In this Supply Chain Matters blog commentary we address how the COVID-19 coronavirus pandemic has already provided meaningful lessons regarding the automation of customer fulfillment in what ultimately defines differing ways for producing, distributing and fulfilling customer demand during and beyond the ongoing global pandemic.
Areas that are likely to experience such changes includes the approaches to warehouse or customer fulfillment center automation along with the advanced technologies supporting such efforts.
This is beyond what online consumers have come to expect prior to the virus. Consumer needs, buyer priorities and practices have suddenly changed. Some of those changes may moderate, but many will likely remain, including the needs for higher levels of adaptation and flexibility among warehouses and customer fulfillment centers. A further consideration is protection of the workforce in virus or illness protections, and how that manifests in automation strategies.
Our Ferrari Consulting and Research Group 2020 Predictions for Industry and Global Supply Chains, published in January, (Available for complimentary downloading in this site’s Research Center menu) before the global-wide outbreak of the virus, included our prediction of advanced technology investment and adoption strategies. The area that topped our list of likely investments was Artificial Intelligence (AI) and Machine Learning enabled processes applied in both supply chain planning and customer fulfillment execution process.
Specifically, we predicted that one of the more active areas of deployment that will show promise will remain as AI/ML applied within advanced robotics and the automation of physical pick and pack activities. That prediction remains, and the ongoing pandemic has provided added awareness to different needs.
Our belief entering this year was that the business case for overcoming customer fulfillment labor shortages during normal or peak shopping periods, leveraging fulfillment in a combination of online and in physical store, would remain driving forces. COVID-19 exposed more revealing process needs for new areas of online buying, and on external supply chain forces of unforeseen or unprecedented disruptions.
Who would have believed that Amazon would succumb to a combination of unprecedented online demand and a general breakdown in domestic and international logistics and transportation networks, including the online retailer’s own network. Reporting on first quarter financial performance, Amazon CFO Brian Olsavsky indicated to investors that while meticulous preparations are made for expected holiday volume peaks or Prime Day: “The COVID crisis allowed for no such preparation.” Amazon was forced to literally prioritize only the sale of deemed essential goods, suspending many hosted sellers from offering standard product selections. Even with that move, order demands overwhelmed established Amazon Prime one-day and standard multi-day delivery practices. Upwards of an additional 200,000 additional workers have been recruited and marshalled to respond to overwhelming customer demand.
A published report by The Wall Street Journal at the end of March- “Online Grocers Are Getting a Preview of Their Future, (Paid subscription or complimentary metered view) predicts that online businesses should be in a different league after the crisis.
Websites of major food and grocery retailers, food service delivery providers and courier type services experienced unprecedented demand. Cited data pointed to the number of U.S. households ordering groceries online roughly doubled compared to 2019 levels. Average daily traffic into Walmart’s grocery site averaged 1.1 million daily views during that month. Indeed, April’s online volumes likely compounded frustrations and blown promises even further.
Supply Chain Matters featured our blog: Opportunity Lost for Many Online Grocery and Food Delivery Providers, in which we stated that while an event of this scope is indeed unprecedented, the notions of extreme panic buying manifested in specific product demand and supply imbalances, indeed compounded themselves. They have provided an important lesson for businesses and service providers to consider more built-in agility and flexibility of any future fulfillment processes.
When the virus originally impacted the city of Wuhan in January and February, and then rapidly spread within Wuhan, Hubei province, and to broader parts of China, various Chinese online providers were able to provide the important lifelines and deemed essential products and prepared foods to consumers forced in lockdown.
Differences were the prior wider population adoption of online buying apps, experience in supporting the agile logistics needs of truly unprecedented one-day online orders that occurred from the Singles Days shopping holiday celebrated last November. A further difference, from our lens, was the flexibility and agility of online provider’s Alibaba, JD.com and others in marshalling a combination of augmented out-of-work restaurant and other supplemental employees, automated robots or drones to fulfill huge volumes of online orders and required individual and neighborhood deliveries. Although China’s online providers were also overwhelmed, the differences in most cases came down to demonstrations of added ingenuity in leveraging technology as well as people resources in needs for daily or weekly changes in online response and order fulfillment, within the given obstacles that the virus presented.
Differing Approaches- Which to Choose?
Business and industry media has further been contrasting two approaches for either online, brick and mortar, or combination retailers for investing in needed automation in the pre and post COVID-19 environment.
One is the traditional rather large and expensive fully automated customer fulfillment warehouses that feature highly integrated and expansive automation in material handling, robotics and labor-saving devices. They often require significant millions of up-front capital investment, extended deployment time and risk the possibility of not being able to readily adapt to a dramatic or incrementally changed business environment at point of start-up or in a small window of time. An example of sudden change would be the need to accommodate significant demand spikes of certain products, fulfilling orders for both consumer and business order channels from the same facility, or instituting tailored processes for unique channel or customer specific product packaging for a product category.
The other is that of more agile and focused automation featuring infrastructure light, but highly intelligent robots. They are referred to as Autonomous Mobile Robots that can address needs for higher levels of efficiencies in supplemental rather than wholesale replacement of workers and processes within existing warehouse, customer fulfillment, third-party logistics fulfillment related facilities.
In this latter approach, flexibility is equated to maximizing utilization of existing warehouse infrastructure and software applications systems investments with considerably less cost than a complete end-to-end automation. A sudden change in consumer buying patterns can be managed by timely adaptation of warehouse storage and pick and pack flows, the ability to increase the overall efficiencies of individual warehouse workers with machine-learning of most efficient travel times, and to quickly supplement with added robots or automated devices when volumes spike unexpectantly. A further added benefit is the ability to mine what can be termed as “on-the-fulfillment floor data” relative to individual fulfillment or groups of regional fulfillment center data related to certain products more in demand at certain periods or in certain regions. The technology is such that such data can identify and automatically adjust to changing inventory fulfillment requirements or needs for warehouse rezoning. These are all new, and supplemental product and process insights that supply chain teams can leverage for more context aware decision-making.
And, in this interim period for requirements for added virus protections, the leveraging of built-in AI technologies to ensure that workers can be routed to areas of proper social distancing, and that if illness impacts existing workers, substitute worker can quickly adapt to highly intuitive robot-assisted and guided pick and pack fulfillment processes.
In this latter strategy, workers remain an important and meaningful contribution to customer fulfillment processes. Needs for added productivity, process agility and responsiveness can be more economically enhanced.
Soon to Come
Readers can anticipate that The Ferrari Consulting and Research Group and the Supply Chain Matters blog will collectively be exploring this specific technology investment area in a soon to be published industry-specific Research Advisory, and in subsequent blogs and podcast episodes.
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