It is clear from the detail of the recent ‘PeopleVox Fulfilment Report 2017’, that many traditional warehouse operations are really struggling to keep pace with the growth in sales, and that automation holds the key, writes Alexey Tabolkin, CEO of Eiratech Robotics.
The PeopleVox Fulfilment Report 2017, featured recently here at EDelivery.net, shows an industry seemingly undergoing boom times, with 82% of respondents reporting increased sales in 2016, and 89% expecting further increased sales in 2017. Figures cited in the report from the Centre of Retail Research show online sales in western Europe growing by 15.6% in 2016 (to st£201.90 bn/€232.60 bn) with a further 14.2% rise (to st£230.62 bn/€265.68 bn) expected in 2017.
These are truly astonishing sales growth figures, yet looking behind the positive news and tales of success in the e-fulfilment industry, it is clear from the detail of the report that many traditional operators are really struggling to keep pace with the growth in sales and are just about coping with the demands of customers and consumers.
Unsurprisingly, many of the challenges cited by respondents in the report are those of scale: traditional manual warehouse-cum-fulfilment operations are simply not geared to respond to the exponentially expanding demand. The problem becomes even more complex by the often seasonal nature of this demand: when periods of almost overwhelming demand – such as ‘Black Friday’ and Christmas – are then immediately followed by periods of steep contraction.
The response to these challenges shows an industry which is focused on ‘coping with’, rather than ‘planning for’ success. When asked what they were going to do to scale their fulfilment to cope with sales growth in 2017, 37% said they would ‘hire more staff’, 34% said they would ‘reorganise their warehouse’, while 23% said they would ‘increase their warehouse space’. On the issue of personnel during their busiest peak periods, 52% of respondents again said they hire more staff, 45% said they paid existing staff overtime, while 38% said they redirected staff from their existing roles elsewhere in the operation.
Clearly these measures may work for some in the short term, but in the face of promised further growth of similar scale this year and into the future – coupled with anticipated labour shortages in the warehouse sector post Brexit – they cannot be expected to be a foundation for further and sustained success. The MHI 2017 Survey puts it very well when it states: “As customer demand for quicker delivery and multi-channel order fulfilment continues to increase, labor within supply chains will need to become exponentially quicker to keep up, and human labor simply doesn’t scale like that.”
According to the PeopleVox report: “The future looks promising but with this comes the challenge for both online and multichannel retailers to ensure they sustain growth while maximising profits. As they face increasing competition including from Amazon, the ongoing challenges of currency fluctuations, and for some, Brexit pressures, they will need to become smarter at fulfilment.”
One way operators are achieving ‘smarter’ fulfilment is through automation. Many of the challenges manual operations are struggling to cope with: scaling up and back the workforce to meet seasonal demand, coping with sustained growth, and maximising use of warehouse space can be completely or significantly resolved on a permanent basis through automation.
This may be why the PeopleVox Fulfilment survey has 33% of respondents intending to improve their technology and systems. By comparison, according to the MHI Report 2017, in the US adoption of robotics and automation technologies is currently at 37%. However that survey states: “the real story is that adoption is predicted to grow to 53% over the next two years and rise to 71% over the next five years”.
What makes adoption compelling though is the sheer scale of the early adoption companies. All of the big players are automating – many on a huge scale – and these companies really do move markets, by ramping up consumer expectation for great customer service, and shorter and shorter delivery times and forcing smaller companies to match them. This issue is clearly on the minds of the 30% of respondents to the PeopleVox Report who admitted to being being concerned about Amazon
These are the very real challenges the fulfilment sector faces in 2017. Continuing to try to meet the demands of the online market through the traditional warehousing model will inevitably see many fail to meet the challenges of staffing, small order picks, and same day/next day delivery slots delivery. Clients will get disgruntled and business will move on.
For those who take advantage of easier and more affordable access to dynamic robotics and automation technology however, a future of sustainable growth can be planned for: expanding and contracting to mirror demand, and maximising stock availability, warehouse efficiency and storage space through robotics, automation, data diving and cognitive technologies.
Alexey Tabolkin is CEO of Eiratech Robotics.
Image credit: Eiratech Robotics.