Warehouse/Logistics Automation
Collaborative robots are working alongside humans in warehouses and distribution hubs around the world, and this trend is accelerating at unprecedented rates.
Long before COVID-19, the purchasing habits of US consumers were already moving online. From 2007 to 2019, the percentage of retail sales occurring online grew from 5.1% to 16% according to Digital Commerce 360’s analysis of US Department of Commerce Data. With COVID-19 shuttering in-store retail during lockdowns and dissuading consumers from shopping in person, the move to online shopping has been dramatically accelerated. Online spending in May reached $82.5 billion, representing a 77% increase year-over-year (Forbes). If e-commerce growth had remained at its Pre-COVID levels “It would have taken “between 4 and 6 years to get to the levels that we saw in May”(Forbes). In some ways, COVID may have served to accelerate an already inevitable trend. According to eMarketer Analyst Andrew Lipsman: “Certain e-commerce behaviors like online grocery shopping and click-and-collect have permanently catapulted three or four years into the future in just three or four months” (TechCrunch).
This massive and rapid shift in consumer behavior towards e-commerce has caused strains on the delivery systems that bring us our goods. Even Amazon, which controlled 35% of the e-commerce market Pre-COVID and shipped 6.3 billion items through its US network in 2019 (Investor’s Business Daily — Amazon Warehouse Robots Spark Logistics Automation Boom), and has proven to be one of the most innovative companies ever, has struggled to keep up with the blistering pace of online shopping adoption. Amazon has 750,000 employees (Investor’s Business Daily — Amazon Warehouse Robots Spark Logistics Automation Boom) and at least 400,000 of these are warehouse or fulfillment center workers (not including the 100,000 additional personnel they plan to hire according to S&P Global) across their 500 such facilities in the US (NY Times). Knowing what we do about COVID’s spread inside enclosed spaces, it should not come as a surprise that the disease has been an issue at Amazon’s facilities — at one Amazon facility in Minnesota the infection rate was 1.7%, while the infection rate in the county the facility is located in was just 0.1% (CNN). Concerns about COVID spread have impacted Amazon’s ability to keep its facilities staffed: “By mid-March, attendance at Amazon warehouses had fallen as much as 30 percent” (NY Times). At the outset of the pandemic, Amazon had to “stop accepting new shipments into its warehouses that were not for priority products, like health care and baby supplies” because “Companies began sending in products to restock Amazon’s warehouses. But with attendance down and more items coming in, workers could not replenish the supplies fast enough. Trucks backed up, waiting days to be unloaded” (NY Times). This dynamic of labor-shortage highlights a massive opportunity for warehouse and logistics centers to become increasingly more automated in the near future.
In-Warehouse Automation
The most common task for workers inside e-commerce warehouses and fulfillment centers like the ones Amazon operates, is moving merchandise items from bins into shipping boxes. This is backbreaking labor in which workers package orders at a rate of “230 per hour, sending them off in cardboard cartons bearing the trademarked Amazon smile logo…. pickers [are] expected to fetch more than 300 items every 60 minutes” (Wired). Since this work is so hard, Amazon does not actually expect to lay off any of these workers as automation proliferates throughout the process: “Rather than lay off workers… the world’s largest online retailer will one day refrain from refilling packing roles. Those have high turnover because boxing multiple orders per minute over 10 hours is taxing work. At the same time, employees that stay with the company can be trained to take up more technical roles” (Reuters).
Recognizing the need to automate their warehouse and fulfillment operations, Amazon has over the past decade leaned into technologies that mitigate the need for human workers. As S&P Global notes, “Amazon is one of the most prominent disruptors in the retail automation space, starting with its 2012 acquisition of material handling technology company Kiva Systems for $678 million. Amazon has since deployed thousands of orange Kiva robots into warehouses, where they scoot small bins and large pallets of products to staffers.” Wherever possible, Amazon is integrating automation technologies into the fulfillment process:
“The Company started adding technology to a handful of warehouses in recent years, which scans goods coming down a conveyor belt and envelops them seconds later in boxes custom-built for each item… The new machines, known as the CartonWrap from Italian firm CMC Srl, pack much faster than humans. They crank out 600 to 700 boxes per hour, or four to five times the rate of a human packer, the sources said. The machines require one person to load customer orders, another to stock cardboard and glue and a technician to fix jams on occasion….
Including other machines known as the “SmartPac,” which the company rolled out recently to mail items in patented envelopes, Amazon’s technology suite will be able to automate a majority of its human packers. Five rows of workers at a facility can turn into two, supplemented by two CMC machines and one SmartPac, the person said.” (Reuters)
Yet there are certain common automation technologies that have not yet been integrated into their packing process. One example of this is robotic arms and grasping technologies, which Amazon believes “is not ready for prime time” (Reuters). In response, the Company is investing significant capital and effort to bring them up to speed. For instance, Amazon is spending $40 million to build a robotics innovation hub in Massachusetts scheduled to open in 2021 (Amazon Press Release).
Other companies have also adopted similar technologies to Amazon to help automate the fulfillment process. Per Reuters, “Amazon is not alone in testing CMC’s packing technology. JD.com Inc and Shutterfly Inc have used the machines as well, the companies said, as has Walmart Inc, according to a person familiar with its pilot…. Walmart started 3.5 years ago and has since installed the machines in several U.S. locations.” Likewise, companies like Procter & Gamble are also looking to automate everything from ”production lines to end-of-line automation, which would include primary packages, secondary packing and case packing” (Investor’s Business Daily — Industrial Robots Are Friend Not Foe Of Workers).
The demand for robots that can automate the warehouse logistics process, from picking/grasping to packaging to shipping and delivery is reflected in recent market sizings. Pre-COVID, Cowen projected that just the US market size for these robots would be worth $8 billion by 2024, while the International Federation of Robotics has said that the market for these robots was $2.4 billion in 2017, $5.7 billion in 2019, and would approach $22 billion by 2022 (Investor’s Business Daily — Amazon Warehouse Robots Spark Logistics Automation Boom). Cowen also noted that private investment in robotics was up to $8 billion through November of 2019, up from $800 million in 2014, with logistics-related investments (excluding drones) making up $3 billion of the total (Investor’s Business Daily — Amazon Warehouse Robots Spark Logistics Automation Boom).
Much in the way that COVID catalyzed a pre-existing shift in consumer behavior towards e-commerce, it will do the same for the US’s shift towards warehouse and logistics robots. Due to its expensive labor force, the US may actually be ahead of most of the world in terms of warehouse and logistics robots: “Robot sales in the United States hit a new peak of almost 38,000 units, setting a record for the eighth year in a row (2010–2018). Today, robot density in the US manufacturing industry is now more than double that of China and ranks seventh worldwide” (International Federation of Robotics). In 2018, shipments of industrial robots to North American companies grew 7% (Investor’s Business Daily — Industrial Robots Are Friend Not Foe Of Workers). The data shows that the US was already in the midst of a trend towards using robots in factories and warehouses. In the near term, there are indisputable benefits that come with robots and automation in logistics, such as undisturbed economic activity and the preservation of human life. With these benefits, and a pressing need to reduce the number of workers on-site physically and to ensure the resilience of operations, early adopters of these technologies will see competitive advantages, and their peers will have to embrace these technologies to survive.
Autonomous Mobile Robots (AMRs)
In addition to boxing and packaging technologies, perhaps the most critical technological element of automating logistics involves moving materials around within the warehouse environment. For the last couple decades humans have been helped in this task by simple automated devices called Autonomous Guided Vehicles (AVGs), which are relatively unintelligent machines performing very simple actions along prescribed pathways such as line-following. These devices were often expensive to set up and difficult to maintain, but they did help ease the most expensive operation conducted in almost any warehouse environment: paying humans to walk around the facility moving materials by hand. This ever-present need to move materials paved the way for a newer generation of logistics robots called Autonomous Mobile Robots (AMRs). AMRs are built with a whole generation of newer technologies and have much greater sensing and processing capabilities, giving them the ability to navigate complex environments and decide on optimal paths to meet their objectives even in unpredictable conditions. Where AVGs were often heavily customized to a particular environment, AMRs are more generalizable and thus cheaper to produce or replace, and easier to set up. AMRs can work alongside people and other equipment within a warehouse, reducing the need for personnel and freeing up human workers to execute higher value-adding tasks. An AMR might take the form of an automated forklift able to select and transport pallets of goods to a location, choosing its own pathway through the warehouse, or a modular smart-cart capable of following a particular human around with a bin of items. Sortation is another key operation that is increasingly being handed off to a fleet of AMRs to handle, especially picking inventory for shipment, or sorting returns. Fetch Robotics develops a line of AMRs for warehouse and distribution center logistics, among other use cases, and saw a 63% increase in inbound interest from US firms looking to automate their processes earlier this year at the outset of the pandemic (Investor’s Business Daily — Industrial Automation Opportunity Seen in Coronavirus Crisis). Fetch’s AMRs handle materials in a variety of use cases, such as moving items from one conveyor belt to another, transporting them within a warehouse and moving large pallets. Canvas Technology, a direct competitor to Fetch, was acquired by Amazon in March 2019 for over $100 million (Faegre Drinker). 6 River Systems, which Shopify acquired for $394 million in October 2019 (PitchBook), is another AMR provider which specializes in automating the picking of items for orders inside e-commerce distribution centers. 6 River’s robots have the flexibility to be configured for different use cases and item types while leveraging AI and machine learning to streamline item picking to maximize efficiency. AutoGuide Mobile Robots, which Teradyne purchased for $165 million in October 2019 (Robotics Business Review), specializes in AMRs for heavy payloads within warehouses. As the recent high value M&A activity shows, there is lots of innovation coming out of nascent AMR companies, and big companies are looking to acquire and own these technologies, in addition to using them.
Safety and Collaboration
This shift towards automated logistics will mean an increasing amount of human-robot interaction on the factory/warehouse floor, while at the same time decreasing the amount of oversight and attention that the humans will be giving to the robots. So it is of paramount importance that the robots can be trusted to go about their objectives without causing harm to people or property (including themselves). The first line of defense is the perception layer of the robot, using its onboard sensors to detect its surroundings, prevent collisions, and optimize its path through the environment using edge computing. In addition to its onboard signals, an individual robot will often be taking cues from a broader warehouse-wide Orchestration Layer, which is a communication network that relays information as needed to coordinate multiple robots across the warehouse floor. Perhaps the last line of defense would involve humans taking manual control of a robot, or triggering an emergency stop using an E-stop, which often takes the form of a large red button located on the side of the equipment that can be punched if a dangerous situation occurs. But given the relatively slow reaction time of humans (on the order of seconds), this manual E-stop activity is often too slow to prevent all accidents. Efforts must therefore be made to program safety routines into the machines themselves, to benefit from the millisecond and microsecond response times of computer controls. The challenge is that these safety measures are often not rolled out uniformly across all of the many robots that we are beginning to share workspace with. To address this, there are regulatory entities such as Exida that are seeking to apply certified safety standards across a broad range of industrial robots, to ensure that the future of co-bots and human workers is harmonious and accident-free.
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