Automation: Plugging the warehousing gap

This article first appeared in Digital Edge, The Edge Malaysia Weekly, on April 25, 2022 - May 01, 2022.
Automation: Plugging the warehousing gap
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In the last few years, consumers have migrated from bricks-and-mortar stores to virtual ones, and warehouses and fulfilment centres have never been busier. Yet chronic shortages have been reported across many economies, resulting in supply chain bottlenecks.

This has propelled businesses operating within the warehouse and fulfilment centre industry towards digitalisation and automation.

Last year, Reuters reported that warehouses in the UK had to pay up to 30% more to recruit staff in the run-up to Black Friday and Christmas.

Manpower shortages are not something new to the warehouse and fulfilment centre industry. There have been many reports and articles on gruelling working conditions and injuries, in particular, at the world’s largest online retailer Amazon. (A Washington Post analysis of Occupational Safety and Health Administration data found that rates of serious injury at Amazon are nearly double those of other US warehouses.)

McKinsey & Co, in an article at the end of last year, pointed out that in the US, for instance, despite wages rising to above US$18 an hour (above the US$7.25 an hour minimum wage), “attracting and retaining warehouse employees remains elusive”. In the short term, the article acknowledges that strategies such as bonuses, accelerated pay raises and tuition reimbursement are helping. “But the long-term implications of a high reliance on labour are clear: automation in warehousing is no longer just nice to have but an imperative for sustainable growth,” say the authors from McKinsey’s Consumer & Retail Practice.

In US and European warehouses, the boom in online shopping during the pandemic has accelerated the switch to automated systems and robots, which can cope more quickly and efficiently with increasingly complex orders as demand for next-day delivery rises and bottlenecks in the supply chain cause disruptions, reports the Financial Times. Globally in 2021, warehouses were expected to invest US$36 billion in automation, up 20% on 2020, according to the FT.

Last year, Amazon unveiled warehouse robots aimed at taking over workers’ tasks of moving items. Other companies such as Walmart and FedEx are also digitising their warehouse operations with the rollout of autonomous robots to drive speed and efficiency in their operations.

Robots in the warehouse

Closer to home, the warehouse and fulfilment centre industry is already seeing movement towards digitalisation and automation. For some, like the MR.DIY Group, the move towards automation began back in 2019, not from the manpower crunch but the growth observed in its online sales. 

“Our data analytics told us that while our primary business remained bricks-and-mortar stores, online purchases were seeing a steady growth, which meant increased pressure on our fulfilment team. We needed to do three things: improve operational efficiencies in the area of fulfilment, create a better working environment for our staff, and offer our customers a better shopping experience,” says MR.DIY Group CEO Adrian Ong.

And so it initiated plans for its first robotic warehouse. “While the building of the warehouse was operational in nature, the aim was and remains to improve our employee and customer experience, and to find new ways to improve overall efficiency and deliver value,” he says, adding that the decision to lay the groundwork back in 2019 proved fortuitous because when the pandemic hit in the first quarter of 2020, online orders surged and the home improvement retailer began to see bottlenecks in the fulfilment process. “E-commerce sales increased 300% year on year in 2020 — it was clear that the plans needed to be fast-tracked if we wanted to maintain our customers’ trust in us and meet demand. 

“It was all hands on deck. By January 2021, the warehouse was operational and we officially launched it in March 2021,” says Ong of the RM5 million investment located in Seri Kembangan, Selangor.

At the 65,000 sq ft e-commerce warehouse, robots are used to automate the picking process — orders are reviewed and items retrieved from inventory and readied for packing. “Essentially, in this robotics-managed process, the product is brought to the picker who remains stationary, compared to the conventional manual picking process where the picker goes to the product. With a manual picking process, our employees would have to drag a trolley around to find the relevant rack and collect the items based on the received orders.

“With the robotic warehouse system, the orders are in our system. Each robot is assigned an order and then follows a QR code installed on the tracks to bring the relevant racks, which hold the goods, to the picker. The robot parks the rack in front of a picker’s station, where a picker then picks items out of the boxes on the rack. When the picking process is done, the robot automatically turns away and returns the rack to its storage position. It then repeats the process for the next item or the next order,” explains Ong.

Impact on manpower

MR.DIY has more than 12,600 employees across its 900-plus stores nationwide, but the robotic warehouse operates with just 27 employees (with another 900 working across its entire warehousing, distribution and logistics network).

“We don’t see it as a humans versus robots equation, rather as a humans and robots or humans and automation approach. It’s about the two complementing each other to result in the best experience for our people and our customers, and optimising our processes,” says Ong.

He points out that prior to this, warehouse staff could pick only nine customer orders at a time. “Now, they can do 28 orders at a time and pack up to 2,000 orders in a day. Fulfilment lead time has been reduced to one day. And customers can receive their orders in two to four days. This has resulted in a 200% increase in efficiency and enabled us to expand our product range by 20% to more than 20,000 items,” he says, adding that installing this technology has also allowed MR.DIY to establish its presence in the fast-growing e-commerce space, where speed, accuracy and consistency are key.

The introduction of the robots is also addressing bottlenecks and delays, especially during peak periods. “It has allowed us to better handle surges in orders, for example during the 5.5, 10.10 and 11.11 sales. Previously, we had to ensure that we had enough manpower support to handle the surge in orders, including bringing in contract or temporary workers. Since we have robots to support us, we are more confident that we have things under control,” he says, adding that the possibility of human error is also reduced, resulting in better service delivery.

And there have been other upshots to the introduction of robots in the warehouse. For one, the robots have completely reversed the picking process, says Ong. “Where before, our pickers had to go to the product; with the robots, the product is brought to the picker. It has also allowed us to automate the process, so our people don’t have to do so much manual labour, resulting in a better working environment, fewer workplace accidents and less downtime.

“It means that we can upskill our employees in the areas of robotics and automation, leading to more supervisory and management tasks, and allowing us to better utilise the manpower and talents that we have,” he adds.

The sentiment is shared by Pos Malaysia Bhd. According to its spokesperson, with the deployment of the new technology, many manual activities can be removed from the process and warehouse manpower can be transferred to manage different tasks, providing better “earned value” to the operation. It currently employs more than 9,300 people in the mail and courier operations and more than 1,100 in Pos Logistics’ operations.

Simplifying the overall e-commerce experience for customers

Handling an average of 200,000 parcels a day, Pos Malaysia’s integrated parcel centres at KL International Airport and Shah Alam use the latest technology to increase efficiency and speed in parcel sorting, with optical character recognition technology, which enables automated data extraction from printed or written consignment notes. Both facilities use large sorters, which are capable of processing 5,000 items per hour (per sorter), and small sorters with the capacity of processing 30,000 items per hour (per sorter).

The company has also enhanced its e-commerce fulfilment solution (EFS) to meet the needs resulting from the rapid change in the e-commerce landscape, and the high expectations and demands from customers. Its EFS allows its customers to focus more on marketing and other revenue generating efforts.

Apart from normal fulfilment services such as storing, picking, packing and tracking orders, Pos Malaysia EFS provides efficient online inventory management and in-house end-to-end logistics solutions, including customised pickup, delivery and return services, which increases the proportion of next-day delivery. Once onboard with Pos Malaysia EFS, that is supported by a modern warehouse management system, customers also enjoy seamless connection to multiple e-commerce platforms such as Shopee, Lazada and Shopify as well as third-party logistics, says a Pos Malaysia spokesperson.

In addition to its e-commerce fulfilment customers, through its wholly-owned subsidiary Pos Logistics, the company provides full spectrum and integrated automotive logistics solutions, from parts supply management to the distribution of finished vehicles to customers or dealers. According to Pos Malaysia, the automotive warehouse operations use both SAP — which interfaces with the customer’s system — and EQuad (a warehouse management system), which is used for ordering and to communicate with the transport management system.

The company adds that Pos Logistics is planning to employ a new warehouse management system for the automotive warehouse operations. This new system will be launched in several phases, beginning in the first quarter of this year, and will eventually be deployed at all automotive warehouses within two years. According to Pos Malaysia, the new warehouse management system will improve efficiency and reduce rejects and wastage, resulting in cost savings that will eventually be passed on to its customers. Once completed, the same technology will be deployed in non-automotive warehouse operations.

The way forward

McKinsey says though automation presents advantages for warehouses, to harness its full potential, retailers need to develop an end-to-end strategy. To successfully navigate the many choices for automation, retailers must have an informed perspective on where automation can create value, reduce risk and improve reliability across an increasingly complex network of fulfilment nodes. They should then use a three-step process — strategy, design and implementation — to translate their vision into an optimal automated warehouse, it says.

Ong sees opportunities in the deployment of technologies such as automation, artificial intelligence, tech and data to create opportunities for MR.DIY “to find new ways to achieve operational efficiencies, create a better, more productive and more comfortable working environment, and new ways to surprise and delight our customers”.

Its strategy, he adds, is to stay ahead of emerging technologies, so it finds new ways to deliver value and stay ahead of the competition. “We have started by utilising the robots to automate labour-intensive repetitive work to improve accuracy and operational efficiency. We started with the picking process. Next, we’ll be looking at the packing process. Once we introduce automated packing, we’ll have a fully automated warehouse that supports our ambition of creating an omnichannel experience for our customers.

“But the bigger and more significant impact here is that customers now have more choices as we can carry a larger range, they receive their orders faster, and there’s less chance of mistakes on the order — all without additional manual labour, and the pressure, cost and stress that come with it.”