Ep: 13 Establishing the Warehouse of the Future/Connectivity & Optimization Part 2

00:18 Therese Snow 

In this episode of Global Operations on the Go, a panel of experts discuss part two of Connectivity & Optimization: Establishing the Warehouse of the Future. Let's hear what they have to say.

Key Aspects in Construction Planning

00:30 Paddy Le Count 

Availability and productivity of the workforce is an age-old topic that has different or myriad reasons depending on what year it is in terms of why that's a challenge. Looking at those new trends, the executive shifts from historic customer requirements, operational demands, you know, what are the key aspects that then need to be addressed when both planning regular construction of a new facility or selecting and updating current facilities? We've certainly touched on a few elements here, but Prashanth, if we come to yourself first, with, what are the key areas that you think need to be factored in as it is such a crucial part of these developments?

4^th Generation Manufacturing

01:07 Prashanth Mysore 

That's my favorite question as always, Paddy. There are talks about the fourth generation manufacturing Industry 4.0, right? A lot of us have actually worked on it, some of you have definitely read through it. But this has been there for 10 years, this Industry 4.0 technology, which is mostly on automation processes. This has evolved, right, over a period of 10 years, constantly changing, updating on the technologies, upgrading on sensors, data infrastructure and all. So, when we are considering warehouse, why not bring in the best practices, which is already in place, for manufacturing processes.

Obviously, people have adopted from the best practices from manufacturing into warehouse, and while considering a warehouse, we are talking about the utilization of space maximum utilization of space, bringing in automation techniques like robots and cobots and AGVs and even battery charging stations and all. And coupled with, you know, Paul, you mentioned about gaming technologies, bringing in augmented reality. A good combination of these things should help in optimizing, you know, the famously called five Ms, you know, again, an acronym here. Sorry for that, Paddy. Five Ms is manpower, materials, machines, methods and measurements, how do we optimize these by effectively employing, which is a proven technology, Industry 4.0.

02:37 Paul Avampato 

Yep. And I would build on that and take it maybe a little bit offbeat, to that approach. I think that we have to think about the workforce of the future and think about our buildings differently. They have to become collaboration and connect zones. So, if you think about the people who are working, their friends and some of their other folks are working from home now. They got this great work-life balance, but the warehouse worker has to come in, work a shift, work a full shift in a building to get their work accomplished. So, I think there's improvements around automation, there's improvements around layout, there's improvements we need to do from a productivity standpoint, ergonomics to help with that.

But I don't want to underestimate the collaborative and the connection things. The lunch room, you know, how do we change the lunchrooms? Are they going to be a wall of vending machines or are they going to be an opportunity for connects, you know, like you go to an airport, where you see the old stations with the iPads all set up? Will we start to think about ways that we want to create a different environment for workers? And you know, not so long ago, five, six years ago, we built a soccer field at our facility, and we paid the extra money for the land, built a soccer field, and started to create some competition with shifts and gaming and real-time things, that was relevant to that workforce. Providing transportation to bring the workforce in.

So, there's all these different things and little things that we have to think differently about that in the past, just wasn't it, you know, get your butt to work, figure out how you get here. Now, hey, we're going to give you a bus that's going to be air conditioned, we’ll pick you up, bring you back home. But we have to be open to those things to create that connectivity and that affinity for the company coming in that I think will help drive the productivity, on top of everything you said from a technology standpoint, and an ergonomic standpoint that we need to continue to develop.

Improving the Work Environment

04:24 François Rispe 

Yeah, I would certainly confirm that that trend, I totally agree with Paul, and it's a very critical aspect here. I think we've touched on the workforce availability a few minutes ago, but you know, when you look at what are the main, I would say, pain points of our customers and if I, you know, believe a survey that was run by Deloitte in 2019, but 71% of the respondents were concerned about talents. And talents, that means, you know, it's retaining, it's attracting, it's training. And to do that, indeed, it's not all about, you know, putting the right technology in front of these workers, but it’s to make sure that they're going to be experiencing a very nice working environment. And I think when Paul said that, was referring to the lunch room, I would even have a wider view on, do we really think that today's office space in the warehouse is actually good enough. And look, we as Prologis have been developing this warehouse for a long time.

But we realize that one of the key things is to improve actually the work environment, to attract people and to actually keep these people, which certainly is not a trend that is going to go against robotics or cobotics and all this technology, but it's going to be an enabler. If people are feeling well in the office, in the office of the warehouse, I mean, for sure, they're going to be much more, I would say, productive tomorrow. And we actually ran a study, we, about that. And we do believe that is clearly a direct impact on the productivity of the workers. If you have a very well, I would say, design office space for the warehouses. And you know, this well standard that you may have heard about, which is a standard that is very well developed in the office, business, and we are actually now implementing and spreading it over the warehouse space. But there are more to it. At Prologis, for instance, we have developed what we call this Community Workforce Initiative, which is a platform that is using Prologis scale to help communities and customers address labor shortage in the growing logistics industry. The need for skilled logistics workers, I think has never been greater. But awareness about logistics carrier opportunities are kind of limited.

So, we're trying to fill these gaps, and to do that we actually developed an online learning and carried platform for the logistic industry. So, that's the first step of one of the initiatives that we're trying to launch. We also have a platform to actually facilitate the, digital platform to facilitate the workforce hiring and training. So, there are many stuff like this that needs to be complemented. And I think there's not one size fits all, it's a combination of different factors that need to work together. So, the welcome set for the office space, the training and for the workers, the, I would say, the training on the robotics. And because I do believe that robotics, or automation is going to be a complement to the workforce and one will go with the other and not against the other. And I think that's one of the key things that we need to be mindful.

Adoption of Technology “Step-wise”

08:18 Prashanth Mysore 

Yeah, that's exactly, François, right now, you rightly pointed out technology complementing the human intervention, human processes and human skill development. This is across industries, right? We've been seeing this. Adoption of technology has to be stepwise, we need to go stepwise in terms of bringing in technology to supplement at least to start with health and safety of the workers, occupational safety and health administration of the workers. And then empowering workers so that, you know, you bring in a sense of ownership in your operations, right. This is where technology should work towards. And then our technology like, you know, artificial intelligence and big data infrastructure and all. But there has to be good business use case and we should know what KPIs we need to achieve. And just embarking on AI and big data is not meaningful unless, you know, we know what KPIs we want to achieve with the right infrastructure.

09:11 Paddy Le Count 

And as you say, that's going to be something that's unique to a particular industry or particular company in terms of what they're looking to achieve.

09:25 Paddy Le Count 

And there's an interesting question, so probably we move on to the next one that I have planned coming from the audience asking the panel, do you think the industry or the warehousing spaces is ready for a very slow digital transformation? We've seen a lot of discussions over recent years of these journeys that are ongoing, but they are just at, a journey. It's not an event where in a week, we drop in a bunch of technology and it implements itself and we're all very happy because, you know, even then that wouldn't work with the workforce maturing in the way that they use it. So, you know, do you, given the weight of change in terms of demands and requirements for flexibility, and these external factors that are causing a crunch on capacity, a crunch on operations, is there a bit of a disconnect here with how long a successful digital transformation is likely to take for turning a sizable company, compared to the rate of change that is actually required by the industry or perceived to be required by these trends? Open to anyone who wants to jump in on that.

Adaption of the Supply Chain and Digitization

10:28 François Rispe 

Yeah, go ahead. I was just going to say very briefly, I think one of the things that is actually setting the pace of the digital transformation is clearly the e-commerce activity. If you look at the traditional brick and mortar supply chain activity, I mean, they've been running forever with obviously some improvement over years. But I think the pandemic last year, clearly highlighted the need of accelerating the adaptation of the supply chain and the digitization of the supply chain. And I think, Paul, you rightly mentioned it earlier. And the e-commerce trend is going to actually set the pace for the future. Because the number of parcels that need to be manipulated is such that without the technology, it's just impossible to manage, it’s just impossible to actually deliver what the final consumer is expecting. So, I think that the e-commerce is setting the pace and the rest of the industry is actually adapting. First of all, because the brick and mortars probably need to also have an e-commerce activity. And they actually have an e-commerce activity and they need to catch up. And just because of that, this is going to be, you know, for sure, a way to actually catch up very quickly.

11:54 Prashanth Mysore 

That's exactly what I wanted to say, François, and thank you for that heads up. Yes, COVID-19 crisis exposed the vulnerabilities of our supply chains, which is predominantly engineered for cost and speed, right. Traditionally, it's always cost and speed. But some of these supply chain models were not flexible enough, especially during this pandemic, to quickly respond to volatile changes in supply and demand, which made some of the decision makers unable to cope with, you know, conditions, which change, kind of so dynamic, right? And you also rightly pointed out digital acceleration, it's no longer digital transformation. And, you know, people are talking about digital acceleration, time to value, what can I achieve with these technologies in next six months. Digital transformation used to be like three or five year horizon, and digital acceleration is something like six months to one year, what can I achieve by implementing or deploying a particular technology in six months to one year? That's the trend which I've been observing across the industry space.

And we will definitely get go back to basics, which is people, process and technology, and how do we enable people and how do we do value creation for the people to start with, you know, technology should not be, should not work against people who are actually on the floor. So, we should enable people who are on the floor, the processes, right processes, so that they can adhere to standardization, health and safety processes, technology processes, which really help with the day to day operations, and obviously, technology, and technology for acceleration. We spoke about AI, we spoke about collaboration technologies, and we spoke about optimization technologies as well. And we must say that we have a number of customers who are developing or deploying our optimization technologies, especially for the warehouse and supply chain, which is mostly to optimize capacity, optimize people. Some of those things are the need of the hour now. And digital acceleration as rightly said, François.

13:55 Paul Avampato 

And if I were to build on what both of you said, when it really comes down to it, I think that the pandemic was a catalyst. I think e-commerce has been stirring. And I think the distribution world has been slow at adopting the concept of moving data as fast as goods. To your point, Prashanth, it’s all been about speed and cost. And that was about speed and cost of a case. There wasn't necessarily speed and cost of data to drive a behavior or capacity within the network. And I think that the speed that's needed for e-commerce is going to have to force us all, and the companies that will win are the ones who will adopt the optimization, not to look back and see how they did, but to use it to drive forward and how they will manage the next hours, days and months on the flow.

So, I think we're at a tipping point, which is going to be very exciting in the in the distribution world. I think we were behind in the distribution world from that because it just wasn't necessarily as needed. And I think that e-commerce is going to change that dramatically and as well as sustainability. I think we have to constantly remind ourselves and use this inflection point to start to drive a more sustainable solution. And if we're reinventing, and we're going to look at things differently here, it's a perfect opportunity to put that sustainability in the equation also, and design it in.

15:16 Paddy Le Count 

I think that leads us quite nicely on to a question I had pertaining to the sustainability and the role that updating an additional development of facilities can play in that wider business discussion of environmental and sustainability strategies, waste elimination, energy efficiency, etc. François, if you want to kick off on this one, you obviously mentioned a few of those elements when it came to electrification of vehicles, but certainly something that’s been high on Prologis’ agenda for a while in facilities.

Initiatives within the Warehouse Industry

15:44 François Rispe 

Yeah, certainly. I think there are a number of initiatives that are actually now being run in the warehousing industry, when it comes to sustainability. And we at Prologis, there are many different initiatives that we're working on and actually implementing in our new DCs. So obviously, it's a combination of different things, but clearly solar panel to provide partial energy to the warehouse, battery storage, this is something also that is very key, especially in areas where sometimes the electrification system or electrification transportation system is not very efficient, or it's very old. So, battery storage can be a good substitute. I'm thinking about California, for instance, but you do actually have some troubles in providing enough electricity to the end users. But it's also true in Europe. And I talked earlier about electrical vehicle and electrical vehicle infrastructure, charging points that needs to be developed.

And, and this is going to come very, very, very quickly. So when you think about the awareness of the future in terms of sustainability, yes, it's going to be obviously better insulated building. Yes, it's going to use solar energy, yes, it's going to store batteries, solar energy batteries, so that you can actually restitute some of the energy at the peak hours when actually, consumption is really, really high and tariffs are also on the high side. Yes, your truck is going to be refueled so to speak at a charging point in the in the DC. And this is going to actually change totally, probably the physiognomy of the fueling networks of the transportation industry in the future. So it's, you know, we don't see that coming, because today, most of the trucks, if not 99.99% of the trucks are actually using, you know, gas, but the trend is really coming up very, very quickly. And all these initiatives combined together are going to really help reduce the carbon footprint of the warehouses. So, we're working on a few initiatives like this. I think the most important one that I'd like to highlight is this carbon neutral warehouses that we are actually developing in France. It's a very large facility, 100,000 meter, very large for a French retailer.

This is going to be a totally carbon neutral facility, and not only during the construction time, but also over the next 50 years of operations. But it's, you can, when you look at it, I was going to say it's easier said than done, because it's a bunch of different things and steps that need to happen at the same time and combined together. And you'll see that there's no, you know, one solution. There's no one size fits all, it's really a combination of different things that depends on the activity or the operations of the customer. And in here, we are going to combine energy storage, solar panel, battery storage, obviously, AV charging infrastructure, but also green energy that is going to be provided to the warehouse. We're going also to do some compensation with adequate organisms that take care of that. So, it's a combination of different factors together that will help us get there. And you see that, you know, it's very promising. But it's also very challenging to actually get there. Because it's, it does require a new mindset, a new way of thinking, the design and how to approach the design of new warehouses. So, I think we're just at the beginning of this journey. And hopefully, technology is going to help us actually drive that in a much better manner than what we would envisage before.

Perspectives in Large Automotive Companies

20:43 Prashanth Mysore 

François, alluding to your point on some of those initiatives, which are definitely achieving some of the sustainability themes, François. What manufacturers have done, in my experience working with Toyota, and Honda, in bigger automobile companies and industrial equipment companies, they've gone on this green and lean manufacturing, right. Some of the processes, which you mentioned are definitely in place. They have already started adopting this green manufacturing or circular manufacturing, which means reduction of waste and lesser energy consumption. Just by upgrading their infrastructure, as you've already started, upgrading your infrastructure, you know, change your existing hardware, existing resources, you know, be it conveyors and be it your metal handling equipment, old machinery, uplifting them, or upgrading them with some of the smart technologies itself is a huge value for energy consumption. Right, you know, the SCADAs are there, the PLCs are there, which really helps in optimal use of energy, and even consumables, and even consumption of water.

All of those things are definitely controlled with upgrading your infrastructure, right. And this is where we've been working with a few companies, as I said earlier – smart factory, smart warehouse, even smart cities, we are on a few projects for smart cities as well. And the digital infrastructures like connected resources, sensors, data infrastructures, and smart machines and all contribute to optimizing this, you know, the famous theme for sustainability. This is people, planet and profit, corresponding to the human experience of health and safety, circular manufacturing for reducing waste and obviously profit, which includes connected supply chain, which improves visibility, you know, greater visibility of the supply chain activities, which brings in sustainability here. And I must say that I’m part of a few of these green manufacturing and circular economy projects, circular manufacturing projects, François.

22:39 Paddy Le Count 

And Paul, from your side, obviously, again, much like the other companies, sustainability high on the agenda for Henkel across all operations, but specifically, you know, any initiatives that you're able to sort of share with us that are driving the strategy forward, when we look at this, the nature of facilities and DCs as a whole?

Sustainability and the Physical Infrastructure

22:56 Paul Avampato 

I'd say that, you know, we're looking at initiatives in three parts for us. If you think about the physical infrastructure, things like the solar panels that we're putting on roofs, where we can, wind power, where we can, renewable energy, everywhere, would be what the goal is there. I would say we're taking a wider view of the supply chain and looking at our optimization, truck optimization, to reduce the number of trucks is critical, moving the longer distance over to rail to reduce the number of trucks that are moving across, and again, reducing our carbon footprint. And then back into what's inside the walls of the warehouse. It's obvious things that have been around for years, right – LED lighting, the battery technology that we've been using for our forklifts and getting out of propane and getting into more efficient piece there.

And then, you know, the challenge for us is the future, is if you want to reduce your carbon footprint, what does that mean for your buildings? You know, we used to be consolidating buildings, and getting the fewer buildings away from the marketplace. As François said, there's not a truck that hauls 80,000 pounds electric for a long distance. It might go an hour or two, it's not going to go at this, at this stage of the game, is not going to go 500-600 miles. So, what does that mean for our distribution centers? That's an area that we're looking at when we think about sustainability and we start thinking about the carbon footprint is as how do we relink the rail network to the plants and then develop a last mile delivery network that is more possible to be done in a less carbon evasive way. So, those are the types of things we're looking at, besides the standard things of it.

Then I think the last piece is, we're really partnering with our customers on that journey, because you know, this really goes back to consumer behavior. We talk sustainability as consumers, sometimes we act it but then hey, we ordered our e-commerce box, right? We get three different boxes with all kinds of different packaging and paper and then it's really not that efficient for us, right, from a sustainability play. But we're starting with our customers and really starting to look at how do we meet the consumer desire and need together. And so one of the big changes there, and we've got an incentive going on in Italy with one of our customers now, is around how we fill up our trucks more, as basic as it sounds. But there's opportunities to take trucks off the road by better utilization of it. So again, that helps with the carbon footprint. What does that mean for a DC operation? It's fewer trucks, fewer loading, fewer energy consumption for that also. So, we're looking at a three-prong approach – physical infrastructure, network overlay, and then optimization within the supply chain.

25:43 Paddy Le Count 

I think, yeah, to touch on everything that's been mentioned there. It is a patchwork or puzzle that needs to be put together across multiple different areas. There's no silver bullet, I don't think anyone really kids themselves that there is at the minute. But it's really interesting to see that, again, it's another conversation, we talked about the speed of digital transformation, or the speed of sustainability transformations as well. But it may need to go hand in hand some aspects.

26:13 Paddy Le Count 

We’re approaching the last five minutes. But I want to get a question that's come in a little bit from the audience, but also correlates with the poll that we ran, as it's slightly more forward looking, as well. So, your final thoughts on this from the panel. You'll be asked which area of warehouse and DC developments do you think have the most potential for overall supply chain logistics improvements in the coming 12 to 18 months? Again, linking this back to the digital developments, ultimately, of these facilities. A couple of things have been referenced by you guys over the last hour.

And the winner of the poll with 46% was increased automation processes, which is again, I think, no surprise, as it seems to be the one that's in the maturest state of, you know, able to be implemented in many areas. We also asked about increased sensory technologies, which had 11%, increased warehouse management systems, so kind of a bit more of a holistic, tie it all together with 24%. And another one, augmented workforce technology, which came in at 20%. So, you know, a decent amount of voting for all of these elements. But what do you see as it can have the biggest impact on the next 12 to 18 months, when we look at these technologies coming in? As I mentioned, we've only got five minutes left. So, say as much as you can in your minute and a half. Let's, Paul, why don't we start with yourself.

27:27 Paul Avampato 

Real quick, I say we have to reopen some of our models around automation, things where we used to particularly focus on the labor now that the labor is becoming more scarce, automation is becoming more practical. And we need to think about automation in a new light. And so I think one, focus on automation. Two, it's really getting the data to move like the product. And that is really synchronizing and using the visibility that's out there now with AI, I think we're going to need AI to help us to drive efficiencies within the warehouses and that so, like I said, the ability to have real-time truck data come into a DC to drive a receiving dock or a shipping dock and improve those flows, I think is the second area that we have to look at. And then the third piece is what I think is the engagement of the workforce, and how do we engage the current workforce and how do we enroll them and keep them motivated and help their job become and maintain satisfactory. So, those would be the three things that I would say on that point.

AI, Big Data and Automation

28:27 Prashanth Mysore 

Alluding to that, Paul. AI and big data would definitely take center stage the next 12 to 18 months. Obviously, it's been there, you know, a lot of people have been using it to some extent, you know, tracking of material, tracking of workers. Tracking of workers may not be there in every country, you know, but tracking of material, tracking of, movement of material especially trucks and vehicles have definitely been there. Some of the new things which we are working is all on bringing in a virtual twin model of your facility, now be it warehouse facility or logistics facility. Virtual twins which has a real-world connection, you know, virtual world and the real world connection, where, you know, control tower applications will continuously monitor movement of material and then take quick actions based on AI, suggestive actions and decision automation as a remedial action as well in terms of any discrepancies in your supplies, which will have a catastrophic effect on the overall supply chain. So, AI and big data coupled with virtual twins, which you can have a control tower kind of an application to continuously monitor your, monitor and visible operations of your facility here. And this is my experience working with 11 industry verticals now.

29:51 François Rispe 

If I would build on what both of you said, I will probably surmise about the same thing and I think automation is going to be one of the key driver for the next 12 to 24 months. And you know, it's in all the dimensions, it's thinking about AGV and thinking about, obviously, robotics for picking, robotics for picking not only on the on the floor, but also in 3D, this kind of stuff that is going to probably accelerate in the near future. Managing all the data, making sure that it's going to be sync up with human activity on the ground is going to be absolutely key. And I do think that, indeed, we need to make sure that the workforce is going to be well, I would say, trained and be prepared for that, for the next step. But if there is a technology that can actually help drive these three things together, this is going to be also a determining factor to actually, that will drive sustainability as well, because I think sustainability is also a lot of things that needs to happen at the same time in a very efficient manner. If you don't have this efficiency here, I mean, all the investment, the efforts are going to do to make your operations more sustainable, are going to be probably lost. So, I think that's critical that, is this seamless environment that provide real-time visibility and synchronization with the real world, so to speak.

31:35 Paddy Le Count 

I appreciate you guys sharing all of your thoughts on those key elements of how we need to pull all these strategies together ultimately, as these facilities, through their digital evolution and the physical evolution takes place over the coming months. I'm sure it can be a space where there's a lot of developments and a lot of interest going forward. Thank you all very much for your time. Really appreciate it.

31:54 Therese Snow 

That concludes part two of Connectivity & Optimization: Establishing the Warehouse of the Future. I’m Therese Snow. Thanks for listening to Global Operations on the Go.