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3 Strategies for Improving Warehouse Operations with Modular Mobile Technology

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In 2018, U.S. consumers bought more than $500 billion worth of goods online, an increase of 15% from the previous year. That's just a small sliver of overall total retail sales of $3.6 trillion, which doesn't include the sale of items people can't really purchase online such as gas or restaurant food.

While ecommerce sales are still just a small portion of all retail sales in the United States, its growth cannot be ignored representing 14% of all retail sales in 2018 versus 11.6% of all sales in 2016 and last year accounting for more than half of all retail sales growth, according to the U.S. Commerce Department.

What most consumers don't realize is that even these relatively small increases year-over-year in ecommerce has led to big changes for warehouse and logistics operations. Warehouses are getting larger by the square foot; SKUs are increasing; the average number of employees in a distribution network is now up to 287—up from 249 in 2018 and 239 back in 2012; and, there is immense pressure to optimize these environments, says David Krebs, EVP enterprise mobility and connected devices at VDC Research in a recent mobile technology webinar.

"We call this the Amazon impact for ecommerce companies in terms of setting new expectations for customers in everything from ordering to package arrival times," says Krebs. As such, it's imperative for warehouse and logistic operations to have a unified strategy to deal with these monumental sea changes especially around labor optimizations, speed and accuracy improvements, and technology modernizations.

"Gross margins for these companies are already pretty slim," says Andrew Herchek, general manager of Cognex's mobile products division. "It's harder than ever to remain profitable."

Those three operational challenges should be top of mind issues for any ecommerce facility, warehouse, or distribution center but they need to be dealt with holistically because they are very much interrelated challenges, adds Herchek.

Labor Optimization

The most basic problem warehouses face is labor optimization. Access to labor is a challenge for many companies and then the seamless onboarding of a seasonal workforce and training them quickly to get the desired operational level of efficiency is also a challenge.

But, with increased numbers of employees to meet the operational scaling challenges posed by ecommerce, companies need to be thinking about the processes they can while also investing in technology that employees want to use and that will increase picking efficiency.

Warehouses have always been a KPI-driven environment (pick rates, pick errors, perfect order rate, for example) because as the adage goes: you can't improve what you can't measure. Organizations will need a comprehensive strategy to improve performance in the face of ecommerce demands that factors in technology modernization and labor optimization in order to drive speed and accuracy improvements.

Speed and Accuracy Improvements

Improving speed and accuracy can be very challenging for companies, particularly if they are experiencing high ecommerce growth. Companies have only a few improvement levers: add additional bodies, invest in expensive robotic equipment, or split the difference with mobile technologies.

Warehouse operators know firsthand this need for greater speed and accuracy. Orders need to be shipped faster, with companies like Amazon and Walmart setting 1-day shipping expectations for customers, and the need to fulfill through various channels and at various increments. It's no longer just shipping pallets, but instead shipping at the item-level.

"The exposure to errors is being amplified," says Krebs. "The consequences of errors for return items is more acute. It's driving customer confidence, customer service, and loyalty."

To meet this demand, and minimize errors, warehouses are incurring extremely high operating expenses (OpEx), relative to capital expenditures, when compared to other industries like consumer electronics, manufacturing, and automotive. A primary driver of OpEx is labor, with workers spending their time loading, receiving, and stocking, among other tasks, but the largest component of OpEx labor is picking. When orders come into the warehouse, usually through a warehouse management system (WMS), workers are guided to an aisle, row, tote, etc, to pick the order to be shipped. By increasing pick rates companies can increase the profitability of its operation.

It's nearly impossible to think about increasing the speed and accuracy of fulfillment without also thinking about making investments in the technology stack. There are many technologies that enable faster picking: mobile terminals that help pickers pick faster, carousels and shuttles that bring parts right to the pickers (think Amazon's Kiva systems), and finally "lights out" autostore systems. The former, level 1 automation, is often very cost effective to deploy in a warehouse, whereas the latter, level 4 automation, is prohibitively expensive for most companies.

Technology Modernizations

Over time, many companies have chosen to optimize picking with mobile barcode scanners based on the low required investment and high returns (e.g., faster pick rates). A vast majority of legacy devices are running Windows CE in conjunction with their WMS systems. But, with Windows CE reaching end of life, there's a reason for companies to think about how and when they will migrate to a modern platform like Google's Android OS or Apple's iOS.

"It's taking a little bit longer for warehouse-designed modern mobile solutions to become available," says Krebs. That's evident by an informal poll taken during a recent Cognex/VDC joint webinar where slightly more than half of respondents say they have no plans to migrate to a new OS. Nearly 44% say they have already migrated or will migrate within a year to a modern OS.

"Companies should be devoting some resources to evaluating and testing right now because workers are used to modern devices in their non-work life," says Krebs. "Seasonal, younger workers might be puzzled by legacy devices . They aren't used to that technology. It might sound trite, but you have to design applications that are intuitive to users, especially if you want to get them up to full productivity."

VDC Research has seen it take roughly 75 hours vs 118 hours to reach max productivity when comparing modern mobile solutions versus legacy devices. That increase in productivity is also the main reason (along with better battery life) driving the investment in modern mobile solutions.

Along with migrating to newer mobile devices, Krebs says there are also developments happening in robotics, vision systems, and other automation systems to help warehouses and ecommerce facilities replace manual processes and ultimately reassign labor. There's also a renewed interest in the concept of hands-free technology with voice applications, wearables, ring scanners, or smart glasses.

Learn how Cognex's modular mobile technology can help your organization improve your organization's picking rates using modern operating systems and technology in our on-demand webinar.

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