November 15, 2021
By Lior Elazary, co-founder and CEO of inVia Robotics
We’ve all seen the numbers citing how unprecedented e-commerce growth has been over the last 18 months. Sales grew 40% in 2020, in the midst of the pandemic. The switch to online shopping that was prompted by necessity because stores just weren’t open is here to stay. People like convenience, and online purchasing has now become a habit for them and many won’t switch back completely to brick-and-mortar shopping. The latest forecast is that we’ll spend more than $4 trillion dollars shopping online this year.
While increased demand is great for the increased sales for retailers, it creates a lot of pressure on their fulfillment operations. It’s particularly challenging for retailers that are doing the majority of their business through physical retail stores. The process of getting products into the hands of customers is very different in a physical store, where stock is replenished in bulk pallets and cases to onsite storerooms. E-commerce orders consist of individual items in random assortments that are stored in large distribution centers centrally located to ship across the country – or globe. They also have to be stored in a specific way that allows random access to any particular item at any particular time. This can be much more complicated than replenishing store inventory.
This has given rise to increased demand for third party companies that specialize in managing e-commerce fulfillment and logistics. These third-party logistics providers (3PLs) manage all of the back-end processes for getting orders to people who buy online. They offer a variety of services, with transportation and picking & packing orders being the most sought after. Many retailers want to focus on their core competency of creating or curating products to sell to consumers, and outsource logistics to a 3PL. A recent Armstrong & Armstrong survey found that 90% of Fortune 500 companies use 3PL services. Smaller companies are even more likely to outsource, given how expensive it is to build internal fulfillment and logistics capabilities.
So, growing demand from consumers has created growing demand from retailers to use 3PLs. This bears out in both demand for warehouse space, as well as order volume. 3PLs doubled their leasing volume this year, and 85% of them saw order volumes grow. They are seeing an unprecedented need for the services they offer.
While this is good news for 3PLs, many of these warehouses are operating with the same manual processes they’ve used for decades. Most of them have not been upgraded with any technology that can improve operational efficiencies. Many of them are picking orders in cavernous facilities with the equivalent of pencil and paper and no map, a slow and inefficient method. The good news is that there are many technological innovations that can help them take advantage of the boon in demand they’re experiencing.
One of the most exciting ones is robots. The most time-consuming task in any fulfillment warehouse is picking, and there are several types of robots that have been created to do this task autonomously. Workers spend up to 50% of their day walking up and down aisles to pick items that are put into orders, and using robots to do this frees up a lot of time for people to be doing other, higher-order tasks.
The robots are also programmed using artificial intelligence to follow more efficient paths than people would take. Think of how much more efficiently you would move through your grocery shopping list if an algorithm had calculated the shortest distance for you to travel to find each item and had you simultaneously get items located close together. That’s how robots can work, reducing overall cycle time or the time it takes from when an order is received to the time it goes out the door. This helps 3PLs meet demanding service-level agreements (SLAs), which are the service levels required to get orders processed to meet on-time delivery requirements. Along with increased consumer demand for products has come an expectation for almost instantaneous delivery, and robots can help 3PLs keep up.
Robots also offer an accuracy advantage when compared to manual processes. As volume and pace increase, so does the opportunity for mistakes. People aren’t perfect, and a brief lapse in attention or a day after a rough night’s sleep can easily lead to mispicks. The higher the order volume, the more mistakes a company will likely see. Robots operate with machine precision, programmed to only pick the right item and in the right quantity. So accuracy rates stay high, which helps limit customer churn.
As e-commerce demand continues at unprecedented levels, back-end logistics processes will need to be modernized to keep up with growth. This has created a valuable opportunity for 3PLs to step in with a highly-efficient solution, one that eliminates the burden on retailers to create their own in-house infrastructure and lets them focus on the front-end customer experience. We see our 3PL customers rapidly adopting – and showcasing – robots and automation as a differentiator for their offering. It helps them increase cycle times and accuracy rates to consistently meet their SLAs. That results in a high level of trust from retailers that they’re choosing a partner that will consistently meet the expectations of their customers.
About the author: Lior Elazary is the co-founder and chief executive officer of inVia Robotics. inVia makes warehouse automation systems that combine AI-driven software and autonomous mobile robots to automate ecommerce fulfillment. Lior is a technology expert with more than 20 years of experience as an executive in internet networking, robotics, software development and enterprise architecture roles. In addition, he has a proven track record of scaling technology companies. He most recently co-founded and later sold EdgeCast, a content delivery platform. Before that he co-founded and later sold HostPro (now Web.com), an internet hosting company.
Elazary completed a master’s degree of computer science at the University of Southern California (USC) with a specialty focus on artificial intelligence. He attended a Ph.D. program in robotics at USC where he met his inVia co-founders. Their work together sparked a passion for the dramatic effect robots can have in driving efficiency and productivity, and most importantly in helping people live happier and more fulfilling lives.