How Logistics Automation Cuts Costs

By Shipware May 19, 2020 eCommerce, Shipping Knowledge

Robots. Software applications. Smart machines. Internet of technology. All these modes of logistics automation can make a major difference in a logistics company’s efficiency and operations, resulting in lower costs. Companies don’t have to use every method of logistics consulting available to take advantage of the benefits of logistics automation. But they should know what’s available and formulate a plan to find the methods that make the most sense for their situation.

Logistics automation uses automated machinery or business process automation to improve logistics operations’ efficiency. That can be in a warehouse, a distribution center, or other areas of the supply chain including transportation, procurement, forecasting, and enterprise resource planning software (ERP). Systems working together to coordinate inputs and outputs are the best suited to make the biggest impact on cost-cutting. 

Of course, there are other benefits of logistics automation that can’t be overlooked. It can also impact labor, improve quality and accuracy. Ultimately, that means improving customer service.

Warehousing/transportation is in the top four market segments using logistics management that are ripe for automation, according to McKinsey Global Institute. That’s because of the labor shortage in recent years, as well as growth in e-commerce. Warehousing/management is behind accommodation/food services, manufacturing industries, and agriculture. Technological advancements make automation possible now more than any time before.  

Types of Automation

In warehouses, logistics automation comes in many forms. 

Machinery

Warehouse operations (as well as manufacturing industries) use many types of automated or smart machinery. For example, automated storage and retrieval systems employ robots, which allows for denser storage and better use of existing space. Some warehouses find success with automated guided vehicles to move cargo and items to the human workers for picking and packing or storage. Machines can weigh packages, determining if items are the right weight. Or that automated weight machine helps with packaging determinations, some even applying postage, after the software determines the appropriate amount.

Industrial Robots

Larger robots are used to load, unload, and move pallets and cargo. These may do so using RFID tags or bar codes. Arm sensors can determine the size and shape of a package to best grasp it, without dropping or damaging it.

Conveyor and Sortation Systems 

Conveyor and sortation systems in some warehouse operations are automated to route bins and other items into specific parts of the warehouse, using scanners.  

Software

Business process automation is a big part of what the software can do. Amazon warehouses, for example, use software applications to determine the best storage spot for e-commerce items, to place in a moveable bin. Items are tracking with a barcode. The software monitors not only the product placement, but chooses which products should be moved to a different warehouse for fulfillment if needed. The fulfillment operations software determines a pick list, sending the robots to retrieve items from the closest bins to go to the fulfillment operations picker. Software applications serve many purposes in the automated logistics setting, whether it’s the ERP, TMS, or another type. The business process automation software can be used for analytics, route or shipment optimization, energy savings, or other uses.

3D printing

3D printers can print needed parts or goods, saving time, labor, and expenses.

Drones

Drones are increasingly used for logistics management in warehouses and yards for inventory management, whether reading RFID tags or delivering items in a small area. 

Assisted Fulfillment Operations Picking

Even when human workers are doing the warehouse picking, they still may be assisted with automated logistics technologies. One example is smart glasses, where images of the items appear in the glasses, and a robot directs them to the next item. 

The Challenges of Automating

Not all logistics companies are automating. They might resist because they don’t yet know which technologies will be most helpful. Automation can be expensive to implement and the planning process can be long, depending on the plan. Some companies have a hard time proving value to the decision-makers in the C-suite. Or logistics companies don’t want to invest without knowing they have contracts to pay for it.

In the various market segments, warehouse automation is projected to have the slowest growth, according to McKinsey research. They estimate warehouse automation to grow at 3% to 5% annually until 2025. Yet in response to warehouse automation, costs could fall 40% owing to the cross-functional alignment between operations and cost-effective logistics. In comparison, McKinsey estimates that the pharmaceutical industry’s logistics automation will grow at 8% to 10% annually, and retail and automotive sectors will grow their automation at 6% to 8% annually.  

Market Segments in the Supply Chain Management

Other market segments and their supply chain management can also benefit from logistics automation

  • Transportation: This sector offers opportunities in logistics management for air, ocean, rail, long-haul trucking, and last-mile delivery. In rail, some terminals are already using automated machines to move containers on and off trains. Automated safety systems like Positive Train Control (PTC) allow the trains to slow down or stop when a safety issue is detected, especially important for avoiding human operator error.
  • Retail: This sector finds logistics automation and logistics management especially helpful when operating in an omnichannel environment. Shippers can’t always find a logistics company that can meet their automation needs, so they create their own solutions or have a hard time evaluating companies because they don’t know what would help them. 
  • Parcel: Companies in this sector rely on the benefits of logistics automation to remain competitive and carry increasing numbers of packages and cargo. They’re using automation software that provides visibility and tracking for customers and for themselves. This allows customers to schedule services without needing help from the parcel or logistics company. The software provides efficient routing for drivers and delivery proof. Logistics automation is important in the sortation of shipments as well. Given the time expectations and guarantees, the parcels must move efficiently, and automation is key for that. Loading and unloading in the hubs is an important part of this. Parcel services use automation equipment which increased employee productivity, to an estimated 3,000 items per hour in unloaded shipments, up from 700 to 1,000 items per hour.
  • Trucking: This sector introduced the electronic logging device, which is controversial, but stores information about the driver’s hours on the road. Truckers also use logistics automation to schedule pick-ups, accept jobs, and allow customers to see where the trucks are at any given time. Some logistics systems allow refrigerated trucks to track temperature to ensure quality, feeding this information to cloud-based solutions for instant updates. And of course, there’s the move toward automated driving of these long-haul trucks. It’s estimated that if trucks were fully automated, operating costs would decrease by 45%, saving $85 to $125 billion per year.

Areas to Employ Logistics Automation

Labor

The first reason to consider automation is the labor pool. Until the coronavirus hit, the U.S. was experiencing record low unemployment rates. Warehouse operations were paying higher wages and needed to use recruiting companies to fill roles. Finding labor was difficult. It remains to be seen how the pandemic will affect labor availability. But until a successful immunization is widely circulated, with herd immunity, safety might continue dictating that employees need more space between them. Increased worker illness rates can lead to more employee absence. Automation can help the facility run more smoothly.

E-commerce

E-commerce is bringing in more business, and the winners are companies that are stocked and able to ship and deliver quickly. Customers are accustomed to getting their deliveries within a day or two, often with free shipping. If a retailer doesn’t offer that, the customers often take their business elsewhere. Logistics automation can increase the efficiency and visibility of the retailer’s ability to deliver goods at the right price and at the right time. 

Transportation

A transportation management system (TMS) can bring freight savings. The shipper receives live carrier rates, choosing the best options and understanding all the terms. The TMS system might also give statistics and analysis of on-time rates and other quality factors. This can mean actual savings for companies as they reduce transportation costs, or it can mean keeping a customer happy even if costs a little more.

Customer Service

Keeping customers happy is imperative. It’s cheaper to retain current customers than to accrue new ones. The benefits of logistics automation include customer service. Companies can offer customers the right type of insurance, live tracking, customer-specific freight accounting, automated scheduling, and other perks. 

Error Reduction

Does your company have higher error rates than you’d like? Perhaps manual data entry introduced costly errors or the wrong freight classification system was chosen. Errors from human workers can be expensive and difficult to track and fix.

Cost Recovery

Parcel carriers like UPS and FedEx offer service guarantees. It’s hard to manually track each package to see if it was delivered on time, using the correct elements of the carrier agreement. Not only is manual labor expensive to use for this task, but it’s also time-consuming. It’s more efficient and arguably more accurate to use a well automated auditing system.

Shipware uses cloud-based solutions that provide line-by-line visibility into the carrier agreement and tracking information. The system identifies each savings opportunity, automatically sending claims daily. The service takes its fee from those cost savings, so there are no out-of-pocket costs. 

Reaping the Benefits of Logistics Automation

The benefits of logistics automation can be reaped even with baby steps. A seemingly small project can yield quick savings with surprisingly little effort. Shipware’s parcel audit and recovery system is one project that pays off instantly and is a quick fix with big results. It can be set up in five minutes and runs in the background. It requires no installation and provides found money. The shipping optimization tool results in returns of deserved savings from the parcel company, without any hassles or haggling on the customer’s part. Parcel contract negotiation is another one-and-done solution that provides automated cost savings going forward. Call us to see how it works and we can set you up with a trial and see how much we can save you.

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