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Positioning for Success: Striking a Balance Between Automation and Value Creation in Warehousing

Amidst somber waves of a global economic slowdown and as countries strive to ignite growth despite the pandemic, warehouse leaders push ahead with new approaches to ramp up productivity and efficiency. In Asia Pacific, the largest region for online retail sales globally, Ecommerce continues its rapid ascent and is set to almost double from $1.3 trillion in 2018 to $2.5 trillion in 2023, according to Forrester’s predictions. Supply chain operators navigate through changes in government regulations and the ongoing China-US trade war as well, as affected industries see a welcome boost or shift operations across borders.

In particular, transforming operations, and responding to the pressure to be more digitalized, has become increasingly urgent to thrive in today’s on-demand economy. In 2019, a global Warehouse Vision Study of over 1,400 IT and operational decision makers from industries including manufacturing, transportation and logistics, found that 80% of organizations plan to invest in new technologies to be competitive by 2024. Yet warehouse modernization face critical challenges, as 77% admitted that they are slow to implement new devices and technology, despite recognizing the need to modernize their warehouse operations. 

Pressures Ahead

Today’s warehouses are no longer just simply storage spaces. With most of the world’s manufacturing activities based in Asia, it makes good financial sense to set up warehouses as distribution centers for companies with Asian businesses. Forerunners include Singapore and Hong Kong, due to their simpler tax policies and customs processes. As different industries take the lead on becoming more sustainable in recent years, it has directly impacted logistics, which must adapt to their customers’ trends. In the area of warehousing management, companies will need to look at developing innovations to raise operations efficiency, labour management and waste management. Technology will play a pivotal role in developing these solutions.

Yet the high capital investment required has held back many players. The work in the warehouses may not warrant or justify automating all processes, when labour cost is significantly cheaper than the cost involved in setting up an automated process or installing new infrastructure.  As some logistics companies use proprietary software, a technology overhaul will involve connecting many different systems, which takes time to design.

Stricter tariffs and regulatory changes can impact even the best supply chains. Operators have benefited as India’s financial regulations have been simplified. The increasing cost of manufacturing in China has led companies to shift their operations to South and Southeast Asian countries.

Paving the Way For Smart Warehouses

With Smart Warehouses being the buzzword of the moment, Asia Pacific companies across industries, from manufacturing, transportation and logistics, retail, post and parcel delivery and wholesale distribution, plan to deploy smart watches, smart glasses and hip-mounted wearables in their warehouse facilities.

Technological advancements and the need for digital transformation in nearly every industry has been seen to be a key enabler to spur growth and productivity. In logistics, digitalization is customer-requirement driven. For pharmaceutical, Fast-moving consumer goods (FMCG), and large-scale manufacturing, automatized processes help to avoid human errors or repetitive work. Yet limitations such as the state of the local infrastructure, and availability of trained and educated talent remain. For example, warehouses or manufacturing plants may be located in areas where it may be difficult to recruit talent who are willing to undergo training, or companies to take care of expensive and complicated IT systems. Much as the potential benefits are understood on the strategy level, there will not be a one-size-fits all solution.

Leaner and more agile supply chains with end-to-end visibility will be implemented through the latest technology. By developing holistic solutions, warehouses will be better positioned to strike a balance between actual operational demands and automation and empower teams to successfully enhance customers’ value chains.

Contributed by: Jan Harnisch, COO Rhenus Air & Ocean
Edited by: Winny Linandy-Tan, Marketing and Communications Manager (APAC)

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