Smart Warehousing Impact of the Advanced Portal to Logistics on...

Smart Warehousing Impact of the Advanced Portal to Logistics on Labor Market

Ben Boone, Supply Chain Consultant, PwC

Logistics in the business industry plays a crucial role in defining success. As a result, when 'Industry 4.0' hit the logistics sector hard, it lead to significant changes in the system of business. Smart warehousing is one such concept that has the potential to affect the industry by impacting customer service with a fully-fledged capacity to leverage the industrial, technological trends. Deploying the right technology to optimize real-time visibility and improve productivity is the key to achieving smarter warehousing.

In our interview with Ben Boone, Supply Chain Consultant, PWC, a broader overview of smart warehousing and its impact on labor market, is discussed. Ben Boone is an Independent supply chain consultant, currently working with PwC on the supply chain optimization of the spare parts business of the large Swedish company.

What are the significant challenges faced by European logistics?

There are quite a few remarkable pain points faced by European logistics, significant among them is an aging workforce and the scarcity of skilled laborers. From the customer point of view mass customization and shorter lead times, are the biggest challenges. Further the varied capabilities of distribution centers (DC) in terms of requirements like omni-channel, reverse logistics, and value-added services and also scarcity of land for DC plots increased the need for efficient warehousing. All these current challenges demand better solutions making smart warehousing more of a necessity than a luxury.

"Though the jobs cannot be protected, the organization can retrain and reorient the people and protect them from losing jobs"

What are the current technological trends that could help tackle these challenges?

The front drivers of Industry 4.0—AI, Machine Learning algorithms, IoT, and data analytics makes the system smarter, safer, more efficient, and highly optimized. All these technological trends make warehouses fully automated, where human interaction will be focused on supervising operations to avoid technical errors and performing quality checks. But the rest of the warehouse jobs are evolving to complete automation: unloading goods automatically from transportation in a mechanized way, selecting pallets/roll cage/individual box, and automatically loading it back. Each of these are entirely automated, seamlessly-integrated, and optimized into the system.

How will warehousing 4.0 impact the labor market?

On the risk side, low skilled workers will be left behind. There might be a more profound quality gap, and only the elite workers might be benefited from salary hikes. On the other hand, there are also many opportunities for skilled laborers. Since these systems may work with fewer people, it becomes a solution to the aging workforce, resulting in the standardization of the workforce in a company. It also is a solution for offshoring of labor leading to reverse offshoring. Industries are now witnessing the Algorithmic wave of automation where simple computational tasks and analysis of structured data will be automated. Within this decade, the Augmentation wave may hit the industrial sector—the automation of tasks in a semi-controlled environment such as moving objects in warehouses are expected to happen. The Autonomous wave in the mid-2030s may result in evolving toward some more automated states. Accounting of the inventory, empty boxes, number of cartons, load carries and movement of people are expected to be automated, tracked, monitored, and improved. By mid-2030, it is estimated that automation of physical labor, manual dexterity, and problem-solving in dynamic real-world situations would wipe out 51 percent of jobs in the logistics sector.

Furthermore, robotics and AI might result in displacement and income effects that can be beneficial for the labor market in the long run. You need fewer people, but with different skills and elements like complex problem solving, critical thinking, and creativity. So some of the jobs may disappear eventually and get replaced with new jobs for technical skills such as technical debugging for all the controllers and monitoring smart warehouse. On the other hand, it also marks the income effect. A more efficient smart warehouse that lowers the prices, increases the real income and spending. As a result, firms start hiring for jobs that are service-oriented, interpretative, and social.

What are the current barriers of adoption to smart warehousing?

First of all, in a financial purview, it's always a high investment to the payback of 5 to 7 years. One must have a long time horizon to invest. The second point is flexibility. Generally, mechanizations prefer stable environments with flat volumes, standardized products, and processes. Smart warehousing results in rapid progress, which means that today's technology may become obsolete in the next year. In such a case, the whole system is expected to be flexible enough for rapid changes. The third point is that within the workforce, the need for highly trained professionals increases, including a clear shift from physical efficiency to data efficiency. Another significant factor is pro-active change management, making sure that the organization is accepting the smart warehousing and doesn't see the threats to current jobs that exist. The workforce must also have in depth knowledge about mechanizations and robotics. The fourth barrier to overcome to make warehousing 4.0 successful are the safety considerations. While robots and humans are expected to work side by side, the safety standard must be kept higher than usual. The final and the crucial barrier to the concept is successful data management. Due to the increased number of connecting devices, a vast number of data is made available. Therefore, improved big data management is a must. Without good quality data, the smart warehouse will not work.

What are the steps companies must take to make warehousing 4.0 a success?

Six recommendations must be acknowledged to make smart warehousing a success. Firstly, there are some no-regret moves that must be taken by the organization. Some small implementations might bring better results in significant savings. That may include leveraging technologies such as AI and machine learning to replace hand laborers, which might add a huge percentage of jobs at risk. The next step is to move toward smart warehousing, by taking a big leap in which the company might need to make a very radical change, , which is risky, yet very crucial to achieve success.

The rest depends on the employees of the organization. First of all, one must build a clear narrative of the plans and implementations and explain that to employees of the organization. Adopting a smart warehouse might result in job losses, and protecting them, focusing on people who work for the organization, is the duty of the company. Though all the jobs cannot be protected, the organization can retrain and reorient the people and protect them from losing jobs. The last recommendation is to own the warehouse at 4.0 debate. One must make sure that it impacts every level of business, not just IT or HR like most organizations recommend it to do. Ultimately, the success of an organization lies in how much the system is agile, adaptable, and reach people for a lot more part of one's organization, to make smart warehousing a success.

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