The impact of digital commerce cuts across every retail, manufacturing and distribution operation, and is putting pressure on all the major modes of transportation and the distribution center (DC) and fulfillment operations that keep supply chains fluid.
To help keep pace, savvy logistics professionals are applying more supply chain management software and technology than ever to better manage the increasing complexity—especially now as the world continues to emerge from one of the most disruptive periods in a generation.
To help us better understand where we are on this ongoing digitization journey, we’re joined by Bart De Muynck, VP analyst at Gartner; Howard Turner, director, supply chain systems at St. Onge Company; Norm Saenz, partner, managing director at St. Onge Company; and Jeff Hedges, president, JHedges Consulting.
Our “2022 Technology Roundtable” covers the continued evolution of transportation management systems (TMS); the growing importance of warehouse management systems (WMS); the many roles automation plays in helping us to not only retain labor, but also to streamline operations; and how robotics has moved from a curiosity to an every-day reality.
TMS: No more excuses
Logistics Management: Here we are in 2022 and we continue to experience hyper-tight capacity, skyrocketing rates, driver shortages and new customer expectations in both B2B and B2C. From your perspective, how would you define this current transportation management environment?
Bart De Muynck: Transportation has gotten more complex due to all of the disruptions that were thrown at us. Transportation costs overall have also increased significantly, and this applies to all modes of transportation and all regions. According to a recent “Gartner Risk Management Survey,” logistics costs and shipping were the top two most significant disruptions to supply chains in the last two years.
As companies try to solve for these challenges and as they continue to become more digital, technology plays an even more important role as part of the overall strategy. Also, it isn’t enough to simply change some processes here and there. Companies have a unique opportunity to transform their business—and those who can transform will be set up for future success.
LM: What would you say are the biggest transportation management pressures facing logistics managers in this current environment?
De Muynck: The challenges are threefold. First is controlling cost. With container rates, full truckload rates and parcel rates all having increased anywhere from 20% to 300%, logistics managers need better visibility into their transportation spend and the use of analytics to understand where they can lower costs. This also means using procurement tools that identify opportunities for above average rates to go out to bid and get lower rates.
The second biggest challenge is getting access to capacity. Companies don’t get paid if the product doesn’t make it to the customer. Again, we see no discrimination between modes of transportation when talking about capacity challenges. Here, too, technology can help to get easier and more transparent access to capacity whether it be through a transportation management system (TMS) that has broader carrier networks or has even direct access to capacity, or through a partnership with a digital freight providers like Uber Freight, Convoy, Emerge and others.
And third is visibility. Every shipper needs better visibility to internal and external shipment flows to control their own operations and serve their customer better. If that wasn’t enough, sustainability has become a huge topic in 2022 and companies have a lot larger focus on understanding their carbon footprint.
LM: Do you think the pandemic accelerated the use of TMS?
De Muynck: Yes, we have seen an accelerated adoption of TMS across the board. Especially with small- and medium-sized shippers, there has been more urgency to use TMS technologies for all of the reasons we discussed earlier. InMotionGlobal offering AscendTMS, also called TheFreeTMS, saw record new daily users on their platform during the pandemic.
Even large TMS vendors like Blue Yonder, Oracle and SAP saw large numbers of companies onboard their TMS. The key though was the ability to accelerate the implementation. creating quicker time to value as well as broader partnerships with visibility platforms, carrier networks and digital freight providers.
LM: Logistics operations that implement TMS tend to be focused on making their transportation operations more efficient while also saving some money along the way. Do you see shippers now more focused on procurement? If so, where are they turning to make this happen?
De Muynck: For sure, procurement is a bigger focus as companies struggle to get sufficient capacity at fair prices. But TMS isn’t always the platform that provides this capability, although many leading TMS vendors have it built in. Manhattan Associates was one of the TMS vendors that saw a large percentage of new customers use their procurement module successfully.
We’ve seen more digital freight management players providing procurement tools to their customers as well—Convoy and Uber Freight are two examples. Emerge came out with their free procurement tool and is competing directly with the likes of Coupa on transportation procurement and so far have been quite successful.
Freight audit and analytics is another source to get better insights into freight spend that allows improved procurement. Intelligent Audit is one such vendor that helps their customers save significant amounts on procurement thanks to their detailed analytics.
Multi-carrier parcel provides their users with continuously larger parcel carrier networks and rate shopping and allows shippers to compare parcel vendors and their respective services. Finally, last-mile solutions help companies get more capacity and lower costs as they work with parcel carriers, LTL carriers, private fleets, on-demand providers and crowd-sourced solutions.
LM: For a long time, TMS was seen as only for the ‘big players.’ With the proliferation of Cloud, are we finally seeing the small- to mid-sized players jumping in and putting it to work?
De Muynck: Yes, we’ve seen this already for many years and it continues to grow. We call it the ‘democratization of transportation technology.’ Today there’s a TMS for every type of company out there and everyone can afford it. I defer again to the example of AscendTMS and their free solution. Cost is no longer an inhibitor or excuse for not using a TMS. We see the same trend with transportation visibility platforms, which is needed by all companies—large and small, complex or simple—and it’s a transactional pricing structure that’s within everyone’s grasp.
LM: As transportation management gets more complex, vendors are integrating more advanced options into their platforms to help shippers wrap their arms around these complexities. What are you seeing taking the lead in this area?
De Muynck: Artificial intelligence (AI) and machine learning (ML) can help advance the efficiency of a TMS, but the biggest advancements are really outside of the core capabilities of the TMS. It’s about the speed of implementation and the ease of use that needs to be in line with the end user’s changed expectations—and often limited resources—that support the system.
On the other side, it’s the partnerships with carrier networks, digital freight players, transportation visibility platforms, and advanced analytics platforms that prove to be more valuable. We even see companies replace a more complex TMS with a simpler TMS as complexity is replaced by ‘ease of use,’ and hence the TMS is used more and better.
Compare it to a car. You can buy an expensive, complex car like a Ferrari. You will never use all of its capabilities and horsepower. But buy a Toyota that’s 1/10th of the cost and you will use all of its capabilities and most of its horsepower—plus you aren’t afraid to use it. So which solution truly brings the most value?
LM: How do you see TMS evolving over the next five years?
De Muynck: Coming back to the previous question, I think we pretty much already have all the capabilities we need. Some of the leaders in the Gartner TMS Magic Quadrant score 5 out of 5 for domestic capabilities. They have it all. We’ll certainly see more expansion of the partner networks and a slow move to more automation of process.
However, this last one is a challenge as transportation is still so manual, controlled by a human who at the same time is very opposed to change. I will say that a great opportunity lies in bringing first-, middle- and last-mile together on a single platform.
TMS vendors have mainly been focused on first- and middle-mile and not last-mile to the consumer. Last-mile solutions have a big focus on the consumer shipments and are expanding into middle-mile as well. If we can bring these two worlds together and shippers can process all of their shipments in a single platform and make optimal decisions based on that—that would be very advanced.
WMS: The center of the distribution universe
LM: How would you best define the current environment inside today’s warehouse and DC operations as it relates to the usage of warehouse management systems (WMS)?
Howard Turner: Companies generally fall into one of two categories. They’re are either (1) looking to replace or upgrade an existing WMS, or (2) evaluating how to best utilize their existing WMS to support their operations. And this isn’t new, as we’ve traditionally seen these two groups. Obviously, 20 years ago I would have included a third group—companies looking to invest in a WMS for the first time. I’m happy to say that third group is dwindling.
So, companies looking to replace, upgrade or better utilize their WMS understand the value of the software. So, there’s no need to explain the WMS benefits or even calculate expected return on investment. But these clients are also keenly aware of the potential for cost overruns and excessive resource requirements. As a result, the focus of the WMS analysis becomes the cost estimate and the requirements of their resources by resource type.
Companies that support multiple fulfillment channels are typically the ones that want to explore opportunities to improve their WMS utilization. Often this is in the form of improving how inventory is allocated across channels. Another focus area is understanding the role a WMS can or should play in facilities that require different picking strategies and warehouse automation.
LM: With this new environment in mind, what would you say are the most fundamental challenges you’re seeing inside today’s operations?
Turner: We’re constantly seeing companies struggle with e-commerce growth and the related impacts. In many cases, e-commerce growth has outpaced their own previous projections, and this has resulted in capacity issues within warehouses. This has also resulted in challenges with staffing as companies have run into hiring issues due to the current shallow labor pool.
LM: How are you seeing warehouse and DC operations responding to the challenges?
Turner: Companies have really shown an interest in warehouse automation. At this point, I would describe the interest as very serious, but still exploratory. For companies that haven’t previously invested in warehouse automation, they’re using this as an opportunity to consider potential automation use cases and validate ROI calculations.
When they do pull the trigger and invest, normally it’s limited to a very specific portion of their operations rather than an initial broad rollout. They’re really being very smart and selective with investing in automation. Essentially, they’re dipping their toes in the automation waters at this point.
LM: What role do you see WMS playing in response to these challenges?
Turner: As expected, WMS is playing a central role in responding to these challenges. The WMS sits at the center of the universe, so to speak, when it comes to software in warehouses. So, the ability of other systems to integrate and leverage the wealth of information within a WMS is paramount in a successful solution.
For example, the ability of warehouse execution systems to access WMS order and inventory data in real time will determine its effectiveness as an e-commerce solution. This applies to other systems as well, whether it’s warehouse automation control systems, business intelligence systems, labor management systems or others.
LM: How has the move to Cloud changed the landscape of adoption?
Turner: The adoption of Cloud solutions has accelerated. Software vendors in the warehousing and distribution space have done a tremendous job in the past five years to six years of dispelling the notion that Cloud solutions are not capable in automated environments. That was previously a drawback because latency issues could not be afforded in automated environments where millisecond response times between systems are often required. Improved software architecture and the availability of high bandwidth Internet have addressed this issue.
Vendors have also done a great job providing tools that demonstrate the data security benefits of the Cloud. Whereas previously it was presumed your data was only truly secure in your own data center. The rise in ransomware has challenged this notion.
However, there are still challenges and barriers to Cloud adoption. I often say this, but I think vendors can do a better job of explaining the value case for subscribing to software rather than owning it. IT executives get it. But I see other C-level executives scratching their heads trying to justify the cost difference when comparing owning software or subscribing over five years.
Vendors in many cases have adopted Cloud-only options for key software solutions. Companies have also expressed concerns with the aggressive push to Cloud solutions and the lack of on-premise options. These are typically companies with larger IT departments that have made significant investments in IT infrastructure, so they have available server capacity.
LM: What are some of the biggest benefits you’re seeing WMS bringing to overall supply chain operations?
Turner: In general, WMS continues to be the system that has the most impact to distribution center operations. These systems are fully mature and provide tremendous tactical and strategic benefits. We’re seeing parity in the marketplace in terms of functionality. So, the systems that are available from the so-called smaller players are in some cases as capable as the upper tier systems.
Deciding on which system to select often boils down to non-functional criteria. For example, how well a system will integrate with other software in a company’s supply chain systems landscape. Or what type of support is available from the vendor company. How deep is their bench?
WMS continue to provide an unparalleled ability to manage large-scale operations. From viewing orders in a work queue and planning labor, to configuring and supporting multiple-pick processes in a facility. Because they’re so closely tied to operations, the WMS is also a great repository of data that can be leveraged by other connected systems.
LM: It seems that WMS has positioned itself as a must-have supply chain application for companies across the board—especially in tackling the labor shortage and adopting to change. How do you see WMS evolving not only inside the four walls but across the entire supply chain operation?
Turner: It’s really interesting to see how WMS has evolved with multi-facility deployments. Traditionally for companies with a multiple DCs, a separate WMS instance was deployed for each facility. Each instance would have its own database. Each WMS instance needed to interface with the ERP host system. Each instance had to be maintained separately.
Fast forward to now and we see that warehouse management systems are really efficient at supporting multiple sites on a single instance. They’re able to manage the operations of each site independently while still leveraging shared databases and interfaces. One instance can be maintained ensuring that all sites have the latest software patches and are running the same version.
Looking forward, when considering all supply chain partners, there are opportunities for WMS from different vendors to work better together. For example, to provide visibility throughout the supply chain, or even to streamline the process for a vendor to automatically generate a receiving ASN when preparing an outbound shipment.
This is challenging when you’re looking across a supply chain and there are multiple WMS of varying age and capabilities. There are third-party software options out there to bridge these gaps that provide moderate improvement. Building out ‘control tower’ capabilities look very promising in this regard.
LM: There’s been a lot of discussion around the development of a supply chain ‘control tower’ over the years. How do you see that evolving?
Turner: Keep in mind that control towers are not just about visibility. Visibility is core, but control towers as a concept offer much more. We find that many companies focus on the visibility aspect solely and can fail to grasp the true opportunity. Maybe because dashboards are front and center with control towers, and when properly designed, control towers provide an opportunity to take appropriate action while considering multiple inputs.
Directly to this question, yes, we have seen an uptick in interest in control towers. Companies, now more than ever, have software tools that can connect multiple systems and process Big Data in near real time. What we’re seeing as the big miss are companies not considering the organizational changes needed to support a control tower.
Having enterprise visibility by connecting these multiple systems is one thing. But how do we effectively structure the organization to act on the information provided? Having the right stakeholders properly involved and represented is key. This involves making sure the relevant parts of the organization are integrated, core functions for each integrated service are properly defined, and a clear chain of command firmly established.
Automation: Find what fits and use it
LM: Based on your time inside a variety of facilities working with your clients recently, how would you best define what’s happening inside today’s warehouse and DC operations?
Norm Saenz: We’ve experienced a wide range of situations over the past couple of years. Some operations are low on inventory and order volumes, while others are busting at the seams. In the heat of the pandemic, most operations had a combination of checking temperatures, mask wearing, hand sanitizing stations, proof of vaccination status and six-feet distance measures.
Over the past year and in recent months, many warehouse operators are done with temperature checks, not asking for vaccination proof, optional mask wearing and no distance measures. So, it’s getting back to normal, while general improvements in health safety are likely to remain.
LM: Considering these new pressures, what would you say are the most fundamental challenges you’re seeing inside today’s fulfillment operations?
Saenz: The biggest challenge we see for companies right now is finding and keeping a healthy labor force to handle customer demand. And, with a concerning labor market, there’s an increased desire to add automation in a time were capital costs and lead times are both increasing. It shouldn’t be missed that supply chain challenges continue, with many operators not having required inventory, while others still have surging inventory levels as a result of over-buying to mitigate the ongoing issues.
LM: How do you see operation responding to these challenges?
Saenz: In response to labor market concerns and increasing equipment lead times, companies are aggressively evaluating automation, lowering ROI hurdle rates, and planning for longer implementation schedules (1.5 years to 2 years). This also means companies are extending the planning horizon for a given solution, and stretching a solution to support the business for 15+ years. Many warehouse operators are also increasing labor pay rates, benefits as well as recognition programs.
LM: Our recent research has showed that the hesitancy around investing in automation has certainly eroded and investment plans have ticked up. Why do you think this is happening?
Saenz: For sure. Companies are much less hesitant to invest in automation these days, and we’re evaluating goods-to-person automation and related technologies in almost every facility planning project. I believe this is happening as a result of the pandemic and the wake-up call for the importance of labor within a conventional warehouse. And, with warehouse labor harder to find and at a premium to maintain, the rise of automation is here to stay—the time is now and it’s only going to continue.
LM: From your first-hand experience, what types of automation are you seeing most applied?
Saenz: The various goods-to-person technologies are definitely at the forefront of automation studies. The majority of labor is in the case- and each-level order fulfillment areas of a DC, where workers are walking to the pick locations with carts or interacting with conventional conveyor systems. These goods-to-person technologies bring the work to the operator and greatly reduces the labor requirements in order fulfillment.
Many of these systems have been around for a long time, including the mini-load AS/RS, horizontal and vertical carousels. Since the early 2000s, multi-shuttles are compared to those solutions, and over the past 10 years autonomous mobile robotics [AMRs] are a part of every automation study.
The modern AMR has seen advancements in technology, application, and there are multiple suppliers such as Locus, 6 Rivers, Fetch, Geek+, INVIA, among others. The other popular technologies we’re evaluating on a regular basis are the AutoStore and OPEX SureSort. The traditional competitors to these goods-to-person technologies are pick modules, unit sorters and put-walls to name a few.
LM: Robotics is certainly one of the hottest topics in automation. Considering all of the excitement, what are you actually seeing in your day-to-day work with clients?
Saenz: The majority of warehouse operations in industry today remain conventional and don’t likely require automation and robotics to achieve their required levels of efficiency. I have been surprised, however, at the level of interest in automation even within these lower-volume operations. We have shown many companies that automation has a 15-year or more payback, and there are mechanized designs that provide them an efficient solution that supports the objectives of their project.
LM: You recently helped us put context around our ‘2022 Warehouse/DC Equipment Survey.’ Any key takeaways in this year’s survey that you’d like to share?
Saenz: The 2022 survey clearly supports what we’re seeing, which is more companies considering automation and technology, increasing capital spend this year and even more planned for next year. It also illustrates the concern with the tightening labor market, including the need to increase labor rates and improve training.
LM: With that in mind, what advice do you have for warehouse and DC operations managers who are looking to accelerate their use of automation?
Saenz: This gives me the chance to stress the important of a quality item master, historical order data, and accurate growth projections. And, to allow the required time to evaluate the various options when selecting the best automation for your business.
The risk is the technology and robotics excitement can lead to a rushed decision that you regret later. Perform the diligent practice of a base case design developed to compare against multiple automated alternative solutions. And, understand what data is required to efficiently design and operate a system, including item dimensions and weight, and the integration of automation controls with your existing warehouse systems.
Robotics: It’s here, it works
LM: What are some of the realities you’re seeing while working with clients inside their warehouse and DC operations?
Jeff Hedges: Labor availability and retention continues to be a key challenge and clients expect this will continue into the future. This realization is forcing clients who have not traditionally invested in automation being forced to move in the automation direction—and the majority of these are starting with software first, including WMS and WES.
LM: What are the fundamental challenges you’re seeing inside these operations?
Hedges: I see speed of order-to-delivery as the key challenge now. This is causing increased focus on technologies to help increase order processing. This is everything from basic process improvement studies, applying robotic picking, using AMRs to reduce walking to automated ASRS buffer systems to deliver product directly to the picker. I’m am also seeing more movement in applying automation to pack out and palletizing operations.
LM: What role are you seeing robotics playing as operations work to respond to today’s pressures?
Hedges: Customers are looking for automation to provide faster and more accurate order sortation and consolidation. Companies are looking for ways to more quickly and accurately fill orders whose volume has increased by as much as 200% to 300%.
Truck loading and unloading continues to be an area that customers are looking to automate. This has always been an automation dream, but with the increased interest in last-mile delivery, this automation component is gaining additional focus. Palletizing and depalletizing seem to be a successful robotic application that’s beginning to prove itself as well.
More and more robotic solutions sets are beginning to promote their application ability to handling and sorting returns. As e-commerce has exploded over the past two years the number of items needed to be handled in returns processing has also taken off.
LM: We’ve made mention that the hesitancy around investing in robotics has eroded and investment plans have ticked up. Are you seeing this when working with clients? And if so, what’s the biggest driver here?
Hedges: I’d say that robotics as a service [RaaS] has played a big part in this surge in investment in two ways. First, it has enabled the AMR and robotic adoption market to explode, and it’s also opening the market to a customer base who traditionally have not been able to justify the
capital expense.
With RaaS, the fee can be incorporated into a company’s monthly operating expense. Additionally, many vendors are offering customers the ability to ‘rent’ additional units during their peak periods. This is a service that I think we’ll see grow as many providers are now actively offering and promoting RaaS on an as-needed basis to existing clients.
LM: What types of robotics are you seeing being put to use?
Hedges: There has been a lot of experimentation going on for the past number of years, and that has been happening behind the scenes as companies test out robotic picking or AMR delivery. But I believe we’re past the testing phase, and we seem to be past the first adopter phase, especially with AMRs. For robotic arms, it’s relatively easy to implement a single robotic cell and prove its benefit before then expanding to multiple cells, so this process of proving itself first before going “all in” will probably become the normal process.
LM: What hang ups still exist around the application of robotics? Any advice for getting around those bumps in the road?
Hedges: Robot picking still can’t pick 100% of all SKUs. So, the question is: How do you incorporate the hard to handle or bulky items? And I’ll add that the AMR market is still a bit fuzzy. Meaning, there are too many suppliers that are trying to be everything to everybody.
My advice is that you need to understand what your particular handling needs are. Know what your product variations are [in size and weight], what your order fulfillment rates are, and what the order SKU variations are.
From there you need to work with your supplier or integrator to understand what limitations a particular handling need may present to their automation solution. And from there, understand what they recommend as part of their solution for your exceptions handling.
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