How does better warehousing practices affect supply chain processes and operations?
Whether the supply chain disruption caused by the pandemic is mitigated, will depend on who you talk to.
At time of writing this, there is a worldwide shortage of potatoes and the crunch has gotten so bad that fast food chain, McDonald’s has removed large french fries from their Set Meals menu. Of course, this does not bode well for countries where starchy carbohydrates are an important staple of the populations’ diet.
And potatoes aren’t the only shortage that the globe is experiencing. One has to wonder about the impact that this will have upon customer experience and satisfaction.
A conversation about upping the customer experience and creating more ‘wow’ moments for them, may eventually veer towards personalisation and recommendation. What is the role supply chain can play here, if any?
What does supply chain mean in the first place?
For Aw Yang Uei, MD and founder of AC2 Group, the definition of supply chain is that it starts the moment something begins from the source until the moment it is consumed.
“If I were to pick an apple from an apple tree, the supply chain starts. If I want to process it into apple juice, the supply chain continues and goes on all the way till a consumer drinks it. That means your house and refrigerator could be part of the supply chain process.”
So, a refrigerator is a critical component in the supply chain to make it work. Imagine, a future when the refrigerator becomes smart enough to detect it is keeping low levels of apple juice and automatically orders more from the grocery shop – the refrigerator’s role becomes more relevant and prominent in the whole supply chain.
Interestingly, the warehouse also plays an important role in the supply chain ecosystem, and is the one component that could help eke out savings for a business.
“In the whole entire supply chain, there are always ways to save money,” Aw said.
With a combination of robotic arms and a Warehouse Management System(“WMS”) solution, let’s say labour is reduced and you save from having to pay wages to 100 workers.
If the Return on Investments (ROI) is achieved in 18 months, the business could start saving after the 18th month.
Now, it is up to the business if they want to enjoy these savings, or pass some of it on to their end customers.
If two different businesses enjoy the same efficiency and savings from having deployed the same processes and solutions like robotics and software, they may start price undercutting each other, to get more customers.
“So, healthy competition in Malaysia is important. Healthy competition means I am still making money,”.
“The moment I want to kill your business, I will lower prices till they are so unsustainable, and then see which business (the competition’s or mine) has the resources and capital to hold out longer. That is unhealthy.”
Based on his experience in the pharmaceutical industry, whereby one particular company had deployed robotics and WMS, Aw shared that savings of up to 70-percent is very possible with a combination of robust WMS solution and autonomous mobile robots (“AMR”).
Pivotal role of the warehouse
The warehouse’s role in a business is more pivotal than most businesses give it credit for.
“Many non-performing employees are being sent to the warehouse that is perceived to be a hot, humid, undesirable environment to work in.
“If you are not doing your work, the punishment is to send you to the warehouse!”
But Aw observed that this is starting to change and that MNC companies as recent as ten years ago, have started sending their best people to the warehouse now.
“If I was sourcing for a pen, and my competitor was doing the same, the prices quoted to us may not be very different given that the Internet has made prices fairly transparent. We would respectively buy these pens at similar prices and likely also sell them at similar prices, provided we do not incur losses for our businesses.
“You could be enjoying the same gross margin as your competitor, both of you buy at about the same price, and sell at about the same price.
So, what will make you more successful than your competitors?’”
In between the buying and selling process of these pens, lies that component called supply chain.
Aw said, “Whoever can get this (supply chain) correct, can enjoy the advantages of it. That’s why supply chain is very important.”
According to a book that Aw co-authored titled, ‘Dodge It If You Can’, advantages can be eked out when the following can be achieved within the supply chain:
- Store and send products at and in the least possible cost and time possible
- Deliver products with least mistakes
- Pick products faster with less manpower
- Deliver more without mistakes
- Minimise mistakes for fewer customer complaints and create brand equity
As the world over slowly recovers from supply chain hits due to the pandemic, they are realising the importance of this ecosystem.
In essence, Aw believes that warehouse operations is the foundation of a business’ supply chain execution.
More and more organisations realise this and increasingly, they would send their best employees to the warehouse to be able to learn very important fundamentals which form the bedrock of their business.