2018 Technology Roundtable: Join the race to transform

Capacity is tight, rates are going up, global trade has never been more complex and the double-digit growth of e-commerce is not slowing down any time soon—and now logistics managers are joining the race to transform their operations just to keep pace.

And while Logistics Management has always advocated for the adoption of new technology and processes to streamline and improve operations, we’ve done so in a practical manner, using fundamentals to help explain the potential. It’s one thing to sit in conference sessions and jot down theory and all of the new acronyms, but it’s quite another to get the straight story on how the much-bandied terms will actually be applied in our operations—or if they should be at all.

This month we’re joined by four of our top technology analyst sources to help our readers get a better handle on the next phase of the digital transformation.

• Ken Cottrill, co-founder and research principal at Chain Business Insights and global communications consultant at the MIT Center for Transportation & Logistics, shares the basics of blockchain;
• Joe Vernon, senior manager of North America supply chain analytics for Capgemini examines shipment visibility and last-mile management;
• Norm Saenz, managing director at supply chain consultancy St. Onge Co., dispels warehouse/DC tech myths and offers realistic solutions;
• and Dwight Klappich, research vice president at Gartner, puts the focus on mobile autonomous robotics in logistics.

Register today for the 5/17 2018 Technology Roundtable Webcast

Blockchain: Just the basics

LM: Blockchain is the new hot concept that logistics professionals are working to better understand. So, let’s start at the beginning: What is blockchain?

Ken Cottrill: Blockchain is a form of distributed ledger technology. It might be better for logistics professionals to think of blockchain in this way: The idea of a ledger of transactions is as old as paper. A modern-day distributed ledger is made up of digital entries. Copies of this digital ledger are distributed to every authorized participant in a community of users.

Importantly, updates to the ledger are not issued to every user—or node—by a central authority, as records are independently updated at each node. In other words, every single node maintains its own identical copy of the shared ledger. Moreover, each entry is verified, and once it’s recorded it can’t be changed.

This is made possible by a number of clever ideas. For example, the distributed ledger’s consensus mechanism ensures that the user network agrees that each entry is valid. Cryptography is used to secure the ledger’s contents, and each “block” of entries that makes up these records is time stamped and chained to the previous block of entries by a digital fingerprint—hence the term blockchain. This arrangement makes it more difficult for the ledger’s contents to be tampered with.

LM: Can you offer a logistics management example?

Cottrill: An international trade transaction is a useful example. Logistics professionals are well aware that shipping goods internationally via ocean transportation involves many documents and milestones. A blockchain can streamline the process.

Each milestone, from when the goods are packed into a container at the origin to when the goods are received by the customer in another country, is recorded on the blockchain. This means that every node (the community of shippers, intermediaries, carriers, ports and government agencies involved) is updated at the same time when a milestone has been completed. Users don’t have to wait to be informed by another party.

Also, the blockchain’s security and providence features assure the community that the shipment really was completed as data suggests. This information is conveyed in digital form, not via unwieldy, fraud-prone documentation. For example, an electronic sensor might confirm that the temperature of the goods stayed within range throughout the entire trip, and this data is recorded and made available to all relevant users via the distributed ledger.

LM: How should companies start?

Cottrill: Logistics professionals should approach the possible adoption of blockchain as they would when assessing any innovation. First, decide what you want to accomplish. This is essential because a distributed ledger is far from a universal database solution. It might be that the centralized database you already use is perfectly adequate for your needs.

Many companies create cross-functional teams to carry out this review. Create a short list of vendors and subject each one to the due diligence process that you are already familiar with. It is getting easier. For example, offerings such as blockchain-as-a-service platforms have emerged that enable companies to explore the technology and build basic systems.

Visibility: Are we there yet?

LM: As logistics mangers continue to transform digitally, visibility is top of mind. How do you define visibility in the context of logistics management?

Joe Vernon: There are still holes along the full length of the supply chain that need to be filled to achieve complete visibility. This can be accomplished through a combination of process, tools and alliances. The motivation for this end-to-end view has emerged from a desire to have better command and control of all the factors that affect bringing a product to the end consumer.

Visibility then takes on a new significance when it’s tied to strategy and competitiveness. Visibility at its core is a quantitative awareness of position, time, condition, quantity and other attributes that can inform and lead to a management decision. Now, in the age of predictive analytics and machine learning, artificial intelligence (AI) tools can mix visibility with other data streams such as weather, traffic and natural disasters.

LM: What are the most impressive software/app advances logistics managers should be aware of?

Vernon: Predictive analytics, machine learning and the Internet of Things (IoT) are driving significant advances. Constructs like blockchain provide a trusted framework to apply these capabilities. For example, IoT and sensors are now being used by grocers to enhance the track and trace of products from source to consumer.

AI helps scan for exceptions in temperature and location, as well as other risks, while blockchain provides a trusted network for computing and payment to link all the physical and financial activities and remove repetitive tasks. The benefit of increased visibility and awareness through these tools is an intelligent supply chain fabric that is aware, responsive and automated. It relieves supply chain practitioners of repetitive tasks, and lets them focus on the end goal of getting the right product to the right place at the right time.

LM: Where does the market stand on software and apps for the last mile?

Vernon: Software companies have aggressively moved into this space, as have contract carriers and to some extent emerging delivery models like Uber. However, in many instances, the last mile is still plagued by physical and cumulative errors. When you run a relay, the last runner inherits any delays and problems from the previous runner. In the supply chain, the last runner doesn’t get to sail down the highway, but instead snakes his way through city traffic, tightly spaced neighborhoods and unplowed streets. So, there’s room for innovation in alerting customers and providing a better end-user experience.

LM: How do you hope that visibility evolves? And, what is your advice to logistics managers who want to be part of this evolution process?

Vernon: The new tools and technology stack doesn’t act like an 18-month ERP implementation. It’s quick, iterative and changeable. It’s also not a rip and replace. IoT, AI and blockchain overlay your existing IT structure and process. You can use the Cloud as your platform to experiment, enjoying the pay-as-you-go model that makes fast failing not as cost prohibitive. Perform short, instructive proof of concepts around new technologies. Partner with vendors and service integrators to make the pilots crisp and cost effective, and make the technology prove itself against real operational issues and data.

Warehouse/DC: Tactical automated solutions

LM: From your unique position inside our nation’s WDC operations, what are some of the hottest things you’re seeing that help facilities play a larger role in the digital transformation?

Norm Saenz: Although companies operating warehouses have spent the last few years focusing on low-investment improvements, for many, now is the time to start spending on tactical automated solutions. But, before we get caught up with the big names getting attention in the marketplace and go too crazy assuming the digital warehouse has arrived for everyone, it should be noted that paper-based warehouse operations will continue to outnumber more digital ones.

Keep in mind that there are more than 10,000 warehouses out there ranging from small to large, and millions of warehouse square footage in the industrial industry. That said, we have been seeing many of our clients forge into becoming more digital.

For example, many companies dealing with e-commerce and other business growth challenges have started investing in digital and automated solutions. At St. Onge, most of our projects come from these types of companies, ready and eager to evaluate the multiple technology-related solutions available in today’s emerging digital environment.

These projects include the basic steps of adding an advanced warehouse management system (WMS), barcoding labels and radio frequency (RF), as well as the more complex steps of adding automated materials handling systems such as conveyor and sortation systems, light-guided put-walls, vertical lift modules, automated storage and retrieval systems (AS/RS), self-guided lift trucks, and AGVs.

LM: Are there any tried and true pieces of equipment, software or automation that continue to be overlooked as a solution to
increased fulfillment pressures?

Saenz: Implementing basic, fundamental improvements such as advanced WMS capabilities, barcoding locations, and RF/scanning is still a major first step for many warehouse operations—I can’t stress that enough. The next step for many is making sure to utilize the right mix of storage and handling equipment within the warehouse. Simply using the proper pallet rack/shelving/case flow, facility layout, and lift trucks can make massive improvements for many operations.

For example, a typical transition for companies adding an e-commerce business is to add a forward pick area for processing orders, versus walking the entire warehouse. This pick area may include shelving and carton flow rack and incorporate pick-to-light or voice technology. But, the biggest push we see, and possibly the most overlooked e-commerce fulfillment technology, is the use of put-walls. These systems integrate with the pick area that diverts totes filled with products for put-to-order processing and packaging. Because most warehouses operate with a legacy ERP, or best-of-breed WMS, product slotting is t most overlooked software.

LM: As labor availability becomes tighter and costs increase, demand for technology will increase. How do you see the application of more automation and robotics inside our operations in response to our labor crisis?

Saenz: The labor crisis is real. One indicator that the labor force is tightening is the increased use of a temporary labor force, even during non-peak periods and with higher turnover rates.

Why don’t these temporary workers want to obtain or retain full-time positions? I’m sure there are many reasons, but the fact is that companies can guard against the labor shortage by becoming more efficient and thus have lower staffing requirements as a result. It may seem that a temporary workforce is a quick fix to provide required labor, but for many, the necessary training time and efficiencies simply outweigh the benefits.

LM: What practical advice do you have for warehouse/DC managers helping their operations undertake the digital transformation?

Saenz: Making the digital transformation starts with accurate data inputs. For many, collecting and maintaining this information is the immediate next step to enabling the digital-era. It’s important to keep in mind that simply slapping a digital solution onto a broken process leads to no improvements. Logistics professionals should work on improving their process and methods, facility layout and material flow, and basic storage and handling equipment. When these items are efficiently designed, operators are prepared to apply a digital transformation to their operations and gain the expected results.

Autonomous mobile robotics: The market is real

LM: Based on your research and client interaction, how would you define the current state of the autonomous mobile robotics (AMR) market?

Dwight Klappich: AMR is an evolution of automated guided vehicles (AGVs), which have been around for nearly 50 years. In fact before the industry coalesced around the term AMR, Gartner referred to these as Smart AGVs. The key is that these add intelligence, guidance and sensory awareness to historically “dumb” AGVs, allowing them to operate independently and around humans. At the most basic level, AMRs address the historic limitations of traditional AGVs that were only traveling a fixed path, lacked situational awareness and intelligence. Addressing these limitations makes AMRs better suited to complex warehouses.

We are in the early stages, but this market is real. There are companies using AMRs in production, many more companies in pilots, and because of the value proposition, many companies are investigating their application. For example, three years ago we had almost no client inquires around robotics in logistic. Today, we have nearly a call a day on the topic.

LM: What are the biggest drivers for the adoption of AMRs?

Klappich: Over the last year or so Gartner has observed an interesting paradigm shift in what is motivating people to invest in warehouse technology. Where historically labor cost was the principle driver, we now find customers more focused on labor availability—companies are struggling to get enough people.

Use of material handling automation in warehousing is not new as we’ve been automating highly complex facilities for nearly 40 years now. Conventional “bolt-it-to-the floor” automation such as conveyor, sortation or automated storage and retrieval, is not going away. However, the high cost and time to design, deploy and maintain it coupled with low adaptability has and will continue to limit where it fits.

Keep in mind, conventional automation was inflexible and difficult and costly to change. Add to this high-up front capital costs and fairly long—five to seven year—payback periods. Because of this, companies would struggle to find the right balance between lower operating costs over time with high up-front capital costs and lost agility. AMRs address both.

LM: By 2021, one in 10 warehouse workers in established economies will be replaced by AMRs. Aren’t we supplementing the human work force, allowing them to focus on tasks humans do well to increase efficiency?

Klappich: I often tell customers that the robotics message is either boom or doom. On the boom side there’s no question that this market is going to grow and that robots offer a strong value proposition both in logistics as well as many other places. The doom side is that we’re going to displace workers with robots and unemployment will skyrocket.

As an optimist I lean toward the boom. As I mentioned above, we’ve seen a paradigm shift from a myopic focus on labor cost reduction to customers expressing more concerns about labor availability. This is driving increased interest in warehouse and labor management applications as well as both robotics and conventional automation. Companies are struggling to find enough people as it is, so it’s not about cutting the work force, but finding ways to supplement the existing work force.

LM: What advice do you have for logistics professionals considering putting AMRs in their operation?

Klappich: We find leading edge companies rightfully following a crawl, walk, run approach. Most are in crawl mode today, educating themselves on the art of the possible. They are going to shows such as Modex to see what’s available, talking to vendors, consultants and early adopters. Next, the early adopters have moved onto walking and are conducting pilots with one or more AMRs to see what works, where they could best leverage these and then how they would actually use them in operations.

We’ve not seen many companies get to running, or a large-scale roll out, but we expect more over the next few years. The nice thing about AMRs is that they are fairly low cost, and it’s much easier to find $1,000 per month for a robot to test out than having to bet $60 million dollars up front on a large scale conventional automation project.