Over the last few decades, distribution networks have changed significantly to keep pace with new customer demands, sales channels, and business strategies. Many companies have adapted to the rise of online shopping, for example, by developing direct-to-consumer distribution channels, bypassing traditional retail outlets to streamline delivery processes. Some have even optimized their logistics to offer same-day shipping. To achieve all this, businesses have had to revise their distribution strategies, with a keen focus on improving inventory management within warehouses and enhancing the efficiency of their transportation systems.

Despite these advancements, warehousing and transportation functions still face notable challenges. The increasing complexity of supply chains, driven by global sourcing and a myriad of consumer channels, adds layers of operational difficulty. Warehouses continue to struggle with inventory accuracy, demand forecasting, and efficient space utilization, while transportation companies face challenges like fluctuating fuel costs, diverse fleets, and tighter delivery windows under varying traffic conditions.

Digitalization offers powerful solutions to these challenges. By integrating advanced technologies such as the Internet of Things (IoT) for real-time tracking, artificial intelligence (AI) for predictive analytics, and automation tools for streamlining warehouse operations, companies can significantly enhance their responsiveness and efficiency. Digital tools not only aid in overcoming the logistical complexities but also in providing the data-driven insights necessary for making strategic decisions.

Digital-First Warehousing

Warehousing managers today face a range of challenges, from adapting to omnichannel sales and keeping inventory visible and accurate, to optimizing space utilization and managing labor well. Solutions like SAP EWM and machine learning offer practical ways to tackle these issues, helping to improve operations and efficiency.

  • Adapting to Omnichannel Sales

    Relying on a single distribution network design to meet the demands of omnichannel sales can lead to higher costs and a diminished customer experience over time. A diversified approach, with different network designs tailored to various sales platforms, is essential. The network design should align with the product strategy — efficient for products with consistent demand and responsive for new products with fluctuating demand.

    This can take many forms. For example, Wipro worked with a client that wanted to launch several new products but feared doing so might interfere with the supply chain of its existing line. Wipro developed a smart supply chain alongside the client’s existing physical supply chain, using a machine learning (ML) model integrated with SAP BTP.  This solution ensured the client could address market demand efficiently without compromising on the delivery of its staple products by using a dedicated production line for the new products within the same facility.

  • Inventory Visibility and Accuracy

    Warehouse managers often struggle with maintaining accurate and visible inventory levels, especially when managing multiple large warehouses with a wide variety of products. This lack of visibility can lead to stock shortages, unfulfilled orders, and reliance on lengthy replenishment times.

    Wipro addressed these issues for one of its large clients by implementing the SAP Extended Warehouse Management (EWM) solution, aiming to enhance stock transparency and align inventory with the demand plan. Utilizing the solution’s warehouse monitors and slotting functionalities, the organization optimized storage in its warehouse by determining fast- and slow-moving products periodically. The planning system was integrated to the EWM system to receive dynamic demand data for each product. Timely replenishment alerts ensured no stock-outs. An ML model was fed with years of demand data and integrated with the EWM system to predict the safety stock requirements at different levels of the supply chain, which reduced the stock-out situation by over 90% and preventing the whiplash effect.

  • Utilizing Warehouse Capacity Efficiently

    Despite the large size of modern warehouses and their ability to store thousands of stock-keeping units (SKUs), managers frequently struggle to use the space efficiently due to irregular evaluation of product storage and movement, unassigned spaces which can lead to wasted areas, and storage bins filled with items that are not moving. Integrating SAP-embedded EWM solutions can boost capacity utilization by improving the visibility of storage bin usage and minimizing redundant stock storage.

  • Managing Labor Effectively

    The productivity and efficiency of warehouse labor directly influence the facility's performance and profitability. Common issues include inadequate labor planning, inefficient picking strategies, and inaccurate assumptions about the warehouse's throughput capacity, especially in manual warehouses.

    Adopting some form of automation and machine learning for labor management tasks can be a relatively easy way to boost performance, and this is always one of Wipro’s first suggestions to clients. For those not ready for full automation, implementing a warehouse management system (WMS) is another viable option. Replacing an outdated system with SAP EWM, complemented by a machine learning model to predict labor needs accurately, can enhance productivity and optimize shift management.

Digitally Enabled Transportation

The transportation sector faces similar challenges relating to resource and capacity management, and a lack of real-time analytics needed for process optimization. And, like warehousing, transportation companies can benefit from strategic technology implementations, combining new and existing solutions to boost performance.;

  • Optimizing Vehicle Capacity

    Inefficient packing wastes vehicle space and increases transportation costs. Addressing this challenge requires more than just determining the number of packages that can fit into a container and how these packages can be organized efficiently. Transportation companies must also implement these standards throughout their operations, which can be a complex coordination.

    Advanced management systems like SAP Transportation Management (TM) simplify this analysis and coordination. Specialized tools, such as package builders, simulate optimal loading scenarios, allowing companies to choose the most effective arrangement of goods, ensuring maximum space utilization.

    For example, Wipro worked with a large freight and logistics client that had already implemented a TM solution to manage its fleet and transportation operations. But inefficient packing methods on the customer end were wasting container space and increasing transportation costs, putting the client at risk losing its competitive edge. Wipro suggested using the SAP TM solution to not just manage fleet operations but also enforce standard packing methods for all customers. The client used the package builder functionality to simulate container loading scenarios and select the best approach to reduce waste. Since implementing these changes, the client has reported more efficient transportation planning and reduced costs due to optimum utilization of vehicle space and standardization of handling units.

  • Achieving Real-Time Analytics and Visibility

    Transporting items that are sensitive to changes in temperature and pressure, such as vaccines or perishable foods, is a complex undertaking. These goods need to be kept under stringent conditions throughout their journey to remain viable and safe for use. A break in the cold chain or a fluctuation in pressure can render these products useless, leading to significant financial losses and, more importantly, a loss in trust from consumers or those dependent on the delivery of these critical supplies.

    One of the primary challenges in maintaining these conditions during transit is the lack of visibility into the environment inside shipping containers or transport vehicles. Without real-time data, it's nearly impossible to address issues before they escalate into serious problems. This is exacerbated by the often long and complicated routes these products must take, passing through multiple handlers and varying climates.

    By integrating Internet of Things (IoT) sensors with the SAP TM system, Wipro created a system that monitors the conditions within containers in real-time. This setup not only provides immediate data on temperature and pressure but also allows transportation managers to adjust these conditions on-the-fly. For example, if a shipment of vaccines begins to warm up beyond its safe threshold, managers can remotely activate cooling systems within the container to bring the temperature back to the desired level.

In an era where efficiency and agility are paramount, the integration of advanced digital solutions becomes crucial. However, navigating the complexity of these technologies and ensuring they work harmoniously can be daunting. Working alongside their technology partners with the requisite industry and technology expertise, logistics organizations can ensure a seamless integration of diverse technologies such as SAP EWM, machine learning, and IoT. By doing so, logistics organizations can harness the full potential of digitalization, transforming logistical challenges into competitive advantages. 


About the Authors

Shivanand Hiremath

Shivanand Hiremath is a SAP Digital Transformation Architect driving innovation & business transformation based on SAP suite of applications integrated with best of breed SAP services/Applications. He is the product owner for SAP S/4HANA based Industry Templates complemented with Industry cloud solutions on BTP platform. He has been working with customers in GTM & Consulting initiatives shaping up their Digital Transformation journeys & roadmaps with SAP S/4 HANA led solution implementations.

Aditya Satish
Aditya Satish is a SAP Digital Supply Chain Solution Architect with expertise in sourcing & procurement, manufacturing, warehousing, and logistics, providing consulting and advisory services for customers on their supply chain transformation journeys. As part of the Digital Innovation Group, he works as a product owner to build innovative supply chain solutions.