Over recent months, the world has been facing an unprecedented crisis that is having a huge impact on everyone’s lives. While other sectors experience a drop in sales, food and home essentials have experienced impressive growth rates. According to a study by McKinsey, grocery and at-home entertainment are the categories where people expect to spend more than usual during the COVID-19 outbreak. This is evident in the boost in FMCG sales across European countries.
There is no doubt that the coronavirus changed the whole e-commerce scenario for FMCG manufacturers and retailers. This is because e-commerce has transformed from a convenience to a social function. It removes many barriers for shoppers and serves as a method of avoiding infection.
As people start to choose service over price, many businesses are wondering if this will be an elastic (short-term) or plastic (permanent) effect of the pandemic. While some changes will likely revert to how they were before the pandemic, such as cosmetics and fashion sales, the new roles of e-commerce and traditional stores are likely to be more permanent, according to research by Nielsen.
Consumers are already shopping both online and in stores. But due to the coronavirus, online stores are no longer the secondary form of business for retailers – it is now the primary source of business. Those that move quickly to support this shift will gain an important competitive advantage.
As consumer behaviours are permanently affected by the pandemic, so are logistics processes. Many businesses are suffering due to the lack of logistics infrastructure to cope with challenges presented by the COVID-19 pandemic. These challenges range from booming online orders, a decline in offline shoppers, and a reduced workforce in the warehouse.
Some of the measures businesses have taken to reduce the impact on their logistics processes are; widening delivery windows, turning traditional stores into dark stores, directing inventory to busy locations, bypassing distribution centres, staggering shifts for safety, stopping operations for cleaning, lowering online order size, relaxing return windows, and capping purchases of high demand products.
Needs have changed, consumer priorities have changed, the way we shop has changed – now stores and their supporting supply chains must change as well.
At Swisslog, we have been speaking with many of our customers about their challenges throughout the COVID-19 period. Traditional infrastructures in many cases were not sufficient to cope with a new level of service and it has been demonstrated that warehouses are experiencing a weak performance for e-commerce and omnichannel.
To support businesses with this challenge, we came up with the idea to develop a soft offer logistics model concept. It would be easily and quickly deployed within a running supply chain to improve the logistics capacity in terms of stock, performance, and by consequence, even the level of service to customers. Investment in automation could also be a way for a company to prepare for the future. For example, to fulfil the need to increase the share of the online business as a plastic deformation.
To implement a solution in the fastest way, we believe that standardization will be the key for success. Automation used to be seen as a bit of a monster to be deployed after long and exhausting investigations of numbers, figures and layouts.
But imagine for a moment that if you could have a black box provided to you in a matter of a few months after the decision is taken. With a performance capability of 1,000 order lines per hour, allowing you to run an additional 20-24,000 order lines per day – would you consider this to be an opportunity for the future and to cope with the new business challenges? This is the question we ask our customers.
What an ideal automation solution looks like
We decided to run an investigation with our long-standing customers focusing specifically on e-commerce, grocery, e-grocery, spare parts distribution, electronics, medical, and pharma online distribution. We consolidated a wide range of feedback, which profiles the idea of a logistics module and how automation should be deployed.
What we acknowledged from this activity is that overall, now during the crisis, investments are challenged a lot from a return on investment perspective. The ROI should be as short as possible with a maximum range of 2-4 years.
Option to rent
We also understood that liquidity preservation is becoming more and more of a mantra by financial departments. Operational rent, for example, is a business model which could be preferred to a traditional capital investment.
Short time to market
Time to market is expected to be noticeably short and a crucial element of the solution. The transformation is acknowledged to be ongoing and speed of adaptation will be a key factor for success. Ideally, an automation model should be deployed in very few months from when the decision is taken.
The automation solution should also be installation friendly. This means that our customer wouldn’t like to spend too much time, money or energy in adapting existing buildings or infrastructures to the needs of automation. The solution should avoid a long learning and ramp up curve because this would take time and delay the benefits of the investment.
Flexible and scalable
Automation should connect in a very flexible way to existing infrastructures and minimizing the impact on IT processes, interfaces, or systems. The black box should also be scalable and modular in case of the need of a change. As the behaviour of a business will change according to the behaviour of their customer, it will be necessary to easily extend performances by adding robots or increasing storage capacity by adding racks or bins – without disrupting the operation.
Extendable and relocatable
There should also be the option to add new functionality such as conveyors and integration with waste management. To the extreme, it would be ideal to have the possibility to even relocate the system to a new place in case it would be more convenient for the logistics network.
There is another topic that is expected by all our customers. An automated solution could significantly improve the working environment in the way that it can guarantee the respect of the social distancing rules. In a goods-to-person concept, colleagues work within separate workstations that can be easily cleaned, avoiding the overcrowding typical of traditional warehouses.
The right technology
Therefore, we have chosen two technologies from our existing portfolio – CarryPick and AutoStore – to deliver these results. CarryPick and AutoStore can guarantee what we have described so far. They can both provide a maximum payback period of a maximum of 2-4 years, a very short time to market, and they can both be very installation friendly.
The fundamental difference between the two systems is the density and the kind of goods and items that can be manipulated by the two systems in an automatic way. AutoStore is much more convenient in terms of density and can reach up to 2.1 net cubic meters of stored goods per square meter.
CarryPick has one third of this potential capacity, but on the other hand, in terms of the flexibility in processing items, CarryPick comes out on top. It can process “whatever, wherever” – pallets, small items, and hanging garments. AutoStore is limited to processing items with dimensions up to 600x400mm and to the weight limitation of 30kg.
Six standard layouts available
There are three standard layouts for each of these technologies that can be easily deployed within your supply chain. For each of the systems there is a small, medium, and large configuration.
The small layout can perform 400 order lines per hour, the medium layout will allow 1,000 order lines per hour and the large configuration will have the capability to achieve 2,000 order lines per hour. By playing with the number of robots, ports, racks and bins, we can play with the standard configurations in a way that we can finetune them to specific needs.
Swisslog’s SynQ software will control both technologies as well, and this will give our customers the possibility to deploy both systems in the same warehouse, controlled by the same platform. This plays a huge part in optimizing the overall supply chain and the processing of data, giving logistics processes a unique competitive advantage.
Our productive facilities run all aspects of the business, from sales to realization to customer service. This is a fundamental aspect for you to be in the hands of a solid partner. It also means we can guarantee you certain delivery times without worrying about travel bans, as we don’t fly people or materials out China or Asia.