Warehousing: No better time to automate

This article first appeared in Digital Edge, The Edge Malaysia Weekly, on May 9, 2022 - May 15, 2022.
Warehousing: No better time to automate
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When he was abroad, Gan Soon Kiat had a hard time explaining to his peers back home about his company, which provided warehouse automation solutions.

Before 2018, warehouse automation was almost unheard of locally although the technology was being adopted widely throughout the world. Gan decided to roll out the solutions he was providing clients in China and Thailand and set up the business locally.

However, the company became inactive as he was busy servicing his overseas clients. Nevertheless, Gan continued to do little things to raise awareness of warehouse automation whenever he was in the country, hoping that one day, the domestic market would be mature enough to pick it up.

Gan approached national agencies such as the Malaysia Super Corridor (MSC) and Malaysia Digital Economy Corp (MDEC), attended seminars and gave talks in higher learning institutions on automation during his free time.

“I was quite surprised that there were no courses [offered] on automation [in Malaysia], but [our regional peers such as] China and even Singapore were running programmes,” shares Gan.

But the opportunity to roll out warehouse automation services finally came when the Covid-19 pandemic hit the world, with the ensuing movement control orders disrupting supply chains around the world and leaving factories and warehouses completely stumped.

Seizing the chance, Gan — who has over 16 years’ experience in the logistics and warehousing industry — acquired another local company specialising in logistics automation with investment from a Chinese company.

“We formed a joint venture but [soon] after, the Chinese company decided to dissolve the company. So, we took over all the resources and rebranded the company as WoodTrees in 2021,” says Gan. He became its managing director. 

In March, WoodTrees secured its first private placement of RM2 million from Hong Kong-based angel investor, Max Capital Management Holding Ltd (MCM), to support the company’s business expansion in Southeast Asia and China, as well as its research and development efforts to provide more innovative solutions to the industry.

Businesses still hesitant

Despite the pandemic-induced supply disruption, Gan observes that only a few businesses made efforts to automate their warehouses, including companies like MR.DIY and Eco Shop. “The demand is not so high in Malaysia compared to other countries. Most warehouses do not have a high demand in terms of receiving and issuing goods. They think, ‘Why do I want to spend money to implement automation when I just hire [more people to do the] work?’.

While local companies were hesitant, some had already automated their warehouses way before Covid-19 interrupted processes.

In 2019, famous Scandinavian furniture chain IKEA Malaysia implemented automation and Bank Negara Malaysia was planning to redevelop its Kilang Wang Bank Negara Malaysia building in Persiaran Selangor, Shah Alam, as part of its mint modernisation project.

E-commerce giant Lazada has a semi-automated warehouse in place but Shopee’s warehouse is still fully manual. “But you see, without automation, they are still able to cope with their daily businesses,” says Gan. 

Even so, there was a surge in inquiries on warehouse automation after the pandemic hit, indicating a rising interest among businesses due to the unpredictable lockdown restrictions, he says.

Replacing repetitive tasks with automated systems frees workers up to focus on more value-added tasks like quality control

No one-size-fits-all solution

Given that every business has different needs, a cookie-cutter approach does not work, Gan says when asked about the average investment needed for warehouse automation.

“Each warehouse has different solutions; a company could have two warehouses at different locations and need to apply different solutions. It has never been one-size-fits-all. As a system integrator, we [study a client’s] business and we’ll try to come up with a solution that fits their needs.

“Some clients may invest RM1 million or RM2 million to automate their warehouses. Some clients [invest] more than RM100 million. It depends.”

“It is indeed an expensive investment, but warehouse automation is essential for business expansion,” says Gan.

As a system integrator, WoodTrees acts as a one-stop-shop for all business warehousing needs. Its experts assess each inquiry and recommend the best solution through historical data and forecast the potential return on investment as a result of automation. In some instances, automation is not even required.

“We are frank with them. We will give to them what they want, but [sometimes] they don’t really need [warehouse automation],” asserts Gan.

Once the solution is executed, a WoodTrees representative will be sent to the newly automated warehouse as an “interim manager” to train the warehousing team for three to six months.

WoodTrees currently has three automation systems: Warehouse Management System (WMS); Warehouse Control System (WCS); and Automated Storage/Retrieval System (AS/RS).

“It’s very simple to imagine this. WMS is like your brain, WCS is like your nerves, and the AS/RS system is like your hands and legs. The brain always gives instructions to the hands and legs through the nerves,” explains Gan.

However, it is not necessary to have all three systems implemented, given that the solutions were developed to be independent of each other while being complementary.

In fact, Gan does not recommend that conventional warehouses shift to full automation, but rather have it done in phases to allow the staff to familiarise themselves with the new system. “The difference is quite drastic, going from conventional to fully automated.”

“For clients like that, we will advise them to adopt WMS first and use it for a minimum of six months to a year. Then, we will see how we can go about automating their entire warehouse,” he says, adding that WMS is still able to operate on its own by providing information on inventory tracking.

Grow tall, not wide

Whenever the word “automation” is mentioned, there is the fear that robots might someday take over our jobs. However, Gan rejects this notion.

“Instead of “replacing humans” — the term businesses tend to use whenever they consider automation — the human resources can be redirected to performing other warehouse tasks to increase efficiency.

“For example, if [a business] automates the receiving part, they will reduce the headcount by three, but they can use these employees at the picking station. So, if I place the three people at the picking station, the performance for picking will immediately go up.

“Until now, I’ve never encountered a situation where human labour is reduced [after a warehouse is automated],” says Gan.

When the government introduced the National Fourth Industrial Revolution (4IR) Policy in July last year, transport and logistics were identified as some of the key sectors. This motivated WoodTrees to develop the Transport Management System (TMS) as an extension of WMS. TMS is built to track goods that have been shipped out of the warehouse.

The team is also looking to launch an affordable subscription-based WMS to support small and medium enterprises (SMEs) in their warehouse management. The basic plan is free for SMEs, where they can access the inventory tracking manager if they only need to store data for the goods within their premises.

“We are still in the midst of planning. Maybe, we will be able to launch this service at the end of the second quarter or third quarter of this year,” says Gan.

Based on a BBC report, the current warehouse vacancy rate in Asia is only 3%, thanks to the rise in online shopping during the pandemic. In space-constricted Hong Kong, for example, there are 20-storey-high warehouses to accommodate the growing demand for storage solutions. 

Gan is positive that Malaysia will soon move in that direction. “When we’re talking about automation, we always advise clients to not grow wide but to grow tall. Most of the AS/RS projects that we have implemented are at least 30m or 40m in height.”

He adds that it will be a waste of equipment usage if warehouses are built low.

Getting warehousing right

There are three main principles to making sure warehousing is done properly, says Gan. “The first thing that you need to have is a very systematic warehouse. Systematic doesn’t mean automation. It is a system to track everything. This is an important point.”

“Secondly, you need to have a solution, it can either be a fully automated or even semi-automated solution, but it must fit your needs.

“Thirdly, don’t just get any solution because you want it. You need to get a solution that you need for your business. Of course, you also need to have a team that is very passionate about automation. There are instances where some employees are not happy with automation,” says Gan.

“I encounter dissatisfied employees a lot, but to get warehousing right, you need to raise your team’s awareness towards automation,” says Gan.