Importance of Supply Chain in Retail
Imagine two large companies that distribute consumer goods. Company A has an automated warehouse where robots are picking, putting, loading and classifying orders while Company B has more of an old-fashioned warehouse where all of the above work is being done manually. Is it easy to guess which one of them will be sending out more orders and on time? That’s right, Company A will provide far more effective results in terms of time and quality due to its modern technology and intelligent business processes.
We are familiar with the importance and impact of supply chains across various industries. A well-managed supply chain provides higher productivity, quicker turn-around time and is cost effective. When a supply chain is not well organised or optimised to keep up with market trends and new demands in the industry, it negatively impacts its own business processes and ultimately its end customers.
Evolution of Warehouses for omnichannel distribution
Warehouses constitute about 60% of the supply chain function and is the base for procurement, manufacturing and distribution services. While the evolution of warehouses has been slow, its growth has been steady. A few decades back, warehouses resembled unorganised go-downs filled with thousands of packages being sorted by numerous teams of people. However, in recent times, we have witnessed almost a revolution where such go-downs have upgraded into large-scale distribution centres and have deployed advanced technologies and modern automation. For instance, many progressive warehouses at the moment are installing AI-driven autonomous robots which reduce their order fulfilment and inventory replenishment time. These unique solutions cater to various in-house operations such as inventory storage (putaway), replenishment, picking and combining orders. Hence, they play a major role in enhancing business agility and growth as well as eliminating complexity.
Another scenario in the current warehouses is humans working alongside the robots, also known as ‘cobots’ or collaborative robots. Cobots predominantly perform repetitive tasks to assist the worker. These autonomous order fulfillment solutions work seamlessly with artificial intelligence to pick, process, consolidate, and prepare orders. It works collaboratively with a human operator to fulfill orders, increasing picking productivity from the same workstation. In e-commerce fulfillment centres, they can combine Artificial Intelligence and Machine Vision to revolutionise picking high-mix SKU inventory improving the throughput multifold. Furthermore, they are also being deployed beyond the e-commerce sector and used in warehousing, logistics, and other industries.
Fast growing retail industry
According to a joint report by ASSOCHAM and MRRS India, the Indian retail market is expected to grow over 60 per cent to hit USD 1.1 trillion by 2020. A Morgan Stanley report reveals that India’s e-commerce market will grow at 30% annually for gross merchandise value to be worth $200 billion by 2026. The FMCG industry is expected to grow at a CAGR of 20.6 per cent and is expected to reach US$ 103.7 billion by 2020. The growing competition among e-commerce, retail and the FMCG sectors have led to tremendous increases in the demand for smart, flexible and agile warehouses.
When talking about the various industries across India, what is the one thing that all of them have in common? It’s none other than the Goods and Service Tax (GST). The maximum impact of the implementation of GST has been on the supply chain, as this has enabled big as well as small companies to finally optimize their supply chain networks based on scientific principles and logic, instead of unequal tax structures across the country which has been the case for the last few decades. For example – Now that GST is in place, e-commerce players which used to have a number of warehouses all over the country to avoid duplication of taxes, can now set up advanced distribution centres in key strategic locations leading to seamless facilitation of goods without having to make the customer wait.
Need for Automation to stay ahead
A large number of consumers enjoy online shopping and have become used to having their products delivered to them within a day or so. Many Retailers are upgrading their warehouses with some degree of automation as they race to deliver goods to shoppers faster. While there is intense competition and the challenges are increasing day-by-day in the FMCG sector, and the entry of robotics in this sector has been slow and sporadic, it is gradually adopting robotics systems to move up the value chain.
With the addition of new automation equipment, warehouse operations and processes will be performed more efficiently and accurately. Increasing inventory visibility, and fewer out of stock situations, will result in lowerlost sales. Accurate order fulfillment and consolidation will lead to less returns and reverse logistics. For businesses to keep up with the evolving distribution challenges and consumer demands for speed and convenience, automation is definitely the need of the hour.
The Supply Chain of the future
The world’s largest distribution centres in Europe, USA and Asia-Pacific are adopting innovative technologies, including robotics logistics and cobots, to transform their operations today. The potential of such advanced technology is evident, and it can be predicted that more and more companies will plan to switch to fully-automated or robotised warehouses to enjoy its benefits - they are more flexible, cost-effective, improve productivity and enhance space utilization.
Other important considerations include how they create a safer working environment, eliminate product damage, provide less shipping errors and are environmentally friendly.
Looking forward, retail businesses can prepare their people, processes, and infrastructure to embrace new technologies and understand its advantages to better tackle the growing demands and aggressive competition in the market. These will then become the successful businesses of the future - swift and flexible enough to take advantage of new technologies – as they would be able to adapt to the accelerated change in sourcing, production, and distribution that are necessary to maintain their lead.
This article has been authored by Sid Chatterjee, Vice President, Products, GreyOrange Pte Ltd