Omnichannel supply chain : where do factories fit?

By Jérôme Pedreno,Business Developer, Logistics Solutions, Hardis Group.

The growth of marketplaces means that manufacturers are now selling directly to their end clients. Today’s connected, automated factories are no longer merely places where things are made: they are becoming fully fledged logistics hubs where firms process B2B and B2C flows—and pick and ship e-commerce orders. Orchestrating intralogistics processes and flows with greater precision gives manufacturers the power to turn factories into omnichannel retail profit centers.

From mass logistics to retail logistics

In the past, manufacturers mass-produced the same items over a period of several months or even years. But they are now having to build greater flexibility into their production processes, for three reasons. First, clients are increasingly looking for customized products and services (vehicles with multiple combinations of accessories, options and equipment, or custom packaging—for single or multiple products—for a particular retailer, for instance). Second, product life cycles are becoming shorter. And third, marketplaces are gaining ground, meaning manufacturers are now shipping products directly to end clients and catering to ever more demanding requirements—not least in terms of delivery lead times.

As these trends take hold, factories are increasingly having to tread the fine line between mass logistics and retail logistics: processing B2B and B2C flows, picking by pallet or by package, and shipping goods to both directly to consumers’ homes and to their physical distribution network. What’s more, today’s factories are more connected than ever. For instance, firms can now forewarn the factory, in real time, if raw materials or components are delayed.

Factories: logistics hubs that need to be optimized

These days, factories are no longer merely places where things are made. They are fully fledged logistics hubs—and the underlying processes need to be optimized. In the vast majority of cases, optimization involves deploying a warehouse management system (WMS) for precision management of logistics flows, both upstream and downstream of the production line—introducing manual or automated just-in-time line-side replenishment, adjusting incoming production orders on the fly, taking account of component and semi-finished product inventory from the Manufacturing Execution System (MES), kitting and re-kitting to optimize pre-assembly operations, reusing scrap items on the production line, returning production line output to stock, optimizing deliveries according to B2B or B2C flows, and much more besides.

Orchestrating automation and IoT applications

At these new combined factories and warehouses, it isn’t just production lines that are automated. Logistics operations are, too: think mechanized goods loading and unloading systems at receipt or despatch lines, smart conveyors and automated guided vehicles (AVGs) that automate line-side supply and kitting zone replenishment operations, or pick-to-light and put-to-light systems that route components or containers to the production line. Moreover, some manufacturers have deployed IoT applications so they can identify and track what is happening in the factory in real time. Here, too, WMS solutions are proving their worth in large logistics warehouses, allowing firms to manage these various technologies—WCS, automated systems, robots, cobots, and more—all at the same time. So when it comes to orchestrating logistics operations in industry, a WMS is the perfect fit.

Improved traceability: vital to brand reputation

These considerations aside, better logistics management also improves flow traceability and allows manufacturers to recall products when required—a much-needed capability at a time when manufacturers are serving consumers directly, and have to react quickly when a (suspected or proven) problem arises, so they can swiftly withdraw a product or batch from sale.

A new profit center to be exploited with care

As manufacturers manage intralogistics processes with greater precision at these new combined factories and warehouses, they are able to cater to both mass and retail production, and meet the demanding cost, quality and lead time imperatives of e-commerce. This shift gives manufacturers a competitive edge without having to invest heavily in new logistics infrastructure.

While integrating the factory into the omnichannel supply chain is essential to achieving productivity gains and capturing e-commerce opportunities, it is not entirely risk-free. Because doing so means sharing more information all along the chain—from raw material suppliers to end clients. For that reason, manufacturers must proceed with caution in order to protect their intellectual and industrial property. So as firms open up their data, they must think carefully about how to protect it, where to locate it, and how to keep control of it, and use proprietary clouds—or, at the very least, solutions that provide maximum levels of security.