Here’s a quick question.
If you see a crowded pub, a bustling gold mine and a stolid-looking warehouse, which one would you pick as having the most exciting inner life? Usually, the warehouse would be the last pick. After all, what can a walled-in space lined with racks have that is interesting?
Warehouses are like the temples of the new religion of online shopping. People are furiously buying things and praying for them to be delivered as fast as possible. Peace on earth depends on that lampshade being fitted in 48 hours or that fitness band handed over with birthday wishes in 24 hours. If an e-tailer does not deliver soon enough, the buyer will switch to another e-tailer in seconds. An efficient warehouse — which can stock and retrieve quickly, with minimal errors, can foresee imbalances in demand-supply, and allows no bottleneck to stand in the way of customer satisfaction —makes all the difference. A smart warehouse is like a healthy synapse of an intelligent supply chain.
And supply chains cannot afford to muddle around. “If delivery takes three to five days, drop rates rise phenomenally,” says Akash Gupta, co-founder and CTO of GreyOrange, a multi-award-winning warehouse automation start-up headquartered in Atlanta, Georgia. Drop rates are a measure of how many customers ‘drop’ the product, or do not buy the product, after moving it into the cart. “But, if the product rates can be shipped in one or two days, the check-out rates or conversion rates are much, much higher,” Gupta adds.
Besides this ‘immediate commerce’ mindset, which is how GreyOrange phrases it, there is the multiplication of stock keeping units (SKUs) that fulfillment centres have to deal with. Gupta gives the example of a mobile store owner who may have had five SKUs in the past which could have been handled with one pallet (a unit of measurement based on the flat structures on which goods can be placed and then forklifted to their respective racks). But now, with an explosion of variety in each product, there may be 25 SKUs that need to be handled. The shop owner needs to get a good number of each model, and the person handling the backend operations such as warehousing has to handle a more complex operation. Similarly, in the fashion space, brands are having eight to ten seasons when compared to the earlier three to four.
“Supply chain services have to handle a two-way pull,” says Gupta. On one side, you have the manufacturer demanding a much more dynamic operation that can supply an increasingly varied product portfolio, and on the other, you have the customer who has little tolerance for delays or mix-ups. Therefore, warehouse automation is happening mostly in retail, general merchandising and grocery, according to him.
Bhaskar Mandal, head-digital industries at Siemens India, which equips small and big companies to get Industry 4.0-ready, too, says that these are challenging times for the intralogistics sector. “Growing inventory turnover rates with ever-shorter storage periods, small order quantities with fast delivery times, increasing return rates, and increased delivery quantities on short notice all require flexible, scalable intralogistics processes with maximum reliability and availability,” he says. The technology major equips autonomous guided systems (such as robots that carry goods across the warehouse floor), conveyors and storage systems with integrated automation.
Warehouses are being automated down to the last detail, so that they need minimal human intervention. Inside such warehouses, robots move with fluid coordination, without stepping on each other’s wheels, placing goods on racks, and picking them for delivery to the collection points. “Technology wise, there are three aspects to warehouse management—mobility, perception and manipulation. Mobility is point-to-point movement, perception is for recognising an item and deciding where it is to be placed, and manipulation is to pick it up and place it in a box,” says Gupta.
To monitor and run these new breeds of warehouses, companies are adopting digital-twin technology, which is a meeting point for all of these technologies.
Digital-twin technology was pioneered by Michael Grieves two decades ago. Essentially, it is to create a digital replica of any physical asset (such as cars, factories, warehouses or even entire supply chains). This is created by collecting real-time data from an asset through IoT-enabled devices such as sensors and feeding it back to a dynamic and responsive ‘twin’. The twin can thus reflect the design and real-time state of the physical asset, can be tested-on to improve the functioning of the physical asset, and can be used to predict the maintenance needs of the physical asset.
“All major organisations in India would have had at least one digital journey running in the market,” says PS Easwaran, partner and leader, supply chain, Deloitte India. While the use of this technology is more common in manufacturing, as the data is easier to collect and control, Easwaran says supply chain process is where it can make a deeper impact. “The whole intent of looking at digital twin is also to address the implications of variability. Therefore, the technology becomes extremely relevant to the distribution side,” he says.
It is still an emerging technology, says Prerit Mishra, head of data science, DHL. “There is still some distance to go before we build a fully-realised digital twin, he says, “That said, DHL has put in a considerable amount of work in the use of digital twin in digital warehousing, which we have found to be useful for training and for facilitating operational planning,” he adds.
DHL Supply Chain, which provides contract logistics solutions globally, set up its first smart warehouse that uses the digital-twin technology in 2019, for its client Tetra Pak in Singapore. From the DHL control tower, the flow of goods can be monitored to ensure that goods received are shelved in 30 minutes and goods meant for delivery are made ready for shipment within 95 minutes. Mishra says, “All aspects of supply chain logistics could benefit from digital twin technology. For example, before building a warehouse, companies can collect information relating to space and materials and run tests with digital twins to better design infrastructure. For an operational warehouse, companies can also enhance productivity with real-time data by monitoring personnel and automated systems and identifying operational issues. For last-mile deliveries, a digital twin of a road network, containing information of traffic situation, road layout, and construction and data, such as demand patterns and travel times, will help in the planning of distribution routes and inventory storage locations.” He says that this technology also helps develop autonomous delivery technologies, which are already being tested with DHL customers.
Transforming supply chain logistics using this technology is still a long way away in India. “Having a reliable, fast and uniform communications infrastructure is a pre-requisite for building a functioning digital twin simulation,” says DHL’s Mishra, “The rollout of 5G in India will definitely go a long way in enabling transmission of data at real-time and high speeds, however network gaps are still an issue. If there are data gaps, the simulated outputs will simply not be accurate, which defeats the entire point of implementing such a technology.” But it is definitely a promising technology for the country’s fast-evolving warehousing function, since it is a more controlled environment.
Bots take over
An industry expert quickly encapsulates how warehousing has changed over the past few years in India. Before the Goods and Services Tax (GST) rollout, companies had warehouses in various states to get tax benefits. Then, people would simply take some space, line them with shelves and start stacking pallets. “Space utilisation was very bad,” he says, “Many people were operating inside the warehouse, much time was taken to pick the material, sort and segregate the material, and finally load the material.”
The process was beginning to be transformed in the US and European countries, using automated storage and retrieval system (ASRS) and robotic systems, but these were not affordable solutions in India with its many small and inefficiently stacked warehouses. But, after the GST rollout, the scenario changed, and companies now serve the entire country with 20 to 30 bigger warehouses. They now demand warehouses that can process large quantities, with the smallest footprint, minimal manpower and complete visibility. By visibility, they mean information on the number of SKUs that are being stored or how much will be needed to replenish the stock and having this information real-time. Earlier, this information would be logged manually, and that would cause a lag of a few hours, which delayed delivery time.
“Warehouse and logistics automation is necessary for better efficiency and productivity, with 100% visibility of inventories,” says Siemens’ Mandal, adding, “It reduces touch-points and the total cost of ownership (TCO), and increases profitability.” And, current automation solutions are tailored for the VUCA world.
“Web-based and smart app-based visualisations are making warehouse operations easy and on-the-go,” he says. For example, with WinCC Unified system (an advanced visualisation solution system), Siemens is providing new levels of device-independent, cloud and web-enabled industrial visualisation in the warehouse.
Gupta says that automation really took off post 2014, in line with big e-commerce sales such as the Big Billion Day Sale and the growth of large-scale retail. GST has speeded things along. “In India, it started with the sortation function, which was hugely challenging with having to put goods in the right flights to different cities and then reaching them to the right pincodes. Today, a large part of mobility is also getting automated,” he says.
Mobility automation is pretty mature globally, says Gupta. GreyOrange caters largely to markets outside India, such as the US, Europe, Japan and Korea. In other geographies, which have deep markets, he estimates that around 10% of the fulfillment centres use mobility automation. But, in India, where the market is not so deep, only 2 to 3% of the centres are using this technology.
GreyOrange has a large market share in India in sortation technology, and designs ‘awarehouses’ for its clients. Awarehouse is just a fancy term for smart warehouses, in which data, bots and people are connected and managed by an intelligent operating system that can take decisions in real-time. Humans work only in the periphery, either stacking these ‘moving’ shelves with inbound goods or retrieving goods to be sent out for delivery.
“India joined a bit late in the warehouse automation bandwagon, and Industry 4.0 technologies are still in their nascent stage,” says Amit Kumar, co-founder of Rs.2.5-billion, intralogistics automation start-up Addverb. It has big names on its client list, including Fortune 500 companies such as Amazon, Unilever, Coca-Cola, Asian Paints and Reliance. According to him, the lag was because of various reasons including lack of adequate infrastructure, cheap availability of labour, and the lack of awareness about automation solutions. Kumar says the early adopters were the FMCG, F&B and specialty chemicals industries, who were open to the idea because of their thin margins and inventory characteristics that require careful handling to ensure safety. “However, with the GST rollout, rise of e-commerce and COVID-19 disruption, the adoption of automation across industries has accelerated by 15-20%,” he says.
Addverb, founded in 2016, designs and provides hardware and software solutions for smart warehouses.
Kumar says that, in the beginning, clients were hesitant to try their solutions because there was a lack of awareness about warehouse automation’s possibilities and the companies had had little or zero experience in it. The start-up began educating them through workshops and customer events and worked on virtual simulation to be more economical and check all possibilities. They now work with various software solutions provided by Siemens, such as Technomatics. It tells them how many robots a warehouse would need, the length of a conveyor belt, or the number of people to be employed. The start-up can simulate the whole warehouse and see where the bottlenecks will arise and correct it beforehand. Besides simulation, the platform can even emulate the environment real-time, without having to rely on historical data and best-guess forecasts. The cost of automating a facility is often a dampener, so Siemens even provides collateral-free finance through Siemens Financial Services.
The start-up is now experimenting with dark warehousing and micro-fulfillment centres for its clients. Dark warehouses are those that need no internal lighting because they don’t need human oversight. Here, inbound goods from different vendors will be received by automatic conveyors and placed into their designated slots. When the warehouse receives an order, the shelves retrieve the goods and hand it over to bots that cart them away into hold. From the hold, the goods are sent through conveyor belts, sorted according to the location codes and loaded onto the transportation vehicles for delivery. “Two-three big giants are on the verge of using these systems. And once they are successful, they are planning for a rapid expansion,” says the industry expert quoted earlier.
Leap into the future
Gupta sees India “leapfrogging” in warehouse automation in the next two to three years. “With increased digitisation in supply chains and e-commerce conversion, and people getting better acquainted with the technology, I think there will be a steep upward curve in their adoption. Anyway, India is known for leapfrogging when it comes to technology. It is introduced late to any new technology, but given the sheer volume of consumers, its usage shoots up within a few years,” he says.
Siemens' Mandal suggests that warehousing industry is at the cusp of a transformation. He says, “Cloud connectivity, remote operations, industrial IoT and artificial intelligence-based solutions are the next big things, bringing future-ready technological advancement in this industry.” Automation coupled with robotics is just the first step.
The next stage in warehouse management could even be more micro-fulfillment centres. They are smaller, fully-automated holds located inside the city. Traditionally, warehouses were located on the outskirts and goods were carted to the distributor and from there to the retailer. But, the micro-centres bring everything closer to the end customer—from these centres, goods either go directly to the buyer or they are sent to a small, neighbourhood store, which is closer to the customer than a large department store. Earlier, neighbourhood stores used to be last in the distribution line since they can only stock a small quantity. But, through this new warehousing mechanism, neighbourhood stores can have a digital catalogue and have their shelves replenished within a few hours through these micro-centres.
“Over the past two years, the biggest trend has been same-day delivery of essentials such as groceries and medicine,” says Kumar. While this can be easily done in metros, the service has not scaled up enough to serve the larger population living outside these urban centres. He says micro-fulfilment centres are the industry’s answer to correct that. Kirana stores will be where all the action will be.
Kumar also sees robotics as a service (RaaS) and cobotics picking up. With e-commerce and its need for ‘smart’ warehouses accelerating, there will be a massive hunger for warehouse robots and related R&D. Instead of building these in-house, he sees the companies focusing on their core operations and outsourcing the rest, thus expanding the market for RaaS. Cobots, with easy configuration and app-based controls, can be integrated into existing systems without any hassle.
There are challenges to be met and overcome along the way. He says the lack of skilled manpower is the biggest. “Not many warehouse managers are aware about automation solutions, so building the right talent is key,” says Kumar. Therefore, Addverb is actively collaborating with universities to increase awareness.
Another hurdle is the mindset of client companies. “Most companies only automate critical operations and keep the rest as they are,” he says. Companies have single-minded focus on return-on-investment as a key-performance indicator of automation, which overlooks other benefits such as operational efficiency, scalability and safety.
Warehouses can and need to adapt to consumers’ impatience and retail growth. But are manufacturers willing to see these facilities as more than empty spaces that can creak along on cheap labour and chaos? Can they see them as dynamic hubs on which the spokes of their sales must turn, and carry them forward? If they don’t, they might soon end up losing the race.