Podcast Summary: Omni Talk Retail
Episode Title: The State of Retail Supply Chain Automation & Investment Spending with Dematic's Kim Baudry
Release Date: February 8, 2025
Hosts: Chris Walton and Anne Mazinga
Guest: Kim Beaudry, Director of Market Development at Dematic
Introduction
In this insightful episode of Omni Talk Retail, hosts Chris Walton and Anne Mazinga welcome back Kim Beaudry from Dematic to discuss the current landscape of supply chain automation within the retail industry. With her candid and frank approach, Kim provides a comprehensive overview of investment trends, operational challenges, and the evolving role of technology in retail supply chains.
Current State of Automation and Investment Trends
Flattening Investment in Automation
Kim Beaudry opens the discussion by highlighting a significant trend: "In 2024, and we're predicting into 2025, pretty much kind of a flattening of investment as far as high levels of automation and distribution centers" (02:43). This trend is not limited to the U.S.; it's a global phenomenon influenced by several factors:
- Economic Constraints: High interest rates have led to a hold on capital expenditures (capex), causing retailers to reassess their investment in automation.
- Geopolitical Uncertainty: Ongoing global tensions contribute to a cautious approach in automating supply chains.
- Post-Pandemic Adjustment: After a surge in automation investments during the pandemic years (2021-2022), the industry expected growth to rebound by 2025. However, this recovery has not materialized as anticipated.
Pragmatic Investment Approaches
Kim explains that while large-scale, monolithic automation systems are seeing reduced investment, retailers are focusing on "brownfield investments"—upgrading existing facilities rather than building new ones (05:23). This pragmatic approach involves enhancing current infrastructure to improve efficiency without the substantial capital outlay required for new automated systems.
Operational Efficiencies and "Sweating the Assets"
Maximizing Existing Investments
In response to constrained capital, retailers are adopting a strategy Kim refers to as "sweating the assets" (10:36). This involves optimizing the performance of existing automation and infrastructure to enhance operational efficiency. Kim elaborates:
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Comprehensive Audits: Conducting end-to-end audits of distribution centers to identify bottlenecks and inefficiencies. For example, a customer discovered that the rush to implement automated order fulfillment created logjams in other areas, prompting a reevaluation of their processes (06:35).
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Process Optimization: Improving interconnected processes such as receiving, storing, and shipping to ensure that high-velocity automation does not disrupt overall operations (08:04).
Example of Space Utilization
Kim shares a case where a large regional distribution center repurposed existing space to handle e-commerce fulfillment instead of building new facilities. This not only maximized space efficiency but also contributed positively to sustainability efforts (14:55).
The Role of Software, AI, and Machine Learning
Investment in Software Solutions
While hardware investments have plateaued, Kim emphasizes that software—particularly AI and machine learning—will be the primary focus of investments in the coming years. Key areas include:
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Control Towers: Systems that monitor the health and performance of automation equipment, enabling predictive maintenance and operational oversight. "The control tower aspect, you know, looking at AI and machine learning to say, first of all, I can make predictive analytics about equipment that we think are going to go down" (18:05).
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Digital Twins: Creating virtual replicas of physical operations to simulate and optimize processes without disrupting actual workflows. Kim highlights the potential of digital twins to "simulate and try different things" before implementing changes in the real world (22:35).
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Inventory Visibility: Enhancing network-wide visibility of inventory to streamline operations and improve decision-making (20:17).
Benefits of Advanced Software
These software advancements allow retailers to:
- Preventative Maintenance: Anticipate equipment failures and perform maintenance proactively, reducing downtime.
- Operational Simulation: Test changes in a virtual environment to assess their impact on overall operations.
- Energy Efficiency: Optimize resource usage, such as monitoring lighting systems for energy savings (10:44).
Impact of Tariffs on Supply Chain Automation
Delays in Investment
Tariffs present another layer of complexity and uncertainty. Kim anticipates that tariffs will "delay investments even more" due to increased costs of goods and the need for retailers to adjust their supply chains (26:08). The uncertainty surrounding:
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Supply Chain Adjustments: Retailers may need to diversify their sourcing regions, such as exploring options in Mexico and Canada, disrupting established supply chains (26:08).
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Cost Management: Increased costs may force retailers to prioritize maintaining profit margins over new investments in automation.
Limited Mitigation Through Automation
While automation can reduce labor costs, Kim remains skeptical about its ability to significantly offset the financial strain caused by tariffs. She asserts, "automation always saves human labor... but at the end of the day, you can only do so much to eke out savings" (28:08).
Human Workforce and Automation Synergy
Balancing Human and Automated Processes
Kim emphasizes the importance of maintaining a balance between human workers and automation. Certain tasks, especially those involving the final touch before a product reaches the consumer, are best handled by humans to ensure accuracy and customer satisfaction (23:42).
Training and Operational Support
Investing in software also entails training staff to effectively use new technologies, ensuring that automation assets are fully utilized and integrated into daily operations (17:01).
Future Outlook and Recommendations
Continued Focus on Efficiency
Despite the current investment plateau, Kim remains optimistic about ongoing improvements in operational efficiency. She encourages retailers to:
- Conduct Regular Audits: Continuously assess and optimize existing processes and equipment.
- Leverage Software Solutions: Invest in AI, machine learning, and digital twins to enhance operational capabilities without substantial capital expenditure.
- Adopt Flexible Automation: Utilize adaptable automation technologies like Automated Mobile Robots (AMRs) that can easily integrate into existing workflows (14:55).
Addressing Uncertainty
Kim advises retailers to navigate economic and geopolitical uncertainties by adopting flexible, efficient, and technology-driven strategies that optimize current resources while preparing for future investments when conditions stabilize.
Conclusion
Kim Beaudry provides a nuanced perspective on the state of supply chain automation in the retail sector, highlighting a shift towards optimizing existing infrastructure amidst economic and geopolitical challenges. The focus is shifting from large-scale automation investments to enhancing operational efficiencies and leveraging advanced software solutions. While uncertainties like tariffs pose additional challenges, the ongoing integration of AI and machine learning offers promising avenues for retailers to maintain competitiveness and operational excellence.
Notable Quotes:
- "We are seeing investments in existing buildings. So Brownfield investment has continued." — Kim Beaudry (05:23)
- "Sweating the assets... make your systems run more smoothly." — Kim Beaudry (10:44)
- "The software is probably going to be the biggest areas of investment I think over the next couple of years." — Kim Beaudry (18:05)
- "Automation always saves human labor... but at the end of the day, you can only do so much to eke out savings." — Kim Beaudry (28:08)
Additional Information
About Dematic: Dematic is one of the world's largest material handling suppliers and software providers, offering equipment and software solutions for distribution centers and beyond.
Contact Information:
- LinkedIn: Kim Beaudry (Kim Beaudry BAUDRY)
- Website: dematic.com
- Email: kimberly.beaudry@dematic.com
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