Increasing automation does not only stir the economy, but also the minds of the people. Many are afraid that they could lose their jobs and the media is fueling the debate with provocative questions like “What jobs will the robots take?” or “Will automation and the internet of things lead to mass unemployment?” Personally, I do not see a dire future in this matter, because there will always be a plethora of tasks (at least for quite a while) that machines cannot do by themselves. But let us take a look at the facts: What is happening right now in the industry? What do experts think about this particular topic? Which automation solutions are in place right now? And what role does software play, especially in the logistics sector?
Automation trade fairs are in vogue
The Internet of things and digitization, automation and industry 4.0: These are the trends and buzzwords of our time. For instance, in March 2015 the Automate 2015 took place in Chicago, the biggest specialized fair for automation technologies in North America. 61 percent more visitors (a total of 18,115 automation experts) and a growth of 76 percent regarding exhibitors (322 total) compared to last year speaks for itself. We can notice a similar trend on the European side of the Atlantic Ocean: Over 220,000 visitors from more than 70 nations traveled in April to the world’s biggest industry trade fair, the Hannover Messe 2015. The organizers chose industry automation as their focus topic. For demonstration purposes, collaborating robots, which work in modern factories side by side with human employees, were on display. In the aftermath of the trade fair, the following message (at least in Germany) took its medial course: “Industry 4.0 has finally arrived.”
Of course, a trade-fair vision and living reality are two different shoes. For instance, according to a study conducted by McKinsey, German companies, known for their high technology level, are currently reluctant to invest in automation technologies compared to other countries. However, I perceive the general expectations regarding this topic to be quite optimistic. A representative study conducted on behalf of BITKOM revealed that, for the six economically most important industry sectors, a total added value of 23 percent related to industry 4.0 until the year 2025 is expected. In a more recent joint study published in April 2015, DHL and Cisco Systems forecasted multi-billion dollar growth, especially in the supply chain economy, induced by the internet of things. While today approximately 15 billion devices are connected to the internet, the number is expected to increase to 50 billion in the next five years. This increased digital integration facilitates communication from machine to machine. This way the devices can, for example, coordinate the production steps in a process chain, and check if all requirements are fulfilled. This can lead to new delivery alternatives, the ability of more intelligent warehouse management and improved options of shipment tracing. According to the study, a worldwide economic growth of up to $8 trillion ($1.9 trillion in the logistics sector alone) until the year 2025 could be possible.
Automation of inventory management through add-on systems
Instead of speculating if these forecasted growth rates can actually be achieved in the future, I would like to shift the perspective to currently practiced automation processes in logistics, especially in warehouse and inventory management. Oftentimes, logistics managers need to overview extremely complex interrelationships and flexibly react to fulminating changes. This calls for intelligent software solutions which are able to process a vast amount of data and implement suggested actions in real time. To illustrate this, I have chosen two examples from current supply chain practice, where this objective was achieved with an intelligent software solution.
Corporate growth and interlocking global supply chains lead to increasing logistics costs. This was the case with wholesaler Keller & Kalmbach, where long delivery times, millions of articles and fluctuating customer demand led to the decision to implement an automation solution. In the company’s central warehouse, over 100,000 storing positions are handled on 35,000 pallets and six employees plan 18,000 items from a growing product portfolio (10% per year) on a daily basis. In this situation, a system is required which can process the permanently growing flow of commodities in the right sequence and calculate precise forecasts for inventory planning. Only by doing so can the vast amount of data be efficiently analyzed. Based on the forecasts, Keller & Kalmbach currently orders more than half of their articles fully automated. By means of the automation solution, operation costs can be cut. And with the aid of the demand forecasts, capital lockup due to high stock levels can be significantly reduced.
My second example refers to supply chain management in the food industry. Sustainable inventory management presents itself as a big challenge for many companies. It is necessary for logistics professionals to make sure they can guarantee short delivery times to the customer while keeping stock levels low. Additionally, industry specific factors like seasonal demand or the perishable nature of many groceries play a crucial role. In this context, specialized optimization technology provides valuable decision support regarding production and demand planning by considering parameters like the shelf life of a product. Even before a customer or planned order is accepted, the system checks its feasibility. For instance, if the raw material or components are not available, the system will warn the involved planners and provide alternative solution suggestions.
There is huge potential for automation of important processes in the supply chain. Actually there are some very successful companies, which rely on intelligent software solutions to automate vital processes along the supply chain. The systems I am thinking of in the first place support planners in decision making within the data jungle and relieve them of time and cost consuming routine work. Humans and machines, hand in hand – this is the future, I am convinced of that. Especially in supply chain management where complex data flows enable the control of the supply chain, we will see many innovations in the future.
This article was originally written by Ludger Schuh in German and was published on the BVL blog (National Logistics Association – Germany). It was was translated by the Inventory and Supply Chain Blog Team. The original article can be read here.