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How industry dynamics have changed from past era

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By Fred Albrecht, chief executive officer of Logistics Systems Engineering

“We’ve always done it this way” is quickly shifting places in a world that is adapting fast to better efficiency.

It is clear – as we have likely all experienced to date – that over time every industry will undergo certain changes as better ways of doing business come about, as well as that development of technology and designs advance at a rapid pace. In logistics and storage systems this is especially true. In this article I wanted to consider how certain natural progressions have shaped what we see today.

One significant change in the cold chain, and specifically cold storage, is how each square meter of a facility footprint can be utilised. In my view it goes far beyond just the square meterage, but the utilisation of each cubic meter, and these two methods of optimisation are conjoined.

From a producer or source level, and particularly in multi-generation scenarios, one would often see resistance to change because for 20 to 30 years the selected process and systems used “have worked”. Additionally, some of these producers have access to land areas that would cost a hundredth of the square meter rate one would find in an urban setting. So, the need to change is not necessarily an urgent requirement. At the same time, those in urban areas, have the developers pushing square meterage, as quite frankly every business must do what is best in achieving their strategy. The main driver is however the fact “that it has worked this way” for the last generation or two.

However, when we consider such things as forced and cool-down chambers, sterilization (steri) rooms and cold storage on an industrial or commercial level, we have to think about how we improve the all aspects of a facility and its operational efficiency – and not the size of the “box” itself.

Image credit: Logistics Systems Engineering
Image credit: Logistics Systems Engineering

So, one of the biggest drivers of change that we have seen over time is that technology goes up – in a literal sense – which has several benefits. In older areas and facilities, when they were in their prime, a six meter high rack was considered “ground breaking”, while today sees the “norm” shifting past the 16 meter high system locally, and far higher in Europe, the US and China. The most obvious benefit, considering that users started realising they are actually paying for cubes of space used, by increasing height by only one level – the utilisation of footprint already doubles and so on, while the cost of building a taller box is negligible.

In South Africa, buildings can only take up 50% of a site according to regulations and so this is a critical advancement because now owners or operators can either double their capacity at existing sites or invest in a facility that is half the size keeping the same capacity (or even more based on individual setups and choices). Saving can therefore be ginormous and on the converse, so can costs when a client is advised incorrectly or themselves choose incorrectly.

We recently were involved in a case where a client was misinformed and their costs escalated by over 30% because of their footprint, the equipment required in the facility as well as the amount of additional staff and supervision required. It was also driven partially by the customer’s old-school thinking as mentioned before, of how high the pull-down chambers were designed historically, and in the end, costing the 30% more in CAPEX and OPEX. What was obvious in this project was that even the old traditional steel structural system used by previous generation was selected in a modern facility, and so keeping to a low structural system added tremendous CAPEX costs.

We must also understand that all workers have a point where they become inefficient when looking at an operation holistically. Operators, notwithstanding their best efforts, cannot defy the laws of time spent on travelling and the time it takes to get from A to B. The smaller the footprint, the lower the costs.

Although the height factor actually has several benefits other than this alone, as it is a multifaceted approach that has to be understood and develop holistically. One challenge that is in fact prevalent in holding the sector back from applying higher systems more widely, are certain standards such as the requirements for sprinkler systems. These are in most cases very “old school” and restrictive and so essentially limit facility owners’ implementation of high facilities given that sprinklers as a risk mitigation device are linked to insurance. While we (South Africa) are sitting with the latest facilities at 16m, abroad we are already seeing up to 25m tall systems commonplace for the same class of goods.

Users already acknowledge that the successful utilisation of cubes is the way to go and with the height factor, the availability of the necessary equipment and technology to suit is the next consideration. In the past, off the shelf solutions regarding the material handling of the storage systems would cater to perhaps 6 to 8 metres and within only a couple of years since I started in the sector in 1991, we are already seeing a shift towards 13 metres, gaining at least half a meter in height per annum. Recently from Europe that height was extended even further to 17 metres on advanced storage systems, serviced by material handling equipment that can easily reach these heights.

These developments all create new opportunities. When you are able to increase your capacity – a business that also used to outsource their storage at certain times of the year or peaks, no longer needs to provision that and return on investment can be as little as 18 months. This, again, all ties back to the search for efficiency that translates to savings on the bottom line. Every business, no matter how old school they can be, and are “using what they are used to”, must eventually consider that the bottom-line is vital for their own sustainability.

Image credit: Logistics Systems Engineering
Image credit: Logistics Systems Engineering

As I mentioned in my previous column, there are only certain points that one can purchase at and sell at based on supply and demand – one of the buying factors is of course volumes. With volumes comes a far more complex operation as one would for example see in a large national retailer or wholesaler that must stock perishables or fresh products, such as vegetable X, and then also be able to sell that product before the extremely short shelf life is reached. In the background of the operations, highly efficient packaging lines and use of storage capacity and systems will play a role in the pricing to consumers – that can make the product cheaper or more expensive – contrary to the notion that only the actual purchase cost of the product determines the selling price.

A further element of how dynamics have changed from the past is the combination of various systems and the incorporation today of artificial intelligence (AI). Something I can mention specifically is what I consider old methodology and design with large doors within a cold storage facility. Even today, suppliers are very proud of their very high and wide doors that can accommodate any sized equipment and can open and close automatically. But in an increasingly cost-conscious economy, in a controlled environment at very low temperatures, from an engineering perspective when those doors open, we need to understand that air will flow in or out like water and with that scenario it means energy literally disappears – and energy means increased costs. Automation today allows the combination of systems such as smaller doors and airlocks with a shuttle-type system that reduces the amount of lost energy and possibly also limits the amount of vehicle movement.

The use of technology such as this can provide facilities significant savings into the hundreds of thousands of rands per month which offsets the capital expenditure within just a few months. This sort of thinking out the box, and the improvement of the in the box designs, and how technology can be used differently sets suppliers and their technology apart from the rest in the exact same field they operate in.

Taking a step along, another thing that has also changed significantly from past scenarios and has shaped the entire food supply chain is that in years past, most customers had a lot of money to spend in terms of disposable income. Today this is not the case, because although generally consumers make more money that 10 years ago, disposable income has reduced sharply and therefore the customer profile has changed. A simple example is that a consumer would buy a fizzy drink in a 2lt bottle, but today sees that same class consumer buying a 500ml bottle, or even a 250ml bottle consumed at the outlet and getting a discount for a return. So smaller quantities are the order of the day – not like the past when people used to buy and store an entire month’s supplies – this has also changed to more of an “on the go” situation. Every time the local economy undergoes a change, so too does the profiling of the end users/buyers.

With these outcomes, it makes sense to adapt to the changing demand and for this it’s also not always necessary to replace an entire system. The smallest changes can also lead to better efficiency. Here a recent example I can draw from was the design and installation of pull-out drawers on multiple levels to meet the changed requirements of order picking at a facility. Bulk storage locations were halved with this latest technology adding an amazing 70% in additional pick-faces, a requirement for warehouses when these customer profiles shift. This solution also addresses other health and safety aspects and enabled the client to remain competitive in their offering. Keeping a solution simple based on the client’s requirements is also essentially think out the box and really think of every space and technology in the box.

While many providers today may want to push the latest technology and AI – this may not be the solution for the client to realise efficiency in their business, therefore concept to completion involves many scenarios of planning for a phased approach.

The development and use of software has also grown exponentially over the years – although I do still encounter facilities that still use a spreadsheet. I will be honest in saying that I do wonder how they manage to make money, or shown sustainability, because finding products in the system and in the storage system is, not only from experience but every case study, complex, labour intensive and therefore operationally expensive. Warehouse management systems (WMS) – considered the basis of any facility in the new age – have improved so much over the last couple of years and have been reported to reduce a customer’s costs by a minimum of 20% because they know exactly where each and every product must be stored automatically, and software drives operational efficiency. Every touchpoint is a saving which these systems address. Each development of such systems and their integration with equipment and monitoring means an overall savings and the ability to expand on ranges into the thousands of products (or SKUs).

Research and development & Innovation into finding new ways to service the customer’s needs will be found at reputable suppliers of technology advanced storage systems. This aspect is of particular value when considering the best outputs, but also the interaction of individual system functions and the need for scheduling and performing of maintenance, or, the identification of breakdowns. Far different from the technicians of the past spending a whole day at the plant to find the wire that was faulty or troubleshooting an entire plant that has potentially thousands of sensors and mechanical devices.

Through advanced software and connectivity this can be identified off site and preventative maintenance avoiding system breakdowns becomes a reality. This even available from these reputable partners for semi-automated systems such as pallets shuttles and mobile racking systems.

In today’s economic environment where competition has become very intensive, the facility that adopts technology first, is the provider who is going to be able to keep their customers satisfied. Taking that example further, where the best solution is implemented, there would be no need for a consumer to choose another brand because of erroneous ordering or lack of foresight where potentially an entire basket of goods are lost, because an order can’t be filled as required. The same applies for stock holding and expiration. Inefficiency goes a long way into complex business structures and today has also seen the advancement of much faster and very specific demands of the consumer that was not known in past eras.

In days of past and the honourable handshake to close the deal – today facility owners and managers really need to “compare apples with apples” given the vast options available. Role players must become less prone to taking the cheapest quote and more interested in the details – why that technology, why remote assistance, why volume management is important for speed of pack and picking. At the end of the day the choice either means a failed facility or meeting the demands of customers while ensuring you get the right product to the shelf at the right time. Too many times customers still page to the last page, review the price and do not ask the questions posed above, or; reviewing the true inclusions that will improve their bottom-line.

People often ask me: why should we automate? Why must we put in better technology and why better and more advanced storage systems into our facility? Why a solution and not just a rack, as it worked for so many years already? If I had to give an appropriate response that comes to mind first – all that one would need to consider is another question:

What would the benefit be if you could teleport yourself anywhere? This statement in fact doesn’t even need an explanation but the reality is that your life would get easier and your productivity would increase ten-fold if not more, your costs would decrease, you would exhaust less energy, your competitiveness would soar, and your reliability would be unmatched. With that on offer to your clients – they would not have any reason to not come back time and time again – knowing their requirements would be met. An interesting justification.

About Andrew Perks

Fred Albrecht

Fred Albrecht has been involved with various intra-logistical and storage systems for over 35 years and has experienced their development first hand from manual, to semi-, and now fully-autonomous solutions over his career. His knowledge of best practices from around the world positions him as a specialist in this subject and specialised field of intra-logistical and system solutions, as well as other critical aspects for dry, cold and frozen goods facilities.

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