Can you imagine logistics without IT?
Hardly. Let’s suppose some yogurts from a batch delivered to the supermarket are contaminated with dangerous bacteria. It would be impossible to withdraw them quickly from the market without an IT system. Today, humans are not the brains behind modern logistics.
So now the logistician must be an IT expert?
Tasks of IT companies are not limited to the delivery of software to logisticians. Distribution centers should correspond to the characteristics of stored goods. We also use warehouse automation systems, and influence the construction of the warehouse itself. We create the concept of logistics as a whole – from production, through storage, to distribution and transport. We are IT experts, logisticians and architects in one.
As quality standards keep increasing in the food industry, probably no one needs to be encouraged for modernization?
According to our experience, not more than one in two companies of this industry have value-added IT solutions. Others use HR, sales and production management systems which are unable to identify goods, or optimize the supply. In the food industry, goods vary in terms of expiry dates or storage and transport conditions. Managing this information is important from the economic point of view, and is of key significance for consumers’ health.
Are there any solutions dedicated to this industry?
Today’s logistics is based on computerized WMS systems. They optimize the supply chain and allocate the goods so as to optimize the route or the pickup, delivery and distribution processes. Several parameters, i.e. expiry dates and specification or transport conditions of specific goods, are taken into account at each stage. Voice Picking, an overlay for WMS, is a perfect solution (especially in cold stores), as it enables voice communication between the operator and the IT system. Thus, the employee does not need to use the traditional keyboard, and may execute commands with a terminal equipped with headphones and a microphone.
Computerization provides the companies with many benefits. However, the employees are often afraid of it, as it involves destaffing.
Labor is the most expensive factor in the company. IT systems can manage it more efficiently, and are able to ensure a better use of machines and devices throughout the supply chain. Administrative and telecommunication costs are reduced due to easier access to data. Operations managed by IT systems require several or even over a dozen percent less time. But the key advantage is the business growth which may reach several percent after the implementation. This results from less money being spent on logistics. Computerization does not necessarily mean any reduction of workforce, as warehouse staff may be moved to other areas.
Prior to implementing the system, each company’s logistic processes are thoroughly analyzed. In the food industry, these are particularly complex. Does it mean they are examined in a different manner?
No matter how complex logistic processes are, we always begin with an in-depth analysis of the company’s existing situation. While providing us with detailed information on company’s needs, the analysis makes sure the customers receive exactly what they want. Afterwards, we create a development analysis by indicating objectives and solutions that will increase company’s competitiveness. On the basis of information gathered from interviews and documents, we then develop an algorithm to improve logistic processes. Our task is to create a model that will provide the customer with precise answers to the following questions: is this a cost-efficient investment? What will be the costs? What is the return period?
Do the complex logistic processes of the food industry mean higher costs of implementing IT systems?
The more factors need to be taken into account when developing an IT system, the greater is our workload, and the higher are the costs. Each industry has its own characteristics. In these terms, the food market is not much different than other ones.
But the difference is that the food market was not so heavily impacted by the crisis as other sectors of the economy. Is this an opportunity for modernization?
It surely is. Compared to other industries, FMCG and the food industry look rather stable. Our customers became more cautious, but we do not see any stagnation in terms of investments. This obviously makes the management boards look for other opportunities for business growth. One of them is to invest in state-of-the-art logistics that provides huge advantages.
When does it happen?
Investment costs are easy to calculate. Direct costs (purchase of IT hardware and solutions) need to be increased with indirect ones, involved in hiring staff to manage such software. The return period is determined on the basis of business value and of the role logistics plays in overall operations. The investment in warehouse management software should be recovered within 3 years, but sometimes even 9 months is enough. It is a very good index, bearing in mind that such investments often reach from several to over a dozen million PLN.
But the risk cannot be totally avoided?
Unfortunately not, but it can be minimized. The biggest risk is that the market situation changes after you buy a solution which seemed the best possible just a while ago. Mistakes in the analysis are the second threat. If it does not account for all factors, the assumed objectives will not be met.
What would be your advice to companies who still have the computerization ahead of them?
The most frequent mistake made by companies looking for IT solutions is giving top priority to price. Generally, IT solutions are very expensive, so I would recommend to remain particularly cautious. When selecting your contractor, take account of several parameters, i.e. the experience, references, structure and financial standing. Check also if the company is able to prove the promised return on investment. It is dangerous to get involved in relationships with small companies with little capital. Today’s recession is the best example showing the consequences of investments without solid foundations.
So, paradoxically, can the crisis accelerate the computerization of logistics?
Investments in IT back-office are adversely affected by the recession. However, the interest in IT systems and analysis is very high. More and more company owners see such systems as an opportunity for growth.