Automate or Be Left Behind: Why 4PLs Providers Should Embrace Digital Transformation

By Jens Bohnwagner, CEO, XSQUARE Technologies‍

The world of logistics is undergoing a rapid transformation. E-commerce continues to soar in Southeast Asia and is forecasted to grow to a Gross Merchandise Value of $230 billion by 2026. As the industry burgeons, consumers are also demanding faster delivery times and a wider selection of products. This puts immense pressure on 4PL (Fourth-Party Logistics) providers, who are tasked with managing the entire supply chain of their customers.

For 4PL providers, gone are the days of relying solely on manual warehousing and fulfilment processes. With mounting pressure to streamline operations, improve efficiency, and deliver exceptional customer service, automation is a critical solution for them. 

The bottlenecks of manual processes

Traditionally, 4PL providers have relied heavily on manual labour for picking and packing orders. While this approach might have sufficed in the past, it presents several significant drawbacks in the modern business landscape. Picking and packing are labour-intensive, requiring long hours to complete and creating a significant drain on budgets. As Southeast Asian economies continue to rapidly develop, labour costs will rise in tandem to manage inflation. Just this month, the minimum wages across Vietnam rose an average of 6%. Meanwhile, Thailand plans to raise its minimum daily wage starting in October, a 14% increase from the current standard. Soon, blue-collar workers will no longer be a cost-effective option in this part of the world – the cost of relying heavily on them will quickly eat into profits and hinder overall growth potential.

Manual processes also often involve repetitive tasks and heavy lifting, which means the risk of injuries is high, resulting in unplanned downtime and loss of productivity. At the same time, manually tracking shipments, managing inventory, and optimizing transportation networks present intricate challenges and foster a breeding ground for human error – a concerning prospect in a region experiencing an e-commerce boom with existing customers purchasing more, and new customers entering the fray daily.  Any delays and lost shipments will translate into a trail of unhappy customers and a dented reputation. 

Automation for 4PLs

Automation is transforming the role of 4PL providers. By streamlining processes, boosting efficiency, and generating valuable data, automation empowers 4PLs to become the central nervous system of their clients’ supply chains, delivering exceptional value. 

Automated warehouses operate like a symphony: Storage and retrieval systems, featuring robots or cranes, efficiently manage goods to maximise space utilisation. Conveyor belts seamlessly transport products, accelerating picking and processing. Autonomous robots (AGVs and AMRs) navigate warehouses independently, ferrying pallets and goods, eliminating manual intervention.

For an automated warehouse to run smoothly, efficient implementation of software plays a central role. An Intelligent Warehouse Orchestrator Software which serves as the warehouse brain, connecting to Warehouse Management Systems (WMS) and sub-systems, like ASRS, shutter doors, conveyor belts and others for interoperability to orchestrate process flows across these sub-systems and overseeing inventory levels, order fulfilment, and overall operations. This real-time system provides complete stock transparency, streamlining picking and packing. Powerful data analytics platforms analyse vast amounts of supply chain data, identifying trends, predicting demand fluctuations, and enabling data-driven decisions for optimised logistics strategies.

As Southeast Asia witnesses increased investment in technology and infrastructure, the costs associated with implementing automation solutions will decrease, facilitating seamless implementation. However, the upfront costs of automating operations can still be daunting to some. This necessitates a shift in perspective – rather than focusing solely on rapid cost recovery, 4PLs must evaluate the long-term return on investment (ROI) from automation. 

By reducing reliance on manual labour, 4PLs adopt a more cost-effective and worker-friendly approach to managing surges in demand. This, in turn, mitigates turnover and helps the business cope with the rising blue-collar labour costs. Simultaneously, increased accuracy contributes to higher customer satisfaction and increased likelihood of repeat purchases.

Here’s how: 

Benefits of automation for 4PLs

Automation frees up human resources for more complex tasks like strategic planning, innovation, problem-solving and customer relationship management. Repetitive, time-consuming processes can be handled by automated systems, leading to faster order fulfilment and improved overall process flow. Automation also minimises human error, leading to fewer inventory discrepancies, shipping mistakes, and associated costs. This translates to amore reliable and cost-effective operation. At the same time, employees can be exposed to reskilling opportunities that will empower them to focus on higher-value tasks.

Unlike manual processes, automation can be scaled up or down to meet fluctuating demand without labour constraints. This allows 4PL providers to adapt to changing customer needs and seize new opportunities. 

At the same time, automation enables access to real-time data insights which can empower 4PLs to make informed decisions regarding inventory management, resource allocation, and process improvement. This data-driven approach fosters a more optimised and responsive supply chain. 

Automation also eliminates the need for employees to perform hazardous tasks such as handling of heavy materials, or working near moving machinery or harmful chemicals. This creates a safer working environment for employees and reduces the risk of injuries. Faster order fulfilment, improved accuracy, and real-time order tracking all contribute to higher customer satisfaction and loyalty. Automation empowers 4PLs to deliver a consistently positive customer experience.

Embarking on the automation journey

Taking the first step towards automation can seem daunting, but the long-term benefits far outweigh the initial challenges. In today’s competitive e-commerce landscape, adopting automation is not just an option anymore; it’s a necessity, especially for 4PL providers who want to thrive. By partnering with the right automation solutions provider, 4PLs can embark on their automation journey with a scalable plan, ensuring they stay ahead of the curve and deliver exceptional value to their clients.

‍As published in Tech Collective. Read here: https://techcollectivesea.com/2024/08/02/automate-4pls-providers-digital-transformation/