MHI Solutions Improving Supply Chain Performance
Executive Viewpoint
BY , SENIOR VICE PRESIDENT, OPERATIONS, KENCO GROUP
Back before COVID, our company, Kenco Group, was making investments in robotics and automation. We had an AutoStore Robotics Shuttle system. We had LocusBots. But we were just slowly adopting the technology.
With COVID, we learned what many others did: We had to accelerate its use. We had to shift our thinking, too. The question used to be, “How can we do that with people?” People weren’t as expensive as technology. But now, the question is, “How can we do that with automation, and supplement it with people?” We recognize that we really need to use automation as a base. That way, if everything falters again, the output won’t drop as much. We’ll be ready.
Kenco is a leading 3PL provider. We offer supply chain, fulfillment, distribution, transportation and material handling solutions. We have about 115 distribution centers across North America and have about 5,000 employees. During COVID, we saw a lot of that change. Turnover went up. There was fear of the virus. There were government incentives and families to take care of. Wages went through the roof. You could argue that was a good thing or bad thing; either way, it was necessary, but probably should have happened at a slower clip.
The result is that there were a lot less people available to work, and they got a lot pickier.
We still struggle with this, and I know we’re not alone. We’d all better recognize that the world has changed, and we’re not going back to pre-COVID. If we don’t change our processes and learn to be more nimble, flexible and adaptable, then our businesses will be in jeopardy.
I consider this “the COVID effect.” The experiences of the last few years continue to impact industry, labor, robotics and automation technology.
OK, so let’s back up to where things were before COVID. It was a good economy, a strong labor market and online retail sales were on an upward trajectory, remember? That created a certain dynamic in the industry, and a really high level of innovation in all segments of the market. The primary benefit of that was reducing costs. Return on investment came into play.
Then the world changed. The economy shut down. Industry shut down. But, people still needed their toilet paper. They still needed their toothpaste. They needed hand sanitizer and masks. Every aspect of the supply chain was thrown into the spotlight as a result. We had to shift.
The labor force almost got turned upside down. There were two things happening: There was the “great resignation,” where people 55 and older said, “Hey, this is telling me that I don’t need to work anymore. I just need to retire.” Then you had the younger, 18-24 age group that stopped working as well. We lost workers on both the top and bottom end of the labor force.
At the same time, people needed home delivery more than ever. We needed workers more than ever, but guess what? They just weren’t there.
What are you going to do? You’re going to start looking more toward robotics and automation technology.
It’s important to say this isn’t about stealing jobs. Even if everyone in the United States was duly employed, you’d still need another 3 million people. You’d still have a labor gap. That’s a problem, and it’s driving the introduction of robotics and automation at lightning speed. It’s changing the businesses of suppliers and manufacturers and even the end-users.
Before COVID, it was the Amazon effect: You clicked a button, and you had whatever you needed in two days, whether you really needed it in two days or not. COVID turned that into a week or 10 days because of not having the materials, or maybe having nobody to pick and pack.
Now, companies are starting to ask about the value of two-day shipping. Do customers really need that item in two days, or would they be interested in a discount with later delivery? The mindset is, “Maybe we can look at this a little differently.” There will be a balance between service and needs, and it will impact the use of robotics and automation, rippling through the supply chain.