Five keys trends to look out for in Middle East retail logistics
With the perpetual advancement of technology, retail logistics is undergoing rapid change. What used to be complex is now being blended with technology to create more efficient, self-orchestrated systems. The rapid change affecting the sector can be broken down into five key trends that will impact local retailers supply chains in the coming years.
Additive manufacturing or 3D printing shifts the value in manufacturing from the company that owns the inventory or equipment to the company that owns the intellectual property. Customers with 3D printing capabilities will simply download patterns and create their own parts on site.
Some industries have already adopted this paradigm. For example, the aerospace industry is using 3D printing technology to print spare parts at the point of need, rather than store and ship from a central warehouse. This not only saves money on inventory, but it keeps airplanes in the air instead of on the ground.
If you haven’t investigated 3D printing, it’s time to start. Distribution centres may become printer farms in the future rather than the warehouses of today. In the region, we already see early signs of this trend with the recent launch of Panalpina’s new DC in Dubai South, which is ‘future-ready’ and can be easily converted from primarily storage and distribution to 3D printing of a range of items.
“Panalpina’s Logistics Manufacturing Services is the company’s response to a swiftly changing global manufacturing and supply chain landscape, where speed to market, product customization and the influence of the end consumer are of paramount importance,” says Stefan Karlen, CEO, Panalpina Group.
Artificial Intelligence and Robotics
Warehouses have had automated picking and packing equipment for years, but advances in artificial intelligence (AI) are causing even bigger changes. Imagine a warehouse where intelligent robots pick and pack material. The robots then use AI to calculate the least cost or fastest route for delivery and arrange for pickup.
“Every company is different, and each business plan is unique,” says Frédéric Zielinski, general manager Swisslog Middle East. “The right solution really depends on the customer needs and the market requirements as well as the development stage. In the Middle East, we see some bigger companies having requirements for highly automated and integrated solutions, such as Mai Dubai, our latest customer. Robotic systems are already required, for example, for Almarai in Saudi Arabia with automated palletizing and depalletizing. Generally, we can say that data and robotic driven under the Industry 4.0 and Big Data umbrella is the next big trend in the industry.”
Supply Chain Visibility and Orchestration
Most supply chain executives want more visibility into their supply chains. Visibility enables rapid fact-based decisions, minimizes inventory and improves customer service. According to an Aberdeen Research survey of 161 chief supply chain officers, 85% of them said they plan to increase supply chain visibility using a control tower approach.
“In this region there is a lot of pressure on warehouses because the UAE is a very retail strong economy and if the warehouse isn’t delivering on time, it affects the entire business,” says Dr. Makrem Kadachi, general manager, Ehrhardt & Partner Solutions Middle East.
“Warehouses are generally not very well-organised in the Middle East. Many are still using paper. This is a problem because if a customer in a shop purchases a product, they need the correct information about the real amount of stock in the warehouse. If the operator goes with his list and picks that item and goes back to the office and updates the inventory, in that amount of time the stock has become out of date. If you have one hundred stores across the country and this is happening every minute, the problem becomes clear.”
With greater visibility comes greater ability to orchestrate the supply chain for efficiency, service and lower costs. Insight into a supplier’s inventory or operation status allows you to react quickly when there are changes in demand, and you can use the insight to store inventory nearer to the point of demand, saving on transportation and logistics.
Smart Last Mile Fulfilment
If you aren’t already using route planning or truckload planning software, you’re falling behind. With last mile fulfilment accounting for as much as a quarter of total costs for express logistics companies, the need to make this operation more efficient is clear. Many Dubai-based retail logistics partners are making heavy use of telematics in this regard, as well as route planning software.
“Retailers are dedicating less and less space to back-end storage, because they want to maximise the front of house space,” says Steve Pyle, CEO, Chef Middle East. “This has forced us to rethink our last mile fulfilment.” Chef Middle East had adopted software that helps it not only track its fleet but also load its vehicles in such a way that the last item in is the first out on the delivery route. “Our routing software also enables us to calculate the most efficient route based on the clients’ preferred delivery time, which saves fuel and maintenance costs.”
For retailers without their own last mile logistics operation, many are turning to express logistics companies with a proven reputation for optimisation. “One of our services that provides a highly efficient solution for retailers is FedEx International DirectDistribution, which delivers a leaner logistics flow and streamlines the shipping process by introducing fewer steps, fewer stops, and fewer obstacles, thereby shortening the supply chain and delivering an enhanced customer experience,” says Taarek Hinedi, vice president of Middle East Operations at FedEx Express.
Blockchain & Smart Contracts
Blockchain enables “smart contracts“ that eliminate disputes over quality issues, late payments, delivery disputes and many other issues that plague logistics companies.
A smart contract, like any contract, consists of agreed upon terms and conditions for execution and delivery of products and services. When a party to the contract meets a condition, such as delivering goods, the smart contract automatically triggers the next step in the process or the associated payment. To prevent fraud, the smart contract might require an electronically signed proof of delivery, ensuring both parties are in agreement. Once the conditions are met, payment or fulfillment is automatic.
The financial services industry has embraced blockchain and smart contracts for currency trades and fund reconciliation. Major companies such as HP, IBM and GE are investing in the technology, which is expected to have a major impact on almost every business.
While LSPs customers in the Middle East won’t be asking for smart contracts right away, it won’t be long before they do. This is another technology to stay abreast of because it will change the way 3PLs manage retail logistics very quickly once it’s ready.
These are just a few of the trends and technologies that will change the future of retail logistics. Some are here now; some are a year or more away. In either case, you should be tuned in to these changes that will have implications affecting your business and operations.