December 1, 2021
(Editor’s Note: Robotics-World is proud to present a three-part series about how AMRs are transforming supply chain operations, authored by John Santagate, vice president of robotics at Körber Supply Chain. In Part 1, he discusses the market forces having a huge influence on the rise of autonomous mobile robots in supply chain and fulfillment operations).
Autonomous mobile robots (AMRs) are quickly becoming a must-have technology for warehouses, especially those that perform e-commerce fulfillment operations. Research firm Interact Analysis predicts that by 2025, 2.1 million mobile robots will have been shipped worldwide.
Beyond the number of robots, it is important to consider the number of sites where the technology is deployed. “At the end of 2020, mobile robots had been deployed in just over 9,000 separate customer sites, mainly warehouses and factories,” writes Ash Sharma, managing director of Interact Analysis. “By the end of 2025, this will have increased to over 53,000 deployments, and that will still be far from the point of market saturation.” This represents a compound annual growth rate of over 42% between 2020 and 2025 in terms of sites leveraging AMRs.
Many that assume this growth is being driven by the ever-present desire to reduce operational costs are often overlooking other drivers. While operational cost reduction is important and measurable, there are far more impactful issues driving the investments of AMR technologies today.
#1 The Surge of E-Commerce Fulfillment
This trend has been increasing year over year for a while now, but the recent COVID pandemic thrust several years of growth onto the e-commerce market, as it became the only available channel for product acquisition overnight. While this was a short (relatively speaking) burst, it drove a 32% increase in e-commerce sales in 2020, and e-commerce is forecast to make up almost 24% of all retail sales by 2025.
But why is the move to e-commerce from brick-and-mortar retail so important to the growth within the AMR space? The big answer is that this changes the way material is handled along the supply chain. With brick-and-mortar retail, the fulfillment mechanism is built upon economies of scale, which involves the handling and shipping of full pallets and full cases to a retail location.
In contrast, e-commerce is built on flexibility and diversity, and most impactful is the evolution from the handling of bulk materials to the handling of units, or “eaches.” By transitioning to units or eaches from bulk material handling, fulfillment operations now have to touch a lot more product on a daily basis, which requires more people in the process to move the same amount of material through the supply chain.
#2 Labor risks: Scarcity, turnover, reliability
Labor risks in this space include availability of workers, but also the reliability, risks of turnover and quality of employees hired for these jobs. The big one of course is labor scarcity. Quite simply, there are not enough people applying for warehouse-related jobs as there are available open positions.
In the July 2021 jobs report, there was a record of more than 490,000 openings for warehouse jobs – months ahead of the typical seasonal peak that often requires hundreds of thousands of short-term workers to flood warehouses to meet the demands of peak operations.
Another risk is high turnover, as there is very little incentive that keeps workers from moving down the street to another warehouse that is offering a few dollars more in hourly wage. Or in the case of Amazon, offering sizable signing bonuses for workers to join their teams. One big impact of high turnover includes the quality of work – having a revolving door of labor means that companies have to constantly train workers, or face an under-trained staff that can make mistakes.
The other big labor risk is reliability – having workers that show up and work as expected. No-call and no-shows are occurring every day, which means even fewer people available to meet customer demands. Employees that do not show up can significantly impact operational performances, and companies are looking at alternatives in the form of technologies that will “show up” no matter what.
#3 Modernization and digitization efforts
Whether you call it modernization, digitization or just “Keeping up with the Joneses”, the evolution of the technology landscape has thrust a wide range of technologies that were not available just a few short years ago. Cloud computing, the Internet of Things (improved sensors), artificial intelligence and machine learning are just a few of the new technologies having an impact on warehouse and fulfillment operations, mainly for the surge of data that these systems provide. Digitization efforts have given businesses more data available to drive operational improvements to better visualize and measure operational performance.
How these trends drive AMR adoption
Increases in demand and evolving fulfillment models are requiring new ways of doing things. First, as warehouses are forced to handle eaches and units, they are also forced to look for ways to move the same (or increasing) volumes of units with more touches. This creates a supply/demand imbalance in the market, but the balance is not about raw material or goods. The demand is the fulfillment and the supply is human labor. There simply are not enough human workers available to support the growth in demand for fulfillment centers. Additional data provided by digitization efforts lets companies learn how to improve the operation through digital connectivity to the physical world.
AMRs offer a solution that addresses or support these market trends. First, mobile robots will “show up” to work, reducing the “no-call/no-show” labor challenge. AMR technology allows organizations to scale on demand, which means increasing fulfillment capacity during peak times requires fewer human resources. AMR technology accelerates the time it takes to train new associates. AMRs focus on reducing or eliminating the non-value-adding movement within the fulfillment process. While there are various approaches to this type of fulfillment model, they all generally enable operational efficiencies that simply are not available when pushing a cart through a pick path.
In our next column, we will address the misconception of complexity with “It’s Easier Than You Think: 5 Step Process to Implement AMR”, followed by a discussion of how AMR’s align to existing warehousing technologies in “Operational Alignment: The Link Between Existing Warehouse Technologies and AMRs”.
About the author: John Santagate has spent the last decade helping leading companies design and implement cutting-edge technology-based solutions for supply chain applications. He is the vice president of robotics at Körber Supply Chain. Previously he was the Research Director for Robotics at IDC and prior to that he was a management consultant with the Tata Consulting Services Supply Chain Center of Excellence. Follow him on LinkedIn or Twitter at @_that_robot_guy.