In production logistics, the growth opportunities provided by automation are undeniable, regardless of the relatively slow pace of progress so far. At best, the change can generate totally new kind of business, which manifests itself as, for example, growth of electronic commerce.
Efficient flow of information and real-time tracking of products have contributed to shaping of the current consumer habits. Packages come and go efficiently from a warehouse to home door.
Last year, the US on-line retail giant Amazon introduced a mini RC helicopter Prime Air. Its operating principle is that it picks up the shipment from the warehouse chain, flies to the address fed into its system, and drops off the package on the customer’s steps.
According to Amazon, the system designed for an urban environment could be introduced within five years. Even though this idea may seem crazy, experts have not unequivocally condemned the functionality of the concept.
We are also discussing such topics as automatically driven cars and potential uses of the big data in electronic commerce. On the basis of a consumer’s on-line behaviour, the company can forecast his or her next purchase, so the product may be on its way to the consumer already at the moment he or she places the order.
– As far as other technological breakthroughs are concerned, for example, 3D printing and light nano materials are not directly linked with operational logistics, but with the help of them supply chains and their functioning can be changed. Products made of nano materials are lighter, which makes their distribution easier, estimates VTT Research Scientist Ville Hinkka.
Efficiency through information management
Production logistics involves much more than mere physical processing of material flows. Technologies and complex procurement networks have given information management a more pronounced role in the process than before. The overall functioning of a system has an impact on, for example, throughput times of products, accuracy of deliveries, and optimisation of production and warehousing. By developing these, companies improve their productivity, efficiency and competitiveness.
As concerns production processes, the progress made in automation manifests itself, for example, in product development of machinery manufacturers. Compared to actual manufacturing, production logistics, which mainly includes deliveries, handling and transfer and warehousing, has advanced at a more leisurely pace. This cannot be blamed on lack of concrete development within the fields of technology suited for production logistics, though.
Karri Rantasila, Key Account Manager at VTT, underscores that companies have been performing automation of production logistics internally within closed systems for a long time. A more comprehensive goal, however, is to enhance the scope of automation, to extend it from a single company to include the entire supply chain.
– The overall flow of production logistics consists of money, raw materials, products and information. Money lives its own life within the framework of banking systems. The flow of goods and information, on the other hand, can be enhanced by using automation So far, this development has been slowed down by, for example, various incompatible standards and systems, says Rantasila.
EDI traffic increasing
The basic prerequisite for enhanced automation of production logistics is the standardisation of data flows. This is referred to as EDI (Electronic Data Interchange), which means automated transfer of data in electronic format between the data systems of various organisations.
The use of the EDI standard is economically justified when the volume of data to be transferred is large enough, or if the traffic of orders and invoices is otherwise busy enough. The use of the system becomes topical if a business partner of a company uses EDI traffic and requires it also from its partners.
The use of EDI expedites processing of data, lowers data transfer costs, makes processing of errors simpler and easier, and reduces the time required for business processes. EDI functions are most widely applied to transportation, purchases and warehousing, but also to, for example, payment transactions.
– The starting points for the development of EDI are good, since many Finnish companies already have their own ERP (Enterprise Resource Planning) systems in place. In the next phase, these two systems should be made communicate with each other, Rantasila notes.
Finding a common view is difficult because each company in the supply chain differs from the others in some way or another. Many SMEs are sceptical about automation due to the investment pressure it creates.
To make the situation easier, the General Industry Federation and GS1 Finland have embarked on a mission to digitalise delivery chains within the grocery trade, for which they are currently seeking Tekes funding. The purpose of the project is to build an electronic data transfer system for the needs of the grocery sector. It can be operated as a cloud-based service using a smart phone, tablet or computer. The goal is to introduce the same operation model in other sectors as well.
– Depending on the calculation method used, there are some 1,800–2,700 actors in the grocery sector. Currently, only 30 of them are capable of electronic data transfer between companies, says Kyösti Orre, Senior Adviser of logistics from the General Industry Federation, describing the development needs within the sector.
Will for harmonisation
Seamless transfer of data opens up improved opportunities for mechanical automation of production logistics. Today, for example, RFID (Radio Frequency IDentification) technologies are being used for monitoring of goods traffic and storage circulation, and automatic identification. It facilitates, for example, rapid calculation of individual products included in a batch of palletised goods.
The data transmitted to the warehouse management system enables monitoring of sales and automatic ordering of the next batch of products at the optimal phase of storage circulation. In spite of all the opportunities this technology could offer, the different practices at various companies still impose limitations on the use of technological solutions suited for logistic application.
–For example, in books trade, one chain of shops may use RFID tags in their products, but others may not. Even though it would be easy to place the tag in all books at the printing phase, due to this difference, it needs to be done manually. It all boils down to sub-optimisation, which is relatively more expensive than large-scale use of RFID, says Ville Hinkka.
Independent of its high price, sub-optimisation is still taking matters in a better direction small step at a time. The higher the volume of goods and material flows brought under the same system, the easier it is to raise the prevailing level of automation within the sector.
– With the launch of our project, several major actors within the groceries sector have expressed their interest in harmonisation of data transfer. They have understood that integration of data flows will also provide assistance for the management of the flow of goods. Automation, as well as different codes and tracking systems related to that, enhance error-free functioning of the system and, consequently, make it more efficient, underscored Orre.
Towards more extensive use
Technology is not a value in itself in the automation of production logistics. For example, it is not reasonable to build storage automation in a company that dispatches a few packets a day. Instead, for example, WLAN- or GPS-based localisation is suited for, for instance, large warehouses, and tracking and identification of shipping containers, whereas computer vision is suited for quality assurance and reverse logistics.
All in all, the wide spectrum of technologies on the offer provides opportunities for implementation of automation solutions for various needs.
– In my opinion, the development of operational logistics and related automation methods is not in any way lagging behind manufacturing activities. It is more a question of at what stage it is possible to adopt such solutions to large-scale use. For example, in Finland, only 40 per cent of goods traffic dispatch data is transferred in electronic format, when the corresponding figure in other Nordic countries is 90–95 per cent. In the first phase, we should have this type of functions standardised, notes Rantasila.
Crisis preparedness needs to be improved
In addition to automation, production logistics can be improved by means of, for example, robotic solutions within warehouses. However, automation plays a more significant role in enhancing the effectiveness of entire supply chains. This will come to transform the way people work, in the same manner as tractors and threshers once did in agriculture.
– The amount of physical work will reduce. However, there remains a lot of functions for people in maintenance, correction of errors, and added value production, estimates Kyösti Orre.
Improved productivity and automation of the basic work sound promising, but the change has also its flip side.
A digitalised operating environment is heavily reliant on electricity and information security. This raises questions related to, for example, business secrets, hacking and privacy protection. Disturbances and problem situations are no longer local events, but crises that can shake the entire global supply network.
Companies are increasingly engaged in international co-operation to prevent major threats. Accordingly, identifying security threats and responding to them is one of the major factors in securing continuity of digital and automated supply chains.
– Different types of threats have existed for a long time, but they have changed over time. By the side of business threats, now we can also talk about information security and physical occupational safety of warehouse functions, which has improved as a result of automation and robotics,” says Karri Rantasila, summarising the development.