Change is inevitable but transformation is a conscious choice

With social media in the Supply Chain and Industrial Property space lighting up about the new wave of Automated Distribution and Fulfilment Centres, we thought it would be prudent to go a little deeper for anyone thinking on embarking on this journey.

For Australia and New Zealand, what is clear is that 2017 will be remembered as the year where the proliferation and adoption of automation reached a tipping point, with momentum only set to continue.

There are many businesses and individuals within the sector trying to remain relevant as the landscape continues to change. But unlike vanilla industrial property and development, the next generation of facility is not a place where you can “fake it until you make it”. This is a change that will continue to lead to growing disruption in our industry as many struggle to keep pace.

We shouldn’t be surprised however by what feels like a rapid step-change in our industry. You only need to look to overseas markets to realise this not a short-term trend, but a new dawn for how businesses will operate in the region.

Relevance to our clients is everything, and we understand the importance of staying up to date with the latest trends and systems. Hence why we have this year alone travelled to 12 countries around the world via 5 separate trips to review various automated Distributed Centres (or specific elements of automated Distribution Centres) to ensure we can advise our clients on the latest trends.

A broad cross section of our team has travelled to ensure we have a broad depth of experience across all areas, including Property, Project Management and Supply Chain. But simply visiting these Distribution Centres and systems around the world should not be seen as sufficient by anyone serious about looking into this technology for their operations.

It is our firm view that automated Distribution Centres need to be treated as a symbiotic ecosystem between business operations, building and automated systems. You cannot make an informed decision on what system drives the most optimum outcome without the support of a team with experience in developing relevant business strategy, operations, property development, constructability and supply chain. A narrow, singular focus on Real Estate cannot hope to provide clients with what they need for future success.

Obviously labour costs in Australia are higher than many other developed countries and have a significant impact on business cases, but by no means is this the only reason for companies to make decisions to automate parts or all of their operations.

The levels of investment required to fund these new operational technologies is diluting the importance of Real Estate like never before. Business case approvals are now almost solely determined by what goes on within the facility, with a diminishing level of importance being attributed to rental costs.

So what other elements drive business case decisions?

• Competition, and the need to both lower costs and improve service
• The Amazon-effect
• Understanding the current and future operational volumes and range
• Time to serve
• Reviewing data and creating solutions that are both achievable and flexible
• Understanding the correct sites to suit automated Distribution Centres
• Understanding Industrial Relations and the impacts of the project
• Benchmarking operations and costs

Critical to completing an assessment of these key criteria is the ability to accurately assess the cost of the design, procurement and delivery of these integrated systems so that business case development can be robust and bankable.

At the very least clients need to be aware of the following pitfalls when considering automated warehouses:

• Cost of automation in Australia vs overseas costs
• Managing design with overseas standards
• Managing contracts with overseas providers and local developers / building contractors
• Integrated building development
• Future maintenance requirements and management

There have been some hard lessons learned in recent times by the risks associated with trying to implement a generic process that may have worked in the US or Europe, without enough consideration for local market conditions.

We have completed a number of fully automated and semi-automated facilities in 2017, more than any other advisors in Australia and would welcome the opportunity to share what we have learnt and how automation could help you into the future.