2024 Technology Roundtable: Tools to manage the new complexity

It might be considered a monstrous understatement to say that the freight transportation landscape has become pretty complex over the last few of years. Fluctuating rates, capacity constraints, the persistent labor shortage, Yellow’s bankruptcy and about a dozen other domestic and global events have all pushed transportation and logistics optimization further out of reach for many companies.

In the meantime, changing customer expectations—namely, delivery times in both B2B and B2C—are putting more pressure on shippers to tighten up their transportation management approaches. In response, more logistics operations now absolutely must turn to software and automation to help them reduce costs, improve visibility, enhance productivity and make better decisions across the board—both inside the four walls and in transit.

But with so many bits and pieces of such capable technology now available, how do we put those pieces together to offer some practical solutions to this “new complexity.”

As with any journey, it starts by taking the first step. To help us along this path, we’re joined by:

Brock Johns, senior principal analyst at Gartner;

Norm Saenz, partner, managing director at St. Onge Company;

Howard Turner, director, supply chain systems at St. Onge Company;

Dwight Klappich, vice president, fellow at Gartner.

TMS: Now Mission-Critical

Logistics Management (LM): From your unique perspective, how would you define the transportation management environment shippers find themselves in?

Brock Johns: Last year I used the word ‘chaos’ to describe the situation. However, you already hit the keyword in all of this, and that’s ‘complexity.’ For some organizations, transportation management is straightforward. However, as organizations grow, expand geographically, or need to support different modes of transportation, it gets really complicated, and that can happen quickly. And this is just what’s happening internally for an organization.

When you add in some of the external things you mentioned—rates, constraints, shortages—complexity for the logistics and transportation teams skyrockets. I think the average person just doesn’t understand the intricate nature of managing the flow of products from point A to point B. All of this puts many shippers feeling as if they’re back at square one and asking themselves how to get a handle on all this complexity.

LM: Based on this challenging environment, what would you say are the biggest transportation management challenges facing shippers at this point in 2024?

Johns: Cost optimization is always a top concern for transportation leaders, and there have been some signs of relief on that front early in 2024. However, I don’t think they can assume things will be easy the rest of the year. Disruptions are already happening with tragic accident involving the Baltimore bridge collapse and its impact on the port, attacks on vessels in the Red Sea, and low water levels affecting the Panama Canal.

All of this focus on risk and disruption comes back to a big challenge for shippers, and that’s improving their levels of supply chain visibility.

Another challenge we’re seeing for some shippers is that they either have legacy, on-premise transportation management systems [TMS] technology and are trying to figure out the path to migrate to cloud, or they have some type of homegrown solution that’s no longer capable of supporting their needs. So, it’s just a challenge for those shippers in migrating or finding a TMS in 2024.

LM: Taking those challenges into consideration, how do you see TMS evolving to help shippers meet today’s evolving challenges?

Johns: We think that one thing has really crystallized for shippers over the last couple of years: They need technology to help them manage transportation operations.

We see companies of all sizes and complexity levels seeking TMS applications to help manage the increasing complexity. TMS solutions provide immediate benefits from the automation of so many manual and repetitive tasks, freeing up limited resources to focus on other projects or areas to reduce costs and improve customer service.

The ability of a TMS to help automate the transportation procurement process and access more carriers via spot quote functionality is another great tool to help optimize costs. A TMS can certainly help to improve visibility for an organization, especially if they have not had a TMS before. It can reduce the number of phone calls and e-mails just to verify that shipments have been picked up or delivered.

More advanced solutions can even provide predictive ETAs and help shippers better manage customer expectations and even better plan resources within their own warehouses.

LM: Shippers are looking for fast ROI. What would you say are some of the biggest benefits shippers are seeing by putting a TMS to work?

Johns: Automation and process efficiency, improved visibility and customer satisfaction, and faster transportation sourcing and procurement capabilities are the big ones I just touched on. We also see companies benefiting from the embedded analytics and reporting within the TMS, allowing a shipper to get faster access to data to improve decision making.

Interestingly, we’ve also seen an increase in the number of companies exploring the potential of using the settlement capability of a TMS to help them with a match-pay process for their freight bills.

Enhancements in freight procurement, analytics, artificial intelligence (AI) and machine learning (ML), automation, support for more modes of transportation [e.g., intermodal, parcel, rail, air, and private/dedicated fleets], and visibility have added to the value of a TMS.

LM: With so much talk revolving around AI these days, how are vendors working to integrate more advanced options into their platforms? What are you seeing and what is the reality today in terms of AI as a support tool to TMS?

Johns: The good news for shippers is the market has solutions to support them regardless of size and complexity, and the vendors in this market are listening to their customers and adding capabilities to support the challenges in transportation. The most advanced TMS solutions have evolved to support the most complex transportation operations and have more capabilities in areas such as transportation planning and optimization.

The use of AI/ML has become commonplace in TMS technology solutions. More advanced solutions are leveraging AI/ML to improve predictive ETAs, automatically adjust delivery time windows, and provide dynamic appointment management. Transportation forecasting leverages AI to augment predictive demand forecasting for transportation requirements.

It pulls data from historic shipments, as well as from planning data, to predict future need for transportation. We can also see the potential of GenAI on the horizon for TMS as well.

LM: You touched on sustainability efforts last year, as it has made its way back to the forefront of corporate consciousness. Are you still seeing these efforts, and what role would a more advanced TMS play in helping shippers meet these goals?

Johns: We still see shippers and transportation leaders seeking answers and solutions when it comes to sustainability in transportation. I think for many shippers it’s still a learning curve, and the TMS vendors are increasingly able to help them get started. All the major TMS vendors are offering some level of sustainability capabilities within their base products now.

These capabilities include emissions and carbon calculations as well as the ability to provide meaningful data and reporting. And, it’s important to note that this reporting is typically based on and aligned to Global Logistics Emissions Council (GLEC) standards, which helps accelerate the learning curve for shippers.

Beyond the reporting and data capture, these solutions can help the shippers see the impact of consolidating orders and shifting to greener modes of transportation as they build and optimize their transportation plans and routes.

Shippers, particularly retailers, can also use this type of data when offering delivery options to their customers during online checkout. Shippers can now optimize based on cost, service level or environmental impact, or a combination of all three.

LM: Any way to define the capabilities of a truly advanced TMS and the big-picture benefits shippers may be able to realize five years from now? What will an advanced TMS system look like in action?

Johns: The expectations of the shipper is that the most advanced TMS offerings will have it all. But the reality is, at least for larger and more complex shippers, that’s unlikely to happen. What’s more likely is that the TMS will increase in importance and be seen as the hub of their broader transportation technology ecosystem.

It will sit in the middle of this ecosystem and act as transportation’s system of record while interacting with a variety of other transportation technologies and applications. It will be sending data and information out, while pulling data and information back in to help shippers orchestrate the end-to-end transportation process.

As this happens, we can expect to see improvements in how transportation interacts with other areas of the supply chain, from planning and manufacturing all the way through returns.

Automation: Time for a reality check

LM: Let’s start inside the four walls. How would you define the current environment inside our nation’s warehouse and DC/fulfillment operations as we hit the mid-point of 2024?

Norm Saenz: We’re seeing larger projects, involving end-to-end supply chain evaluations to look for large-scale cost saving opportunities. There are fewer single-facility projects, with many companies looking for larger network-wide savings.

This may include logistics optimization strategies, facility consolidations, automation evaluations, labor standards adjustments, staffing/shift alternatives, and investigating incentive pay programs.

LM: With this new reality in mind, what would you say is the biggest challenge brought on by this still unsettled environment?

Saenz: Labor costs and availability remain the top challenges for warehouse/DC operators. Managing labor resources is the primary goal for our clients, which pushes the focus on labor productivity, standards, and management software.

LM: Our recent survey numbers reflect that investment acceleration that took place during the pandemic cooled a bit recently. Considering your time in facilities, are you seeing a slowdown in automation? Or are we just trying to catch up and get new stuff running?

Saenz: Many companies put a lot of investment into automated systems and are finding that it takes longer than expected to realize the benefits. This can simply be the result of typical lead times when dealing with complex systems to fabricate, install, integrate and test.

Some of these longer lead times are a result of racing to automation without an informed specification to define requirements and span of control/integration requirements. The integration and testing period can lengthen if you’re not following this process.

We recommend not rushing into a solution, and just as important, not rushing to select the automation supplier. Take the proper time to plan, design, and write a detailed specification/RFP when making these million- dollar decisions.

LM: Considering where we are in this point in time, do you see any predominant technology trends being applied? And if so, do you see any trends catching on and accelerating?

Saenz: Labor and warehouse management software are important to ensuring you have standard processes and management of inventory, activities, and labor. These systems are needed even when automation makes its way into the operation. The processes surrounding the automation are critical to the success of the integrated systems.

LM: From a practical perspective, and understanding that every operation has different challenges, are there any specific automation solutions that seem to be working better in terms of meeting common challenges?

Saenz: One of the primary objectives of automation is to lower labor costs, so the more labor intensive the operation, the better chances of an attractive return on investment. The majority of labor is in order fulfillment, which often includes walking to pick locations to obtain products. The goods to person technologies, like shuttles, carousels, VLMs, and AMR shelf systems are great automation candidates.

LM: The talk about robotics continues to fuel many conversations these days. What are you actually seeing in terms of robotics being applied in your day-to-day work with clients?

Saenz: You have to remember that the majority of warehouses are manual [walking with pick carts, pallet riders] or mechanized [i.e. pick modules and sorters], but almost all warehousing projects today include the evaluation of automation. We currently have multiple automation projects in the planning, sourcing and implementation phase. And, a growing number have attractive ROIs and get approved, but many struggle to make the desired hurdle rate.

LM: Considering all of the innovation and automation solutions available to us, are there any tried-and-true pieces of equipment, software, or automation that continue to be overlooked as a solution to today’s pressing challenges?

Saenz: The tried and true remains stepping up from a manual/paper-based operation to a mechanized facility using state of the art warehouse management systems (WMS) and labor management systems (LMS) software. These technologies continue to develop and make big differences in an operation.

If you’re already there, with a well-run mechanized facility, then it’s time to look at the viable goods to person technology on the market. These various technologies, such as AMRs, autonomous lift trucks, shuttles and more are becoming more competitive in terms of pricing.

LM: Because so much attention is being put on the benefits of automation, are there any myths you can dispel in light of the variety of solutions available to us?

Saenz: The biggest myth is that you can put an automated system into any facility and get immediate results. The facts are that it takes detailed planning and sourcing process with a well-defined specification package to ensure you have the proper span of controls, item master data, integration design, testing and application to make it work as expected.

LM: What advice do you have for logistics operations managers who are looking to accelerate their use of automation?

Saenz: I don’t recommend adding automation into a broken process. My advice is to first evaluate and improve current processes, systems, material handling equipment and material flow—and make sure there’s proper training, management, supervision, and accurate labor standards.

When ready to evaluate automation, update your facility drawings, collect and validate item master data [item size and weight], and ensure you have the proper historical and forecasted planning data.

Spend the proper time to evaluate your current state and lower cost improvements to meet your future demand, and then evaluate the automation that can make a big difference to lower labor costs and improve service levels. Once evaluated into a strong business case, take the design to the market with a well-defined specification/RFP to source from the best supplier.

Software: SCM takes control

Logistics Management: From your unique experience working with clients here in the middle of 2024, how would you best define the current environment inside today’s logistics operations?

Howard Turner: We continue to see companies that have made a decision to assess their fulfillment operations to be sure they’re prepared to adapt to changing market conditions and they’re operating as efficiently as possible. In the past year, I’ve worked with multiple clients that also see this as an opportunity to upgrade legacy software and aging warehouse automation.

In many cases, I have had clients request replacement software and warehouse equipment that will last another 20 years. Needless to say, I refrain from making that guarantee. What’s interesting is that as a byproduct of the maturity of warehouse management systems (WMS) and many types of warehouse automation, upgrading these systems affords the opportunity to start with a clean slate. As a result, our clients are very interested in what current technologies have to offer.

LM: What are the most fundamental challenges you’re seeing in today’s operations?

Turner: Just the ability to adapt to changing market conditions. For example, we deal with traditional wholesalers that are trying to expand into different sales channels. Typically, the focus initially is on the required operational changes. New order profiles are introduced, so the initial concern, understandably, is how to pick and ship these orders efficiently.

Let me continue with this example. It’s equally important—although sometimes overlooked—to effectively allocate inventory at preferred warehouse locations so that these orders can be efficiently picked. This speaks to software. The biggest challenge facing our clients here is to understand if this can be accomplished in their existing WMS, if a new WMS is needed, or if a new technology altogether like a warehouse execution system (WES) is needed.

LM: As I mentioned earlier, recent research shows that software invest has cooled a bit since the big “acceleration” that happened during the pandemic. In general, what are you seeing inside client operations in terms of software invest?

Turner: Based on personal anecdotal evidence, I suspect that may be due to companies re-evaluating their software strategy. As I alluded to in the previous question, there’s overlap in functionality between software systems. Quick example: A recent client decided they needed a TMS because they needed warehouse dock scheduling capability. While this is a component of several TMSs, this functionality can also be found in a YMS or WMS.

Another factor in re-evaluating a software strategy is when upgrading multiple systems. Is there a preferred order to the system upgrades? Over the past year, I have participated in several strategy sessions to determine if the WMS or ERP should be upgraded first or concurrently. Same with WMS and LMS, or WES/WCS and WMS.

I suspect that re-evaluating the software strategy to obtain clarity on a path forward has led to a bit of paralysis in pulling the trigger to upgrade software. I don’t doubt the findings of your research, but I still personally see a fair amount of demand for new software—along with the desire to deploy it intelligently.

LM: When you offer advice to clients, what steps do you suggest in order to push those operations who may have been a bit reluctant to making the leap to software and automation?

Turner: The advice I offer is to start with creating a vision for future state operations, maybe four to five years out. This is obviously based on a huge unknown—the future—but that has to be a starting point given the cost and effort involved with deploying large scale software like a WMS.

The good news is that the future state does not have to be exact, in fact I recommend creating a vision that includes slight variations to account for potential business changes.

Then do the engineering work to determine how to best support that vision in your fulfillment center. Does the vision clearly identify a need for advanced warehouse automation like robotics? Meaning that an engineering analysis can identify an automation use case in your operations that clearly shows an advantage over other alternatives.

What will be the ideal way to receive product? How will your inventory change given projections of future volumes? What are the key pain points in your operations that you would like to see eliminated in the future?

What you find from this endeavor is a clear set of requirements that will essentially pick your software solution for you.

You will clearly know if and what type of WMS is needed; the types of other systems [e.g. YMS, LMS, slotting, WES/WCS] that are needed to benefit your operations; how they all need to integrate with new and existing systems; and the timeline/effort/cost to deploy these systems to support your future state vision. This is the advice and the type of discussion that we have with our clients.

LM: From a high level, what role do you now see supply chain management software playing in overall logistics and supply chain operations?

Turner: Put simply, companies depend on SCM software for their supply chain operations. Having real-time inventory data is a critical component for shippers to allow for fulfilling orders. It’s not just a competitive advantage at this point because the capability is so prevalent. It is now
a minimum requirement for order
fulfillment operations.

SCM software is at the core providing real-time inventory visibility. It starts will properly accounting for inventory expected and received into a facility. It ends with accurately picking and shipping orders. It’s maintained by continuously monitoring and validating that inventory in the warehouse matches what is expected in the SCM software tools.

LM: What are some the biggest benefits you’re seeing SCM software help operations realize both inside and outside the warehouse/DC operation?

Turner: Good SCM software, when properly implemented, provides the ability to optimize operations with little to no user input while at the same time allowing operators to have the manual controls needed to be flexible to adapt to changing operational needs. Systems that offer flexibility to manually take control as needed offer an advantage to warehouse operators.

For example, it’s great that a WES can be configured to execute picking tasks for the steady flow of orders that make up daily operations. But what happens when exceptions to daily operations occur? How can the WES adapt peak periods? Or the times when certain pick modules are not accessible? Will the WES allow the user to manually select pick modules to bypass as needed and adjust allocation rules to accessible modules?

Advancements in artificial intelligence (AI) and machine learning offers promise, but the ability to manually take control and drive operational decision making on occasion is still of value.

LM: Indeed, there’s so much talk about AI today. Where do you see AI going and how do you see AI integrating with SCM software? What capabilities will it bring that we don’t have today?

Turner: This is a great follow-up to the previous question. As I previously stated, advancements in AI and machine learning offers promise as it pertains to executing routine tasks and reacting to unforeseen events.

The word ‘promise’ is probably not correct because there are plenty of examples where shippers are benefiting from AI and machine learning capability. But we’re still scratching the surface in terms of AI deployment along with full utilization where AI exists in current systems.

What’s particularly interesting to me are AI tools that exist in the decision-making space. These decision engines work by integrating with existing multiple SCM software—ERP, WMS, WES, order management, demand planning—to consume data, identify pain points, provide predictive analytics and recommend decisions to optimize operations.

This approach is intriguing because this essentially provides an AI powered digital assistant to sit beside shippers and provide decision recommendations [staffing/workload balancing, order release strategies] based on real-time data.

LM: With that in mind, where do you see SCM heading in the next five to 10 years? Where do you think all of this advanced technology might take a logistics operation?

Turner: Connecting all the dots, or systems, across the supply chain has to be the ultimate objective. This is where I see this heading in the immediate future. There’s a through line connecting API integration, cloud computing, data lakes/warehouses, AI and internet connected devices and warehouse automation. These all allow systems across platforms to share data and communicate.

Because ultimately, the access to information across the supply chain, regardless of system, regardless of organization, software vendor, or platform, will provide the visibility needed to best react to ever changing business conditions. AI provides a means to consume the vast amount of data, to filter what’s relevant, and then the computing power to quickly evaluate alternatives to provide a best path forward.

LM: For those logistics operations managers who like the idea of what you just described, what steps do you suggest they take to start moving in the right direction with their SCM software adoption?

Turner: We recommend companies take stock of their SCM software tools that are already in place. Preparing a software landscape diagram and simply identifying the key functions that are supported by each SCM software is useful in determining how system utilization can be improved.

It also points to the various data sources. Typically, with each SCM software, there are reports/dashboards that are critical to running daily operations. Again, creating a catalog of those reports and dashboards helps to ensure that future SCM updates do not overlook the information critical to running the business.

Finally, enabling data lake/warehouse capabilities to collect data from various SCM software into a single database could allow for later layering AI decision making capabilities without significant upgrades or replacement of systems.

Centralizing this data also provides an access point to key metrics that can be used to evaluate the effectiveness of future changes. It also prepares an organization for the future state objective of interconnected supply chains.

Robotics: Enthusiasm is translating into investment

LM: How would most realistically define the current environment inside today’s warehouse and DC/fulfillment operations?

Dwight Klappich: Logistics organizations remain under extreme pressure to continue to perform at high levels of productivity while they face rising labor costs and growing availability constraints. In a recent Gartner study, 51% of respondents said that rising labor costs was their primary reason for investing in automation and robotics, while 49% said it was growing labor shortages.

An interesting observation was that in last year’s study the numbers were 41% labor cost and 59% labor availability driving interest in robotics. In talking with hundreds of companies, we believe that this shift is largely because many companies have been trying to pay their way out of their labor challenges with higher hourly wages, signing bonuses, and incentives.

Another interesting offshoot of this is that we’ve seen an increased interest in warehouse labor management largely to help companies drive employee engagement to address the unprecedented challenges of attracting, retaining, and motivating an increasingly demanding, yet fickle workforce.

LM: How far do you think we’ve come in the application of robotics since we did the last technology roundtable last year, and what’s the prime motivation for robotics adoption today?

Klappich: Robotics demand, and more importantly deployments, continues to be strong and companies are investing. In the same study mentioned above, when we asked about their investments in robotics, 32% of companies said that they have already secured financing for robots; 44% said they’re actively in the process of securing funding; and only 24% said they do not currently have financing in the works.

On the deployment front, 43% of respondents said they were either fully deployed (13%) or partially deployed (30%); 31% were actively implementing; 19% piloting; and only 8% doing nothing. Furthermore, we now see a few flexible robotics vendors like Locus Robotics and Geek+, plus some others, starting to pull away from the pack with hundreds of customers, hundreds of sites and tens of thousands of robots deployed.

LM: Indeed, there’s little doubt that the robots have arrived inside our operations. With this in mind, what levels or types of robotics are you seeing put to use now?

Klappich: They have arrived. Gartner’s current study found that 92% of respondents to the study now say they’re either currently or planning to invest in intralogistics smart robots (ISR). A critical point to note on this study is that it’s cross industry, cross geography and cross size company, so this isn’t data from only very large companies in big markets like the United States and Europe.

By the way, Gartner defines ISRs as ‘the class of smart robots that orchestrate and perform work within the four walls of a site, and can be mobile or stationary, operating autonomously or collaboratively with humans or other robots.’

We’re tracking 34 different sub-categories of ISR, but a handful of these make up the bulk of demand today.

We break these into the following: transport; mobile-goods-to-person [G2P]; collaborative picking; sortation; mobile manipulation [e.g., picking, packing, palletizing, de-palletizing; and grid/hive robotic systems. Mobile G2P and collaborative picking are the highest volume in sheer numbers of robots with transport and grid
robotics close.

LM: You defined the ‘heterogeneous robotic fleet’ several years ago. What does that look like today and how are operations managing it?

Klappich: We’re starting to see an evolution of the robotics market moving from a single robot platform doing a single task to holistic robotics systems being deployed where different types of robots [i.e., heterogeneous fleets] are delivered as an integrated solution.

These holistic robotic systems maintain the advantages of flexible robotics while approaching the seamless integration of large-scale, conventional automation at a fraction of the cost. The key manifestation of this trend is the requirement for a new category of software, that we call a multi-agent orchestration platform, that will integrate, orchestrate, optimize and observe the flow of tasks and activities across the fleet.

LM: What does this robotic fleet look like five years from now?

Klappich: As noted above, we’re already seeing the emerging trend of companies and systems integrators delivering holistic robotic systems. While these will not replace large scale conventional automation where it makes sense, what it will do is expand the market for automation to companies of all shapes and sizes—and even in geographies where maybe labor is not as big an issue.

The key is maintaining the benefits of ISRs which is flexibility, adaptability, scalability, and faster time to value and payback. We believe the trend is heading in the direction of lights-out warehouses, but today I would say we’re maybe dark gray. But, by moving towards holistic robotic systems, companies will move more and more in this direction.

LM: What advice do you have for logistics operations managers who are looking to move toward robotics solutions?

Klappich: Gartner research finds that while demand for robotics is high, many companies struggling to move forward for several reasons.

A couple of the notable challenges we find companies facing are lack of internal robotics expertise, inability to find experienced systems integrators,
and difficulties identifying the right business case.

To address these challenges, we find that leading-edge companies on the forefront of robotics adoption are addressing the above challenges by creating robotics competency and
collaboration centers.

Companies can leverage the equivalent of competency centers to formalize their processes and use these centers as focal points for driving
successful robotics adoption across their organization.

Robotics competency and collaboration centers play some of the following roles: Knowledge gathering; education; business case development; problem solving; socializing robotics solutions across their business; and laying the groundwork and policies and procedures for governance and control.

Without a cohesive organization that supports many of the roles outlined above, companies will struggle to successfully exploit robotics to the degree they might have. While many companies might not call their organization a competency center, we do see the most aggressive adopters of robotics having the equivalent.