Warehouses of the future
by Yasir Aheer, Rahul Rao and Varun Rao
Summary:
The role of the warehouse in our modern life can not be overemphasized. From our beloved gadgets to life saving medications and equipment, each and every item spends time in a warehouse where it must be meticulously stored and efficiently retrieved upon demand, while maintaining a safe working environment for staff.
According to one estimate, companies spend $350 billion annually on warehousing. Their expenditure is expected to grow, driven by increasing complexity within global supply chains.
It has been exciting to see all the various fields of technology, such as Robotics, IoT and Artificial Intelligence, converge to deliver real world solutions to a complex problem such as warehouse management. It has also been refreshing for us to note that human safety takes central focus in developing these solutions, leading us to safer work environments in the future.
Imagine someone takes all of your belongings and stores them in the biggest warehouse in the world, the Boeing Everett Factory. Measuring at an astounding 4.3 million square feet in land area and 472.7 million cubic feet in volume, it is also the biggest building in the world. To understand the sheer size in relative terms, you could fit an entire Disneyland or 80 football fields with room to spare. Now, imagine the difficulty of locating your belongings in a building of that scale within a reasonable amount of time. And yet individual warehouses take in hundreds of thousand items every year, store them efficiently and retrieve them upon request.
Warehouses play a fundamental role in the modern supply chain. Every product you have ever bought or used has spent time in one, if not many, warehouses. They offer efficient storage of goods and the ability to release them when needed. Modern warehouses can be centres for several forms of logistics activity, but can be grouped into four simplified types:
Production Warehouses: Typically located inside or within close proximity of the manufacturing site, the goal of a production warehouse is to even out the demand for raw materials or for semi-finished or fully finished goods.
Storage Warehouses: This warehouse type is often used for storage of finished goods as part of a company’s outbound supply chain operation.
Consolidation Warehouses: The primary purpose of this type is not merely storage. They are used to receive large inbound shipments and then break them down into smaller outbound loads. They are also used to consolidate smaller inbound shipments into larger ones, for example dispatching shipments to the same geography.
Fulfilment or Distribution Warehouses: These warehouses are used for more than simply storage of goods. They act as centres for value added services such as order fulfillment, labeling, packaging, and dispatch or transportation.
According to one estimate, companies spend $350 billion annually on warehousing. Their expenditure is expected to grow, driven by increasing complexity within global supply chains, partly contributed to by recent tariffs wars among nations. Another trend expected to increase spend on warehousing is the popularity of e-commerce which, while being on the rise for some years, saw an unprecedented growth in terms of penetration rate (USA) in the recent 3 months (Figure 1). The desire of consumers for speedy delivery could also add pressure on warehouse operations. According to McKinsey and Company, 30% of customers would pay extra for reliable or speedy delivery (Figure 1).
Warehouses have utilized technology and automation for some time now in order to reduce staff injuries & cost and increase operational efficiencies & key service level metrics. However the automation revolution might be poised to enter a new era driven by advancements in robotics, internet of things (IoT) and artificial intelligence. This together with the improved economics of deploying autonomous robots has made increased automation much more attractive for the warehousing industry. The average industrial robot price has fallen by half in real terms in the last 30 years, and even further relative to labor costs which have grown substantially over the years (Figure 2).
Another case for greater automation within warehouses is the health and safety of staff. Warehouses, often full of moving machinery carrying heavy loads, are inherently one of the most dangerous places to work. In 2018, more than 1 in 4 workers who were fatally injured in Australia were employed in the transport, postal and warehousing industries (Figure 3). Greater automation has the potential to get humans out of harm's way, with robots taking on more of the mundane, repetitive and/or injury prone tasks.
One of the most automated warehouses in the world is operated by Ocado, a UK based online supermarket, and located in southeast England. The warehouse uses swarms of purpose-built robots that can autonomously pick and pack customer orders. The robots at the warehouse are capable of collaborating to pick a typical 50-item order in a matter of minutes. The process makes up part of the Ocado Smart Platform: an end-to-end ecommerce, fulfilment, and logistics platform. The company also offers their technology to other large brick-and-mortar grocery retailers around the world, including Coles supermarket based in Australia.
Of course, any discussion about warehouse automation cannot be complete without covering Amazon’s fulfilment centres. At most traditional warehouses shelves are fixed and human pickers have to go to the shelves, however at Amazon’s fulfilment centres the shelves come to the picker driven by an army of robots, shuttling product shelves across the warehouse floor, as shown in the video below. The video also showcases an incredible safety mechanism that allows human workers to safely walk the floor amongst whizzing robots. The staff member turns on a safety vest that emits a radio frequency instructing the robots to avoid his path, protecting him, the robots and the product inventory, while also reducing downtime on the warehouse floor. Another neat innovation uses Machine Learning to keep shelves containing items that are currently trending or popular hovering at the outside edges, closer to the picking stations, reducing travel times and increasing the speed of order fulfilment.
In addition to these larger companies, there is a vibrant ecosystem of players developing exciting new technology to automate the warehouses of the future. One example is USA based Seegrid, that develops vision guided vehicles (VGVs) and fleet management software. Seegrid’s autonomous robots can help optimize warehouse operations and workforce productivity by reducing the reliance on man travel. The autonomous robots can carry loads and traverse the warehouse floors safely to a predefined target location. As of publication of this article, Seegrid’s deployed trucks had travelled almost 4 million miles without any reported safety incidents.
Grey Orange is on a mission to help warehouses be ready for the Age of Immediacy. The company believes that greater value can be realised for warehouse operational efficiencies through a higher degree of integration between the robots and the central software controlling the robots. They are developing a Fulfillment Operating System which is an AI-enabled software brain, called GreyMatter, that integrates robots rather than merely interfacing to them. Robots leverage GreyMatter software built into their core to communicate with other robots and with the central system, creating continuous feedback between the algorithms in the software brain and the real-time operations on the floor. The creators believe such tightly coupled integration results in the “best decision” moment to moment.
After having covered some of the most cutting edge technology solutions involving robotics, IoT and AI, we have to admit that one of the most ingenious innovations in warehouse efficiency involves no technology at all. Why spend a fortune in warehouse automation, invest in fancy technology or hire warehouse staff, when you can get the customers to do the order picking directly from your warehouse. IKEA’s walk-through warehouse stores save transport, storage, and workforce costs by having the majority of items moved by the buyer from their location in the warehouse to the cart to the register and out the door.
Parting thoughts
The role of the warehouse in our modern life can not be overemphasized. From our beloved gadgets to life saving medications and equipment, each and every item spends time in a warehouse where it must be meticulously stored and efficiently retrieved upon demand, while maintaining a safe working environment for staff. An earlier article of ours explored automated, environmentally sustainable and cost-effective last-mile delivery solutions, such as drones and autonomous delivery vehicles. The warehouses of the world also need to continue innovation efforts towards greater automation or risk becoming a bottleneck within the broader supply chain.
It has been exciting to see different fields of technology, such as Robotics, IoT and Artificial Intelligence, converge to deliver real world solutions to a complex problem such as warehouse management. It has also been refreshing for us to note that human safety takes central focus in developing these solutions, leading us to safer work environments in the future.
Being a vital component of the end-to-end supply chain, continued innovation in warehouse management is imperative.
Co-Authors:
Disclaimer: This article is based on our personal opinion and does not reflect or represent the views of any organisation that we might be associated with.