The maritime industry is fraught with challenges and ports have been tasked with handling ever-greater amounts of cargo as the global economy and demand for containerised goods refuses to abate.
Consequently, ports not only have to handle more cargo but must find re-examine their entire purpose and place in the supply chain; critical to this reappraisal is the role of warehouses, which can be central to trade coming in from sea and going out to the hinterland.
For that reason, warehousing is one of the fastest growing areas of port operations and is seeing high levels of investment in physical infrastructure and automation equipment and software.
A study from McKinsey in 2019 suggested that the transportation and warehousing industry had the third highest potential for automation. This can be attributed to the growing rising e-commerce industry and a gradually shrinking workforce, particularly in more advanced economies.
Scott Weiss, Vice-President, Business Development, Port Logistics Group (PLG) told PTI that he expects to see greater levels of automation across port operations in the near future.
“There is some automation, but they need much more than what they have been able to install today,” Weiss said.
“Warehouses need to, and will continue to, pursue automation options in order to improve productivity.”
According to Weiss, storage and distribution have become increasingly important for the global supply chain, especially at ports.
“It [storage and distribution] is more important than ever, particularly with the growth of e-commerce, same day order fulfilment and the need to have instant gratification to receive – i.e. the Amazon Effect.
“You can have the greatest product in the world but if your orders do not get fulfilled accurately and on time you will suffer.”
As for what trends the port warehousing industry will experience, Weiss said he expects to see “more robots, continued e-commerce growth and continued drop shipping by retailers.”
Drop shipping has become an increasingly popular supply chain trend where retailers transfer orders to manufacturers or wholesalers, which then transfer goods directly to customers.
This allows retailers to increase their profit margins and cut costs, but also increases the burden on warehouses, which must then directly ship goods themselves. The trend is growing so fast that warehouses are now being built that specifically cater to drop shipping.
Automation allows warehouses to operate more efficiently while processing an increasingly high number of goods. Innovations such as Warehouse Management Systems and Automated Storage Systems allow ensure space is utilised and consume less energy.
Warehouse automation includes traditional technology, such as forklift trucks, sorters and conveyors, as well as the robotics Weiss mentioned.
Equally, warehouses have become pivotal to a number of overarching macro-economic industry themes, the largest of which is the aforementioned Amazon Effect, a term used to describe the phenomenon where companies have to ensure they placed as close as possible to the end consumer market due to the growth of e-commerce.
A consequence of the Amazon Effect has been the concept of Port-Centric Logistics (PCL), where ports look to utilise their location and access to markets by becoming central to a company’s supply chain.
“More warehouse space is needed to due to e-commerce growth and returns, more warehouses will need to be closer to the end consumer,” Weiss said.
“There will also be more use of drones for outbound deliveries and more self-driving.”
Driving Innovation
The role of automation has been one of the foremost topics in the port and terminal industry in recent years and has since been joined by smart technologies, such as artificial intelligence (AI), blockchain, machine learning and big data analytics.
Not only can the flow of traffic be improved inside the warehouse, but the building itself can be a hub of digital analytics and help goods to be moved seamlessly from the sea to the hinterland, and beyond.
Amir Rashad, CEO and Founder, Centresource Technologies, said the biggest benefit AI has to offer ports is “digitally linking terminals with warehouses” and “real-time tracking to facilitate better planning or resource utilisation”.
“This would include tracking of what cargo will not make it by deadline and seeing and seeing if significant cargo will arrive in a time slot,” Rashad said, explaining that operations can become backlogged in the warehouse or elsewhere without such foresight.
“The role of warehouses is ever so important because they act as the hub. Increasing efficiency only in-between the hubs cannot improve the whole network in itself.
“The distribution centres and the transporters of cargo need to coordinate in their efforts to improve the whole chain of logistics. When the goods are not stored and loaded in the most efficient manner.
“The efficiency of the transporter cannon cover for this lost time, thus a truly strong supply chain encompasses improvement of all elements.”
Enabling Ports to Realign the Supply Chain
Central to any port’s PCL business is cutting the number of ‘in-between storage facilities’ which consequently reduces the number of miles travelled by cargo and costs.
“In essence, [PCL] is the idea of integration between ports and distribution facilities. This of course would mean increasing the complexity of port operations as well as an increased need for accuracy, which can be supported by introduction of higher levels of digitalisation.”
The COVID-19 pandemic has exacerbated the need for more advanced and efficient storage operations; as exports from China resumed, ports were put under yet more pressure and warehouses were left at near full capacity, especially on the US West Coast. This had knock-on effects across the supply chain and caused chaos for haulage providers, freight forwarders and operators.
Logistics providers across the US have increased their warehouse capacity to cope with the increasing demand. In November 2020, the Georgia Ports Authority announced that World Distribution Services (WDS) was to expand its presence in the Port of Savannah with a new 280,000sq ft warehouse.
PhilaPort, also known as the Port of Philadelphia, announced in March 2021 that it had broken ground on a new 201,621sq ft near-dock facility at a cost of $42 million, which it said will help it attract new shippers and ocean liners.
Speaking to PTI PhilaPort said the facility and warehouses in general were “critical” to its growth strategy and plans to utilise smart technologies. “We need to check boxes every day, technology can only help achieve our goals more easily,” the company explained.
The need for smart warehouse operations is not limited to the US and a number of newbuilds have opened or are under construction globally.
DP World revealed in March 2021 that it planned to fast-track a 146,000sq ft warehouse at London Gateway to meet growing regional demand and an expanding e-commerce sector.
Craig Moore, Head of Commercial, DP World London Gateway Logistics Park, told PTI he expects warehouse investment to continue in the coming years, especially in automation.
“To meet increased customer demand, we must investigate existing and emerging technologies. We have invested nearly £2 billion into the UK economy over the past 10 years – much of this driving forward the automation of our sites.
“Over the next 10 years we have earmarked around £1 billion of investment for further expansion and improvement of the UK’s trading infrastructure.
“Automated technology continues to improve, which in return means the reliability and process improvements delivered by automation also increases. Automation can deliver real time visibility, reduction in pick errors and consistency, and often outweigh the capital investment.
“There remain some complications around training and highly variable operations, but for everyday logistics and warehousing it is the future.
Regarding other technology, Moore said he expects to see a greater role for machine learning and advanced data analytics in warehouse operations in the near future.
