Will the Warehouse of the Future be Completely Automated?
The popularity of e-commerce, the growth of returns logistics, and the relentless pursuit to improve throughput leave difficult questions to answer for the warehouse management
A hearty welcome to the 18th edition of The Logistics Rundown, a weekly digest that aims to put some perspective on what’s brewing within the logistics industry. This is a space where we religiously dissect market trends, chat with industry thought leaders, highlight supply chain innovation, celebrate startups, and share news nuggets.
This week, thought of talking about automation within warehouses and the complicated dynamic it has with the human workforce. To begin with, it is fascinating to observe how off the mark the logistics & transport industry has been with predicting automation trends.
Take autonomous vehicles. The logistics industry has been visibly excited about the idea of self-driving vehicles for over a decade. Somewhere in the mid-2010s, discussions on self-driving vehicles had matured to an extent where major OEMs and ride-hailing giants like Uber were hopeful of putting thousands of autonomous cars on the road by 2020.
It's 2021, and we might still be a decade out from seeing autonomous vehicles going mainstream. In stark contrast, there had been a muted response on warehousing automation, up until a few years ago. While VCs sunk billions into autonomous driving technology, warehouse automation struggled to draw one-fifth that capital.
While VCs sunk billions into autonomous driving technology, warehouse automation struggled to draw one-fifth that capital.
And yet, floor robots that autonomously pick and move shipment are a much bigger reality now, compared to self-driving vehicles. Yes, building robots that move loads within a consistent warehousing floor environment is a lot easier than building autonomous vehicles that can run on city roads. The perspective here, however, is the contrast in 'expectation versus reality' when comparing automation in vehicles with automation in warehouses.
Propping up this argument as a prelude to what has to come—more predictions on the impact of automation on warehousing. For starters, it can be seen that automation in warehouses is more crucial than automation in transport.
The rise of e-commerce has meant a frequent surge in shipment volumes, with them touching higher peaks every passing year. We covered in an earlier newsletter how warehousing inventory capacity is running low due to relentless consumer demand and the e-commerce growth spike since the pandemic. And it's not just capacity that's a problem. Warehouses are also hamstrung with constraints like labor and time. Hiring workers for warehouses has been a problem, just like it has been across all segments within the supply chain. The tight labor market has forced warehousing management to increase compensation and also dish out generous starting bonuses to attract people.
In such a scenario, the idea of automated floor robots sounds enticing. Robots don't ask for breaks, or a salary, or vacation days. Nor do they have issues with working overtime. While upfront costs are higher for floor robots, various leasing options do exist in the market. If prudently thought out, leasing robots to run warehouses could be more cost-effective for a certain scale and size of operations.
That said, human workers are highly effective for different reasons. A human worker can take up different roles within a warehouse—like sorting, packing, and moving—all with minimal training. While robots can do most of these tasks, it would take a lot more training and many hours of coding into the robot's registry for them to transition between different roles on the floor.
"I think the bellwether to automation in warehouses is to monitor the average gross merchandise value (GMV) or the price of the product and the average weight of the individual shipment," said Krish Iyer, head of industry relations & strategic partnerships at ShipStation, while talking to TLR. "This is because robots can be good with moving cheap, small and lightweight shipment, but not necessarily for packing and moving a couch."
Interestingly enough, the size of parcels that move through e-commerce is getting smaller. Roughly 86% of all the products Amazon delivers weigh five pounds or less—just the kind of work that a robot can be set on.
Roughly 86% of all the products Amazon delivers weigh five pounds or less—just the kind of work that a robot can be set on.
But for moving heavier, delicate, obtuse, and pricier goods, we could still need human workers. Iyer contended that automation might never completely remove workers from the warehouse, as there would always be shipment that requires 'extra' attention.
And then there is the returns logistics. The returns market is exploding in tandem with e-commerce as people grow more comfortable returning products—thanks to Amazon single-handedly improving the ease of the returns process. However, returns cannot be processed the same way in a warehouse like it processes forward-looking outbound shipment. Returns involve 'the onesies and twosies' and need to be individually inspected to see if they are fit to return to the cycle or must be discarded. Humans, in such situations, are currently irreplaceable.
When asked what will happen to the displaced warehousing workforce when automation gains more momentum, Iyer said it would not be a cause for concern. "People thought machines will replace them during the Industrial Revolution, but their fears were unjustified. The unemployment percentage today is much lower than back in those days. I have a degree of skepticism on the view that automation could make people irrelevant," he said.
The Weekly Roundup
🚢 The Ever Given has finally reached its original destination, the port of Rotterdam, several months late after being grounded across the Suez Canal and creating a global logistics bottleneck. To date, no accident report has been released, so the exact reasons for the stuck-up are still unknown. While Egyptian authorities claimed $900 million in damages initially, the Wall Street Journal reported that the preliminary deal struck in June was for $200 million.
📦 Walmart has announced that it will sell technology to small- and medium-sized retailers, which will allow shoppers to buy online and pick up in-store (BOPIS). This omnichannel strategy has proven extremely useful during the pandemic, enabling people to have a touchless buying experience. Reports suggest that US retailers that offered BOPIS services pre-pandemic saw 7% order fulfillment through the channel, which spiked to 22% this year.
💰 The crunch in freight container availability has been one of the highlights of this year's supply chain chaos. While new containers are being manufactured to alleviate the demand stress, the number of containers produced is not nearly enough to meet the burgeoning demand. This is reflected in the price of new containers, which has been climbing over the last year. While it was $2,000 per TEU container by mid-2020, it now stands at $3,800 per TEU.
🚚 Tesla has again pushed back the production timeline of its Semi trucks, citing delays with finding battery cells and the ubiquitous semiconductor availability issue. The Tesla Semi is a heavily anticipated battery-electric truck that CEO Elon Musk has touted would deliver $200,000 or more in fuel savings over its lifetime. Logistics major UPS has already pre-ordered 125 Semi trucks, the largest such order for the truck model.
...said who?
"Retailers are going to have to order holiday shopping products now in order to get them onto the shelves by the time the season rolls around."
- Eric Oak, a supply chain research analyst at S&P Global Market Intelligence, while commenting on shipper issues with finding carrier capacity
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