E-commerce has become a fast-growing factor in America’s retail landscape, and thus so have the warehouses where goods are fulfilled. This has required a hiring spree in warehouses, but also a hunger from e-commerce firms to cut said labor costs through automation. This has led for now to the rise of “cobots”—or collaborative robots—that help human workers track down and package deliveries. But it seems that the long-term goal is full automation.
Prologis, the world’s largest industrial real estate company, says automating operations can drastically reduce costs while speeding delivery. A company analysis finds that automation could produce a 20% productivity boost without acquiring additional land—a critical need for firms dealing with strict land use rules. The REIT claims that in its own warehouses, automation rolled out several years ahead of schedule, out of necessity from the Covid labor shortage.
Amazon, too, is at the forefront of the race. The dominant e-commerce provider has been automating its processing facilities, most notably through the deployment of Kiva robots, which were built by a firm the company acquired in 2012. These robots deliver items to workers, who then just need to package goods, enabling more shipments to be packaged per hour. The company rapidly adopted the technology, growing its fleet to double its size from 2014 to 2015. By early 2020, Amazon had 200,000 robots in its warehouses. TechRepublic credits warehouse automation as crucial for meeting the company’s demanding performance metrics.
GXO Logistics, another major U.S. warehouse firm, also makes use of robotics. The firm boasts that one robot assembles 60,000 packages daily. According to Supply Chain Dive, GXO’s use of robotics grew fivefold from 2019 to 2020 alone, and automated processes aided in a quarter of online transactions.
It is not just these big companies. SelectHub projects that robotic-equipped warehouses will number 50,000 by the mid-2020s; and that its market size will double between 2020-2026 to $30 billion. A Harvard Business School analysis describes why automation is so beneficial to the e-commerce sector.
“On costs, Amazon had very thin margins of 1.7% net margins in 2016, and fulfillment costs are a large part of expenses at 13.4% of operating expenses. Any improvements in warehousing costs can make a big difference in profits.”
All the same, delivery delays harm an e-commerce company. I wrote for Catalyst in June about how Amazon currently struggles to achieve its same-day delivery promise in many markets. There are multiple reasons, but faster processing would be one thing that could get the company there. Malcolm Wilson, executive for GXO, agrees about the benefits of automation, claiming that “what used to be a five-day logistics process is now down to one day or less.”
Among the actual robots and cobots being used include automated guided vehicles that move packages around warehouse floors; and automated storage and retrieval systems. A YouTube video of an Amazon smart warehouse shows everything from high-speed conveyor belts, Kiva bots rolling along floors, and robotic arms that lift packages weighing thousands of pounds. CNBC reports that one robot is even being developed for employees to summon and pick up goods in real time.
“Amazon said these types of robots could take over workers’ tasks of moving empty packages across facilities so they can focus on activities requiring critical thinking skills and reduce physically strenuous work,” reported CNBC.
Automation has not yet caused extreme job cuts within warehouses, but that is the goal—albeit a distant one. In 2019, Amazon’s robotics director said it would take at least a decade to achieve total warehouse automation. But one fully-automated facility already exists in Shanghai. The factory was developed by Tokyo-based startup Mujin, and is operated by Chinese e-commerce giant JD.com. At 40,000sqft, it would normally employ 500 people, but instead needs just 5 people to manage the robots.
The path to this level of automation in America will not be seamless; Prologis notes that the cost of building out automated facilities can exceed conventional construction by 4-5 times. Still, industry observers see it as crucial to boosting productivity in an era when e-commerce demands are intense, and it is becoming harder and harder to find blue-collar workers.
[This article was originally published by the Independent Institute.]
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