Hong Kong is a global logistics hub, so as the industry shifts to Logistics 4.0 it is essential that businesses in the sector remain up-to-date with the latest developments.
Kelvin Ko, CEO of BPS Logistics Technology, gave a helpful overview of why these changes are happening now and how companies can capture the opportunities, at a webinar on 27 May. He started with a brief overview of Industry 4.0, including addressing some of the misconceptions.
"Lots of people interpret 'Industry 4.0' as automation and robotics," he said. "But these technologies have been in place in manufacturing for the last 30 or 40 years."
Industry 4.0 is actually about connectivity and advanced technologies including AI, IoT and big data, Ko explained. For example, in the past, automation needed to be pre-set. Today, the more advanced technology can respond quickly to real-time information and use human-machine interactions, helping to streamline processes.
Logistics 4.0 uses the same technologies in a similar way to improve efficiency and also improve customer service.
Ko noted that the increasing integration between manufacturing and logistics under Logistics 4.0 marks a major change.
"In the past, goods were manufactured, then shipped in bulk containers to warehouses before being distributed to stores," he said. "So the manufacturing and logistics industries were quite separate."
This is changing for a number of reasons, including trends that have been accelerated by the lifestyle changes enforced by the Covid-19 pandemic. Firstly, people are doing much more online shopping. They also have more time to do research and compare different products, and customers' expectations now include more personalized products and fast delivery.
The disruption of the pandemic has also changed the thinking on supply chains and led to a shift to more local manufacturing. There have also been developments in solutions to the "last-mile" issue.
"All this has complicated the supply chain," Ko said.
So agility is a key part of Logistics 4.0; businesses need to be able to quickly react and adapt to changing situations. The pandemic has also made stakeholders more sensitive to the possibility of uncertainty or upheaval ahead, and therefore wary about making major investments.
But Ko still expects that warehouses will continue to upgrade and will be driven by automation in the future. Such advanced warehousing can be seen in Mainland China, where extremely fast delivery processes are already in place. During the Double 11 Singles Day shopping festival, for example, some customers received their goods within 11 minutes of ordering.
Ko explained that this is facilitated by using a mix of predictive technology and discounts on hot items. Customers' previous buying history can anticipate the type of products they may be interested in, while special offers will give the customer a further nudge. The company can then ensure that these items are already in the nearest delivery depot.
"So why is this shift happening now? More technology is available to enable concepts that have been around for many years," Ko said.
For example, autonomous vehicles, forklifts and robots are now increasingly operating in warehouses, which improves efficiency and cuts costs. For example, the High Bay Robot reduces staffing needs and enables companies to make better use of space as the robots can access higher shelving than staff members.
But while the technology is available, only a small proportion of warehouses are currently fully automated, Ko explained. Warehouses in Hong Kong face particular challenges – for example, a lot of contracts for rent and for third-party logistics (3PL) services are only for three years, so businesses are reluctant to invest in major upgrades.
"There is also a perception that automation is very expensive and needs a lot of technology and engineers in-house," he said.
This is not necessarily the case, Ko explained, as automation is getting more affordable, and 3PL companies can help businesses to implement the changes. Ko also introduced the 3PL subsidy scheme available from the Hong Kong Productivity Council to help manufacturers fund the upgrading of their facilities.
The investment can pay off. Among the case studies Ko shared with members was HKTVmall, which had invested in automation before the Covid-19 pandemic arrived. This meant that the company was in pole position as online shopping took off.
"After they automated their logistics they can handle around 10 times as many orders daily, which has helped them to capture the market."