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Report tackles implications of warehouse automation for supply chain

Warehouse automation is the innovation that could most significantly affect the transport, logistics and supply chain industry, according to new research from Transport Intelligence (Ti).

“Although there are so many innovations which promise to transform every part of the industry—alternative fuels, blockchain, autonomous trucks, Internet of Things, Artificial Intelligence and 3D Printing to name a few—perhaps the innovation which could have the biggest impact is warehouse automation,” said the report on the use of robotics in warehouse operations.

Automation of the warehouse in turn could transform the role of logistics service providers (LSPs) and impact their gross revenues as well as their relationship with their customers.

Professor John Manners-Bell, chief executive of Ti Insight, a market research consultancy, said in the report that e-commerce is one of the biggest drivers of widespread adoption of robotic systems in the industry.

The e-commerce phenomenon has led to many retailers adopting omni-channel and multi-channel marketing and distribution strategies, transforming supply chain volumes “from unitized and quite predictable, to single item and volatile.”

Bell noted that Amazon now employs 80,000 robots at 25 fulfilment centers worldwide. This automation has allowed it to offer industry-leading service levels at a much lower cost than is the case with a wholly human solution. It is estimated that it allows workers to pick two to three times faster than conventional, manual systems, he added.

“Amazon itself says that the average time it takes to fulfil an order has fallen from 90 minutes to just 15. In the US, this has allowed it to push back two day delivery cut off times from 3pm to midnight, achieving an impressive extension for this service option.”

Automation is also seen as a way to reduce labor cost and address labor shortage. It is seen to increase efficiencies in the warehouse, reduce the need for human workers and provide more flexibility to fulfill peaks and troughs of demand using modular systems.

Automation also means lower real estate costs as a human-free environment allows greater density of storage, such as operating with narrower or even no aisles.

Moreover, the cost per robot is falling, bringing robotic technology into the reach of smaller customers. “Robotics-as-a-service solutions are being developed by some suppliers which work on a ‘pay-per-pick’ basis, therefore taking away the large capital outlay formerly required,” said Manners-Bell.

But there are also repercussions with automating. It will affect governments and policymakers due to the impact on employment. It will also be felt among LSPs whose revenues are largely made up by managing or providing labor forces.

“For the time being it would seem that human jobs are safe in the warehouse. The economic value which is being created by greater levels of efficiency has, so far, led to the need for more workers not fewer,” said the report.

However, there are two clouds on the horizon, said Manners-Bell.

First, since e-commerce companies have created efficiencies in the warehouse, the employees they take on may be at the cost of employment in traditional retailing as well as their distribution systems. The migration of jobs to the likes of Amazon rather than an overall job generation could result in a net loss in employment as many of the jobs which would have been created have been taken by automation.

Second, as robots get cheaper, all segments of industry will eventually be able to use them. And as employing humans gets more expensive and regulated, robots may be very attractive to many companies as they don’t require breaks, health insurance or holidays and can work round the clock at peak times.

“Although the sector is decades from becoming ‘jobless’ (if ever) there is no doubt that, as robots become cheaper and more ubiquitous, the role of the warehouse worker will change. It remains to be seen whether the economic value created by robotics will generate a net gain in jobs, but with many retail jobs being lost to more commoditized warehouse functions which are then at risk from automation, it seems inevitable that labour requirements will diminish. The quality of work for those left, however, will improve,” said Manners-Bell.

For LSPs, while their role will remain significant for years to come, the services they will be asked to provide will change. “There will be more focus on the value which they can bring to the overall supply chain as labour become less important,” the report said.

“This will impact on gross revenues as well as change the character of LSPs’ profit and loss accounts. As a consequence, it will also change the relationship which they have with their customers.”

Photo: TPHeinz from Pixabay


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