Co-location of Hubs Could Save Megastores from Demise

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The role stores are playing has changed dramatically and retail is rethinking the way it looks at them. Logistics needs to stay on top of the changes and be aware that soon stores will become local distribution hubs. We spoke with Russell Holmes from Autostore about co-location and how stores are being transformed into automated hubs, the push toward onshoring and more.

What is the state of onshoring at the moment according to what you see happening on the market?

We have been seeing onshoring occur in strategically chosen verticals like in the medical and technology sectors where there has been overdependence on supplies coming from a single country. It has more to do with it being government driven and with a focus on R&D in the UK in those sectors.

Onshoring in general has been accelerated by the realisation there is an overdependence on globalised supply chains. Covid also played its part. For example, the fashion industry in the UK has an 22% import rate from China but at the same time China’s exports’ rate dropped by 33% in the course of three-month period at the start of the pandemic.

This has had a big impact on local shops in the UK and the e-commerce market.

Supply chains, specifically in the UK, have also been shifting pre-Covid with the UK’s strategy for bringing production back. Brexit is also having an impact on the way UK supply chains behave and what the costs of handling cross border orders means.

Some companies are completely onshoring to the UK but there is also a trend of near shoring. Eastern Europe is picking up many of them. The apparel sector, in particular, has been taking advantage of localised clusters where there is already existing infrastructure. Labour costs have equalised around different locations too and this makes the decision easier to nearshore and/or onshore completely.

Would there be enough capacity for companies who want to bring their production to the UK?

We have absorbed quite a lot of the local labour already. We are also running out of space in general.

So if companies decide to bring operations to the UK they first need to know where they will put them and how they will operate them. Would it be attractive to build a new warehouse, if you can find the space for it, and can you operate without any kind of automation? There is a very strong competition for labour and we are seeing high signing bonuses.

Automation is able to support this and gives companies the ability to go to a smaller, already built, facility. Technology like Autostore’s offers around 75% reduction in footprint. This means that companies would be able to be closer to their customers and are not just stuck at a large industrial estate outside the city. In addition, organisations can run their operations from facilities that they already have but would not have been previously attractive.

The physical distance is also being reduced and the environmental impact is being lowered through shorter ‘last mile’ operations. Operating smaller facilities reduces operational costs.

Wouldn’t having smaller and more facilities be more expensive than a single hub?

Large facilities have a few challenges. All problems are focused in one single place and the business is absorbing the available labour in the local area. The benefit of breaking it down into smaller hubs certainly outweighs costs. Centralised hubs would still be needed. – As the main cross dock centre.

How are automated systems evolving

Russell Holmes explains how the Autostore solution has developed during the years. ‘Up until recently it was built to handle smaller, slow moving products like spare parts. Our Router software has enabled us to operate a lot quicker and the size of our grids have expanded.’ In the UK, Autostore is implementing large scale facilities within the apparel sector. A Swedish client, Boozt, is able to operate over 700 robots and can handle around 25 thousand products per hour, across a 1million tote location storage grid. Holmes expects that the company will be able to service smaller and shallower buildings and respond quickly to season changes. In addition, future facilities will be a complete ecosystem of automation where tech like Autostore’s will be only a single part.

Where would smaller facilities be located?

We are seeing a trend in fashion and grocery where facilities are closer to the consumers. Traditionally they would have been an out-of-town hub. Our solution goes into stores with the correct requirements. There is a trend of co-location. Mega stores have experienced lower footfall in the last few years and higher e-commerce rates. The need to have a massive store is no longer there and these facilities are being underutilised. At the same time there isn’t enough room for stock because stores are not designed for it.

Some of our clients are making their mega stores smaller with fewer items on the shopfloor. In the newly available part of the store, companies can operate an Autostore-type solution. It is so space efficient that shops can actually hold more inventory – This way, there is more opportunity for more SKUs. There is no need for complicated preparations and changes either. Also, stores are replenished faster and the local Click&Collect and Home Delivery service is improved. Robots are energy efficient and do not require a special power facility, 10 robots using the same power as a vacuum cleaner. ✷

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