Global race for logistics automation
Lockdowns and movement restrictions that were implemented across the region because of the pandemic have put a sudden halt on traditional retail consumption and have forced shopping to become digital. Many retail stores in the region had to close, leading to consumers being forced to move their consumption habits online—with some adopting online shopping for the first time.
As a result, e-commerce sales in the region have skyrocketed. To illustrate, Singapore is expected to see its sales in e-commerce increase to a staggering $10 billion this year; Malaysia saw a 149 percent surge in online sales in the first few months of 2020; while Indonesia’s e-commerce sector is expected to witness a 50 percent year-on-year growth to reach $35 billion in 2020.
Even prior to COVID-19, retail has been moving from a “shopper to goods” model toward a “goods to shopper” model. This has fostered an age of immediacy among consumers and their “need it right this second” mentality.
Automation as a solution. In turn, organizations are now forced to prioritize high-speed operations through automation, as it enables low-cost fulfillment of orders in a short time frame through increased operational efficiencies, higher storage density, and greater ability to deal with spikes in demand.
In short, many companies are looking at automating operations to create high-speed, low-cost, and efficient operations.
For more developed economies in the region like Singapore, the push to automate is also compounded by the scarcity of labor. The labor market in manufacturing and logistics is tightening due to the “4Ds”—dull, difficult, dirty, and dangerous work. The next-generation workforce is moving away from this type of work.
To remain competitive in the fast-changing e-commerce landscape, companies operating in countries like this will then have to turn to automation to meet demand.
This massive shift to e-commerce and the rush for organizations to reconfigure their supply chain and fulfillment strategies to keep up with the demand will make the move to automate even more pressing. And with demand for logistics automation already strong prior to COVID-19, this upcoming onslaught of demand will lead to a global race for logistics automation.
This means that those looking to automate will need to act fast, especially in this market where there is a scarcity of suppliers and expertise in this space.
Many automation suppliers around the world are at capacity. Driven by the exponential growth of e-commerce, as well as the increasing adoption of Industry 4.0 technologies such as robotics and driverless vehicles, the warehouse automation sector is also rapidly growing. Market research company Reports and Data last year reported that the global logistics automation market will reach $120 billion by 2026.
This region, in particular, has seen a strong growth in the logistics automation market in recent years. Boosting this growth is the need to provide e-commerce customers with improved service efficiency and meet their expectations of getting deliveries on time.
However, while there are many automation suppliers across Europe, North America, and Asia, the range of suppliers is not endless.
The specialized expertise required to design, cost, execute, and integrate automation systems means that the major automation suppliers around the world have been incredibly busy for the last five years.
In fact, before COVID-19 hit, many major automation suppliers were already at capacity; some suppliers do not even have the capacity to respond to a tender process and design a solution. This has thus often resulted in multi-year lead times for automation implementation.
The need to act fast. With major automation suppliers already at capacity and the upcoming onslaught of logistics automation demand, companies looking to adopt automation need to act fast.
The planning and implementation of automated solutions can take a substantial amount of time, and the process needs to consider the capacity and timelines of automation suppliers.
Southeast Asia organizations also need to consider that there will be an incredible volume of automation demand in North America and Europe, which means they will need to start planning now and get ahead of the demand curve, or risk losing the opportunity to transform their operations.
Slow adopters of automation will not be able to secure automation or labor that will enable them to meet consumer expectations, leaving them at immense risk of an inefficient and expensive operation.
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Holger Schaurig is executive vice president, Supply Chain, of TM Insight Asia.
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