Businesses now spend an estimated US$350 billion per year on warehousing. Thanks to an explosion in e-commerce, there is now more need than ever to tie stock up in centers where it can be shipped within hours of a mouse click. We only have to look at Amazon’s investment in fulfillment to realize just how significant logistics are to business nowadays.
Warehouses are crucial breakpoints in the supply chain, whose optimization and efficiency can ensure evermore paper-thin profit margins are secured. Get things right in shipping, and businesses can carve out reputations for reliability and efficiency, helping them cement loyalty among consumers with more options than ever before.
But get things wrong, and profits will quickly wither away into the hands of more agile competitors.
The very fact that ‘always-on’ efficiency has become key to warehousing, however, makes it difficult to test and trial new methods to optimize operations. If current orders are to be fulfilled, conveyor belts can’t just be switched off for 12 hours while new robotics technology is tested; 100 tons worth of stock can’t just be cleared off the shop floor in aid of a rethink.
At the same time, warehousing and supply chain are now key focal points for tech-driven disruption. New automation solutions abound, from Robotics-as-a-Service to predictive analytics software that can forecast seasonal stock demand.
According to McKinsey, promises of superfast-fulfillment are leading organizations with warehouses to explore digital twins technology, enabling them to replicate the working environment and run experiments to explore how it can be optimized, and how new technologies can be rolled into play.
By creating a digital twin of an individual warehouse, companies can design, simulate and test new warehouse operations and product movements virtually, without making on-the-fly changes to existing sites, which are becoming increasingly complex. The technology is also proving useful for businesses opening up new warehouses and as new automation systems enter the market, organizations can apply them virtually to see what kind of impact they can generate on workflows.
“These technologies can be powerful tools to reduce space and increase efficiency,” wrote McKinsey’s Ashutosh Dekhne.
“But in some cases, incorrect or inappropriate automation can actually create more problems than it solves. Digital modeling lets companies see what is possible from a range of technologies and applications before they make any investment decisions.”
Already, the more pioneering of businesses are utilizing digital twins of their facilities to experiment with different scenarios, whether it’s revising floor plans for a new approach to storage for accessibility, how the site could cope with an unexpected spike in demand, or how a new automation technology could ramp up productivity.
Essentially, advanced, detail-oriented digital twins technology lets businesses optimize without shutdowns.
While the process of recreating a living, breathing warehouse in the cyber realm typically takes six to ten weeks, says McKinsey, revamped designs can lead to efficiency gains of 20 to 25 percent, before any money has even been spent.
“Digital warehouse design has a wide range of applications, from productivity initiatives at existing facilities to mergers, warehouse consolidations, and new warehouse construction,” Dekhne wrote.
“Across all applications, however, the benefits are reasonably consistent: sizable savings in operating expenses from productivity improvement, as well as in capital expenses from optimizing the deployment of material-handling equipment, storage assets, and targeted right-sized automation systems.”
While the benefits of trialing new technologies and processes in a virtualized environment are obvious, there are some caveats. For starters, businesses — and even third-party logistics providers — may lack the data or in-house skills to build virtual replicas. Digital twins aren’t built using ‘traditional’ CAD design, so most businesses will require external help from experienced engineers. This will still be more cost-effective than taking a blind risk on new tech investment, however.
Meanwhile, McKinsey warns that digital warehouse design “is not a turnkey solution.” Companies must look at the longer-term strategy and how future business growth and other factors may impact what currently works. In a similar vein, warehouse owners must be prepared for continuous improvements — “it must happen again and again, as market forces, technology, and consumer preferences continue to evolve.”
Simulations must involve those involved directly in warehouse management, and getting their buy-in from the get-go will also help ensure new processes are slickly implemented.