E-Commerce Popularity Ignites Growing Investment In Warehouse Automation

It’s no secret that e-commerce has skyrocketed in the past few years. Fueled by the global pandemic, a study from US Census Bureau showed that ecommerce grew 43% in 2020. Two years later, it’s still going strong — and likely never to return to pre-pandemic levels despite some near-term signs of economic slowing.

Today, online shopping accounts for 20% of total retail globally, and that number is expected to hit 30% by the end of the decade.

But the digital economy doesn’t operate in a silo. It includes a massive web of packaging, shipping, warehousing, and distribution systems that deliver on the digital promise. This physical infrastructure is what keeps the digital e-commerce world operating.

But along with the growing popularity of buying online, the e-commerce segment has also experienced some growing pains. For instance, consumer demands are — well — never-ending. Traditional peak buying cycles like back-to-school season and holiday season have been supplanted by an “every day is a holiday” mentality. An increasingly savvy consumer market means that buyers are putting major pressure on retail companies to deliver more, at a faster rate, more reliably, and more socially conscious than ever before. Expedited shipping is no longer enough.

At the same time, the global supply chain has been anything but reliable. And while it is improving, according to the Global Supply Chain Pressure Index, companies are still dealing with the pressure of extended delays. Added to consumer pressures and supply chain challenges, companies have been navigating talent shortages — struggling to staff not just their retail stores but warehouses, as well.

The ongoing issues have left many retailers to wonder how to keep up with the increasing demands of the e-commerce segment while remaining profitable at the same time. For an increasingly growing number of businesses, an investment in warehouse automation may be the right place to start.

Transforming the Traditional Warehouse Setting

Traditionally, warehouses and distribution centers have been labor-intensive operation centers with a large number of employees moving inventory to the right place. Typically located in rural areas — although Amazon is slowly changing that with their distribution centers — these centers have played a huge role, albeit hidden role, in keeping our economy up and running. And while supply chain challenges and issues from the pandemic have definitely changed things, we were starting to see an increasing number of businesses turn to other technologies to lessen the risk of their supply chains, prior to 2020.

These organizations were increasingly turning to warehouse automation. According to a recent report the team at Futurum Research did in partnership with Honeywell, this option has been steadily growing in popularity, but it’s far from mature — spelling a lot of room for growth for the future.

From autonomous mobile robots (AMRs) that help grab, sort, and pick items from the warehouse floor to aerial drones that help with inventory, these options will be in warehouses everywhere in the coming decade, I’m sure.

For the past three quarters, U.S. robotics sales have hit record highs. Last quarter saw 12,305 units moved, a 25% increase over the same period last year. Amazon announced it would invest $1 billion in warehouse automation solutions like robots and AI. To keep pace, Walmart says it will invest $14 billion in warehouse automation and other areas. Other companies are investing hundreds of millions into their own proprietary bots. Even for smaller businesses, the economics of investing in warehouse automation are clear. Robots are reliable and cheaper than humans.

Benefits of Warehouse Automation

Regardless, what form it takes, warehouse automation offers many benefits, and businesses around the world are buying in. According to our recent report, some of the key benefits include:

1. A more efficient workplace. With warehouse automation solutions like autonomous mobile robots (ARMs), drones, and automated storage/retrieval systems, businesses can fulfil orders more quickly, more safely, and more predictably than with human workers. This means not just that customers are more satisfied but that businesses are working more efficiently — and with less risk — overall.
2. A more agile “workforce.” Given the many any issues impacting the retail segment, companies need to be agile and ready to change on a dime. For instance, during the pandemic, many businesses shifted to a purely online, direct-to-consumer (DTC) model to create a stronger bond with their customers. While humans may need lengthy training after such a major business model change, robots do not. This allows businesses to be more flexible and responsive to the current environment.
3. Less reliance on humans. Given that many people left the workforce during the Great Resignation, a move toward warehouse automation means less disruption and fewer shutdowns when humans are unavailable to work. Indeed, the warehouse sector used to be a human intensive industry. But with bots, there’s no training, no need for breaks, and no staffing shortages. Bots can even work 24 hours a day to keep up with demand.
4. A more accurate inventory. Human error is an issue for every company, but using warehouse automation and AI can help create more accurate numbers overall, be it for inventory counts, production location, shipping details, etc. Again, this is a huge bonus when it comes to customer satisfaction, as buyers want to know that the products they order are available as promised, rather than receiving an “out of stock” notice or unexpectedly delayed shipment after an order has already been placed.
5. Data-rich Environment. This is a data-driven economy. And because warehouse automation is AI driven, it allows for the acquisition of data throughout its life cycle. This could be used for asset tracking, quality assurance, or any number of processes associated with the Internet of Things (IoT).
6. Augmented staffing. Lastly, warehouse automation can be used not just to replace, but to augment the capacity of current staff so that they can focus on more important things, be it business strategy, customer service inquiries, or sales.

Warehouse Automation and the Future of E-commerce

While right now some warehouse and distribution centers might be operating in survival mode, I fully believe we will see an expansion of warehouse automation in the future. Though some might argue that fully autonomous warehouses would be the ultimate goal, I think that automation technologies and humans will work in conjunction, driving the future of e-commerce forward—This symbiotic partnership between humans and machines (automation, robots, AI) was the thesis of the book “Human/Machine” that Olivier Blanchard and I wrote in 2019, and we are seeing this come to fruition today with warehouse automation being a good example.

I think in the next decade we are going to see a greater reliance on warehouse automation to be more resilient and agile. Right now, forward-thinking organizations need to understand the opportunity to take their current automation plans and push them further, building a foundation that will meet the needs for the future of e-commerce. Those that don’t might struggle to exist by the end of the decade.