be placed, depending on the category of inventory or any other criteria set by the enterprise.

What are the benefits of Smart Warehousing?

• Increased Labor Efficiency:

Tasks such as inventory scans, picking inventory, updating WMS data, etc. are repetitive in nature but are critical enough to be done frequently. These tasks are easy to automate since there is no creative thinking of humans required for them. Artificial Intelligence (AI) powered technologies can be instrumental in automating these tasks. This can give warehouses the flexibility to shift their human resources towards tasks that require creative thinking, thus ensuring optimum management of labor.

Instead of increasing the amount of personnel, warehouses can utilize those salaries to hire/retain staff for more important tasks that require human intelligence.

• Reduced Costs:

Labor costs are a huge cause of burning pockets of supply chains, with them making up two-thirds of the operating costs (source). These costs reach astronomical levels for bigger and more dynamic warehouses and can have a compounding effect on warehouses that are experiencing growth.

During a slowdown, the labor salaries can be tremendously saved since warehouses don’t need to pay for unproductive hours, and instead, have technologies do the work as and when required.

The costs of managing labor aren’t just about wages. Warehouses can end up spending on fighting lawsuits from workers or unions for a variety of reasons, thus ending up draining precious resources.

While automation may seem like a lot of upfront investment, a deep-dive into the ROI or payback periods they provide paints a different picture. For example, autonomous inventory drones generally deliver a payback period of just less than a year for warehouses in developed economies such as the USA, Canada, UK, Germany, etc.

The reduced costs can eventually give companies the flexibility to reduce their product prices or make investments towards their growth.

Also, an extension to our point about reduced legal expenses, warehouses can save their costs in other intangible ways. For example, if drones do the inventory scans, warehouse workers don’t need to scan difficult locations, thus increasing overall worker safety.

Adding up the direct ROI benefit as well as several intangible benefits, supply chain managers can imagine the enormous costs saved in the medium and long term.

• Time Efficiency:

Whether it is the Supply Chain industry or otherwise, a commonly acknowledged fact about automation is that it is known to save a lot of precious time required to do certain tasks.

Warehousing is no different. In fact, the time-saving factor is augmented when one considers the fact that there is not just one, but several repetitive tasks involved in warehousing operations. Right from unloading goods off the truck to scanning the inventory, almost all the tasks are repetitive and mundane that don’t require human intelligence.

Such tasks can and should be automated. Smarter solutions can carry out the same tasks more quickly and with added benefits. An ATLS can load multiple heavy goods inside a truck at a quick rate, as compared to a human loading one or two items at a time.

Saving a lot of man-hours has a compounding effect. The time saved can be put to use for productive tasks, which can have a positive impact on overall customer satisfaction.

• Data-driven Decision Making:

Data is the new oil only if it is managed correctly and put to optimum use. Else, it can well turn into a chaotic mess with no clear output.

In a smart warehouse, the end-to-end collection and segregation of data are done effectively. This means that relevant data is collected from the relevant source, and has a clear actionable intent. Let’s check three examples below -

• Maersk using a Remote Container Management (RCM) system to check the status of temperature, location, and power supply for their containers [source].
• UPS found that trucks turning left was costing them a lot of money, so now their drivers have minimized or eliminated taking left turns. Left turns now constitute only 10% of their routes (yes, you read that right!) [source]
• DB Schenker has deployed Decision Support Tool to simulate daily scheduling and optimize overall operations. [source]
• Numerous Add-ons:

When it comes to ‘smarter’ alternatives, it is not just about doing the same thing efficiently. It is also the packaged benefits that can be experienced by warehouses.

Automated technologies come with many integrations or add-ons that deliver more than what is required. For example, autonomous inventory drones not just scan the inventory, but can furnish image/video proofs of the same, which can either not be done by humans or would consume even more already-drained resources such as time and money. Another example could be Automated Guided Vehicles (AGVs) monitoring the condition or health of the inventory while also handling the inventory.

This is why the ‘Smart’ in ‘Smart Warehousing’ is not a buzzword. It is indeed a smarter way to do essential work.

• Competitive Edge:

This is more relevant to Third Party Logistics (3PLs) since warehousing makes up for their core business. But this can be extended to retailers and manufacturers as well.

Brands or companies willing to invest in sophisticated technologies are well-perceived among their existing customers as well as potential customers. It positions them as an organization that is open to innovation and can embrace technologies for the benefit of their customers.

In 2019, DHL looked towards robotics to boost their productivity by 25%. Now, picture an eCommerce company looking to hire the services of a 3PL for their logistics requirements. While making a choice between different companies, reading this news about DHL is likely to make the stakeholders at the said eCommerce company lean towards DHL. And this is just one bit of news about one 3PL. One can imagine how the leading 3PLs are racing towards picturing themselves as leaders of not just Supply Chain, but also of Supply Chain Innovation.

It is imperative that companies transition towards smart warehousing as early as possible because it is a process that bears results in the medium to long term, and delaying the necessity of competitive edge means basically accelerating the downfall.

Challenges Towards Embracing Smart Warehouses

Like every other technology, smart warehouses do come with their own set of challenges. The challenges are further augmented when supply chains look to scale their warehousing operations across locations. Few challenges that we have observed are -

• High costs: Despite the technologies of smart warehouses proving to deliver good ROIs, the higher implementation cost, in the beginning, turns away many supply chain managers. Due to the sheer scale and sophistication of these technologies, one cannot deny that they do demand high upfront investment.
• Operational changes: While some parts of a smart warehouse, such as an advanced WMS or inventory drones, do not require warehouses to change their configuration or modus operandi, many technologies do require operational changes in the warehouse. Thus the transition from a traditional warehouse to a smart warehouse can be time-consuming, especially if the warehouse managers aren’t keen on changing their present operations or layout.
• Downtimes: This can easily qualify as one of the biggest challenges since this can result in a significant loss of time and money if not solved in a timely manner. If any component of the smart warehouse experiences downtime, it can affect the workflow of the operations. This could further be a problem if all the technologies inside a warehouse are integrated with each other, thus resulting in a snowball effect.

How Can Warehousing Leaders Get Started?

The challenges mentioned above should not deter warehousing leaders from embracing smart warehouses. The pros outweigh the cons by a huge margin.

The first and foremost point that should be looked into is the ROI of this transition. Smart warehousing may not make sense for extremely small warehouses. Or if the warehouse is unorganized to the point where automation cannot function properly. If the ROI and order of the warehouse tick off, then that is a good start.

Secondly, warehouses should work with companies that have reliable technologies with minimum to no downtime. Warehouses are one of the most dynamic operational centers. Downtimes and lack of support can spell bad news for supply chains. Hence, even if it costs a bit more, the technologies implemented should be among the best. After all, the transition towards a smart warehouse is a big step that doesn’t happen frequently.

Lastly, it is critical to get started. As obvious as it may sound, the small set of challenges deter supply chains from adopting smart warehouses. But the delay will cost even more eventually. Even if it is starting with a smart WMS, it is a good start. Or with something that gives a faster payback, such as inventory drones delivering payback periods of less than a year. This ensures that the start is low risk, and it helps in better evaluation of other technologies.

To know more about some prominent technologies that constitute a smart warehouse, visit here.

FlytWare, developed by FlytBase Inc., is playing a major role in smart warehousing, with our fleet of autonomous inventory drones helping warehouses scan their inventory in an efficient way. To know more about us, visit us at https://flytware.com/