In the blink of an eye, automation has gone from being a useful mechanism to drive efficiency and innovation, to a critical success factor for many retailers.
To understand why, you only have to look at some of the ways the labor market, customer behavior and warehouse operations have fundamentally changed.
Firstly, the current economic climate has led to arguably the most challenging labor market that many retailers will ever have experienced. Finding and retaining qualified distribution center (DC) labor has become a major headache – and not just for new operators who have historically ran highly manual operations with hundreds of FTEs. Even established players are seeing record attrition rates. Amazon recently announced plans to hire an additional 125,000 employees this year and UPS is looking to hire over 100,000 seasonal workers this year.
At the same time, pay expectations are increasing, driven in no small part by several retailer’s 2018 decision to hike their starting wage to 15$ an hour, which has had a knock-on impact on other DC operators. COVID impacts have accelerated the wage escalation: 20$ per hour for basic labor is now a reality.
Customer demands are also changing. The expectation for rapid delivery of products, and the need for companies to minimize transit time, has led to dense concentration of warehouse operators in key locations. Finding sufficient local labor has become a major obstacle, particularly in peak periods. In addition, retailers are paying significantly more $/sq ft for warehouse space in these prime locations.
Order characteristics are also trending toward smaller volumes. The days of full pallet in, full pallet out are gone for most retailers. As order quantities become smaller and smaller, processing requirements become more complex, especially as ecommerce flows are integrated into supply chains.
As ecommerce volumes increase and smaller order quantities become more prevalent (e.g. repack/each pick), order accuracy becomes more important and harder to achieve. Highly manual operations typically struggle to hit throughput and order accuracy targets simultaneously, due to the difficulty in balancing speed and accuracy. This can increase the risk of chargebacks, which are essentially customer penalties for errors and missed SLAs, or disappointed clusters and higher return rates.
Both Warehouse and Robotic Process Automation can ease the pressure on businesses
The combination of all these issues is increasing complexity across numerous business functions such as order entry, replenishment, order status updates, invoicing, payables, and general flow/goods management.
Automation can help alleviate these complexities in a multitude of ways, including:
- Minimizing the risk of human error in order processing
- Improving responsiveness for tasks that require a quick turn time, thus improving overall cycle time of goods/orders throughout a supply chain
- Reducing the risk of financial penalties for orders that are not fulfilled on time in full
- Freeing up employees’ time to focus on tasks that add value
In upcoming articles, we will look more closely at the ways automation is driving value for businesses across both processes and physical operations, also considering how organizations can take an enterprise view when assessing automation opportunities.