Executive Briefings

Holiday Demand Increases Need for Warehouse Organization

Online retail continues to grow at a rapid rate, with a 14.6-percent increase in the category in 2015, totaling $341.7bn. That has major implications for warehouse optimization.

Holiday Demand Increases Need for Warehouse Organization

In Deloitte’s 2016 Consumer Shopping Holiday Survey, online shopping has remained the most preferred shopping channel since 2012, becoming more popular every year. That number is expected to continue to grow as e-commerce companies expand their offerings—not simply offering (and stocking) a wider selection, but also a wider range of product categories. Online retailers increasingly resemble the general stores of old, offering anything and everything a customer might need, all in one place. For the customer, this makes things simpler: throwing milk and bread in the virtual cart alongside a high-definition television and a new pair of shoes.

For the retailer, however, this makes things immensely more complicated behind the scenes. Not only must retailers be able to stock this broad range of goods, they also need to maintain an appropriate supply commensurate with expected demand. They also have to be able to find it all within vast facilities known as distribution centers, and do so quickly to meet rapid shipping turnarounds. For example, close to 90 percent of respondents to Deloitte’s 2016 Consumer Shopping Holiday Survey define “fast shipping” as two days or less. Beyond even those formidable challenges, however, retailers need to have the technology in place to be able to handle all of these goods: objects of different sizes, different levels of fragility, and different properties. After all, when preparing an order, you can’t handle a banana the same way you’d handle a set of power tools, or a sweater in the same way as a set of tires. Beyond handling, they also have to be able to find the goods in the first place, an increasing challenge as distribution centers grow ever larger and carry a widening array of goods.

Advanced technologies can help retailers handle these challenges and streamline distribution center operations. While using technology in warehousing and distribution centers is not new—such as automated dock unloading and loading—historically, applications have been limited by high levels of standardization (product shape and size) and concerns over human safety. However, technology advances, particularly Industry 4.0, are allowing retailers and the distribution centers that serve them to overcome many of these limitations.  

Physical and Digital Systems

Industry 4.0 combines existing physical operations technologies with digital technologies such as the Internet of Things (IoT), robotics, additive manufacturing, high-performance computing, and artificial intelligence. The result is that both the physical and digital systems can communicate, and then use that exchange of information to modify and improve operations, learning as they go. For example, Amazon Robotics uses robots to move product racks, irrespective of the product size and shape. The robots are controlled by a centralized computer, which communicates with them via Wi-Fi network, allowing the robots to learn, self-adjust, and aggregate and share data from other robots to troubleshoot issues they may encounter. Other robots can share information, crowdsourcing what they detect on the floor to help each other adjust to any issues they may encounter. This ability to avoid – and learn from – challenges on the center floor can improve productivity and turnaround time, both crucial needs as retailers move into the rush of the holiday season. And even potentially beyond; as data on demand continues to proliferate, distribution centers and the retailers they serve may be better equipped to predict future demand surges, better staying ahead of customer demand.

Many new Industry 4.0–driven technological advancements (such as vision picking) are evolutions of current technologies (such as voice picking) that are common in distribution centers that are technologically up to date. They enable retailers to manage the increasing expectations to handle a diverse set of objects, inconsistent demand surges, and short lead times. In vision picking, for example, workers wear head-mounted cameras that overlay the physical objects they view with digital images that provide additional information. This technology is hands-, scanner- and paper-free, and has the potential to substantially increase picking efficiency as well as bridge language barriers and reduce training time for new employees. Likewise, semi-autonomous, flexible machines can handle the holiday demands for gift wrapping and specialized packing, while safety enhancements and increased modularity can enable humans to work safely alongside Industry 4.0-driven tools, or automated machines to swap seamlessly between roles.

It’s going to be a busy holiday season. In our holiday survey, 73 percent of respondents plan to try new/different stores or online retailers, and 77 percent will buy from another retailer’s store or website if the store has run out of stock. The advancements of Industry 4.0 technology can enable retailers and their warehouses to fully meet all of this demand and beyond.

Adam Mussomeli is a principal in Deloitte Consulting LLP’s supply chain and manufacturing practice. Brenna Sniderman is senior research manager for Deloitte Services LP in Deloitte’s Center for Integrated Research.

Source: Deloitte Consulting LLP

In Deloitte’s 2016 Consumer Shopping Holiday Survey, online shopping has remained the most preferred shopping channel since 2012, becoming more popular every year. That number is expected to continue to grow as e-commerce companies expand their offerings—not simply offering (and stocking) a wider selection, but also a wider range of product categories. Online retailers increasingly resemble the general stores of old, offering anything and everything a customer might need, all in one place. For the customer, this makes things simpler: throwing milk and bread in the virtual cart alongside a high-definition television and a new pair of shoes.

For the retailer, however, this makes things immensely more complicated behind the scenes. Not only must retailers be able to stock this broad range of goods, they also need to maintain an appropriate supply commensurate with expected demand. They also have to be able to find it all within vast facilities known as distribution centers, and do so quickly to meet rapid shipping turnarounds. For example, close to 90 percent of respondents to Deloitte’s 2016 Consumer Shopping Holiday Survey define “fast shipping” as two days or less. Beyond even those formidable challenges, however, retailers need to have the technology in place to be able to handle all of these goods: objects of different sizes, different levels of fragility, and different properties. After all, when preparing an order, you can’t handle a banana the same way you’d handle a set of power tools, or a sweater in the same way as a set of tires. Beyond handling, they also have to be able to find the goods in the first place, an increasing challenge as distribution centers grow ever larger and carry a widening array of goods.

Advanced technologies can help retailers handle these challenges and streamline distribution center operations. While using technology in warehousing and distribution centers is not new—such as automated dock unloading and loading—historically, applications have been limited by high levels of standardization (product shape and size) and concerns over human safety. However, technology advances, particularly Industry 4.0, are allowing retailers and the distribution centers that serve them to overcome many of these limitations.  

Physical and Digital Systems

Industry 4.0 combines existing physical operations technologies with digital technologies such as the Internet of Things (IoT), robotics, additive manufacturing, high-performance computing, and artificial intelligence. The result is that both the physical and digital systems can communicate, and then use that exchange of information to modify and improve operations, learning as they go. For example, Amazon Robotics uses robots to move product racks, irrespective of the product size and shape. The robots are controlled by a centralized computer, which communicates with them via Wi-Fi network, allowing the robots to learn, self-adjust, and aggregate and share data from other robots to troubleshoot issues they may encounter. Other robots can share information, crowdsourcing what they detect on the floor to help each other adjust to any issues they may encounter. This ability to avoid – and learn from – challenges on the center floor can improve productivity and turnaround time, both crucial needs as retailers move into the rush of the holiday season. And even potentially beyond; as data on demand continues to proliferate, distribution centers and the retailers they serve may be better equipped to predict future demand surges, better staying ahead of customer demand.

Many new Industry 4.0–driven technological advancements (such as vision picking) are evolutions of current technologies (such as voice picking) that are common in distribution centers that are technologically up to date. They enable retailers to manage the increasing expectations to handle a diverse set of objects, inconsistent demand surges, and short lead times. In vision picking, for example, workers wear head-mounted cameras that overlay the physical objects they view with digital images that provide additional information. This technology is hands-, scanner- and paper-free, and has the potential to substantially increase picking efficiency as well as bridge language barriers and reduce training time for new employees. Likewise, semi-autonomous, flexible machines can handle the holiday demands for gift wrapping and specialized packing, while safety enhancements and increased modularity can enable humans to work safely alongside Industry 4.0-driven tools, or automated machines to swap seamlessly between roles.

It’s going to be a busy holiday season. In our holiday survey, 73 percent of respondents plan to try new/different stores or online retailers, and 77 percent will buy from another retailer’s store or website if the store has run out of stock. The advancements of Industry 4.0 technology can enable retailers and their warehouses to fully meet all of this demand and beyond.

Adam Mussomeli is a principal in Deloitte Consulting LLP’s supply chain and manufacturing practice. Brenna Sniderman is senior research manager for Deloitte Services LP in Deloitte’s Center for Integrated Research.

Source: Deloitte Consulting LLP

Holiday Demand Increases Need for Warehouse Organization