Human beings have been thinking about robots and automation for thousands of years. But how are they using automation and AI in supply chain?
In Greek mythology, Hephaestus, the god of fire, created three-legged tables that moved on their own. A bronze man named Talos, who was powered by a single vein of lead, guarded the island of Crete. More recent television shows like Battlestar Galactica and Westworld imagine the consequences of conscious machines. You have only to consider the fact that Saudi Arabia recently extended citizenship to the robot Sophia in order to realize that we’re making significant strides in the world of automation and artificial intelligence.
On a more practical level, logistics companies are starting to embrace automation and the benefits it can offer. In fact, the McKinsey Global Institute suggests that the transportation and warehousing sector has tremendous potential for automation—the third-highest of any sector.
That being said, many have been reluctant to adopt automation technology and AI in supply chain. Whereas logistics companies are adopting automation at a rate of about 3-5% a year, McKinsey estimates retail and automotive adoption at 6-8% and pharmaceutical at as much as 10%.
In this article, we’ll explore the inventive ways that companies are adopting automation for each link of their supply chains. These examples will help you stay on top of the latest trends in logistics automation, and they might even give you some inspiration for incorporating automation into your own supply chain.
First, let’s discuss the benefits that are encouraging companies to invest in emerging automation technology.
Exploring How AI & Automation Can Benefit the Logistics Industry
Even though adoption has been slow in the industry, automation can offer significant benefits for logistics companies, including:
- A Solution for Labor Shortages
- As unemployment rates continue to remain at a 50-year low, automating certain tasks could offer some businesses some relief from the tight labor market. Ultimately, replacing humans with machines is a sensitive subject that requires consideration, especially when it means putting humans out of work. However, the greater hope for automation is that it could take over menial tasks, freeing up employees for higher-value work.
- An Opportunity for Increased Efficiency
- Especially when it comes to warehouse activities, like picking and sorting, automation can offer faster speeds with increased accuracy. This efficiency could also result in lower operational costs in the long run, once the investment in the technology has been paid off.
- Greater Flexibility
- Automating certain tasks can give companies additional flexibility to respond to times of peak demand. For example, fully automated warehouses like the one built by UK grocer Ocado can run 24 hours a day, without the challenge of locating late-night shift workers. Additionally, some experts have floated the idea of rental equipment that, for example, could be brought in during the holiday season to meet additional demand.
Despite the advances, however, current automation technology still has its limitations. It remains confined to menial tasks. Warehouse robots also don’t have the same dexterity as humans, and they struggle on stairs and unfinished floors.
Still, many companies are leveraging emerging technology in surprising ways.
Automation & AI in Supply Chain Forecasting
When you’re talking about automation, it’s nearly impossible to ignore the giant in the room: online retailer Amazon.com. This is especially true after its 2018 $775 million purchase of Kiva Systems, a Massachusetts-based company that manufactures mobile robotic fulfillment systems. It’s clear that the company is investing heavily in AI and automation, and it will likely lead the way in adopting cutting-edge technology.
Amazon is currently focusing its automation efforts in an area that might surprise you: forecasting. The initiative, named “hands off the wheel,” shifted forecasting demand, inventory ordering and even negotiation of prices from in-house human experts to an algorithm that they’ve refined over years of monitoring customer behavior.
Although the system was initially designed to allow human intervention through adjustments, the company has increasingly moved toward allowing the algorithm to make decisions on its own.
So if Amazon runs out of the new “hot toy” for the holiday season, they’ll have no one to blame but the algorithm!
With this industry giant leading the way, it would seem automation and AI in supply chain will soon be the norm.
Automation & AI in Order Fulfillment
When many people think of automation in logistics, this is probably the first thing they imagine: robots picking and packing orders in a warehouse.
However, just 4% of companies surveyed in Modern Materials Handling’s 2019 Annual Warehouse and Distribution Center Automation Survey consider their operations “highly automated.” 49% of companies still use mostly or completely manual solutions, while 42% use a mix.
Since order picking can comprise as much as 63% of fulfillment costs, this area seems ripe for automation.
Several large companies agree, including:
- Alibaba, the largest online retailer in the world, which used 60 robots to reduce human labor by 70%. The robots in their warehouse bring inventory to human workers, who then package and mail orders.
- PepsiCo’s Frito Lay Operations use robotic truck loaders and automated picking which allowed them to create fully automated mixed cases for smaller stores. The company credits advances in technology with allowing them to continue to leverage automation in new and different types of orders for retailers.
In addition to automation within warehouses, other companies are looking to augmentation technology, a technology that allows their human workers to act more efficiently and pick orders with more accuracy. Consider examples such as:
- Virtual reality goggles that overlay images on existing structures. For example, consider a pair of goggles that could allow your workers to look at a wall of bins and immediately highlight the one that holds the item they need to complete an order.
- A wristband that vibrates when your worker’s hand is close to the right bin, improving speed and accuracy when picking orders.
All of these pieces of technology could combine to produce a warehouse that operates more efficiently and effectively, reducing operating costs and increasing order accuracy and, in turn, raising customer satisfaction while lowering return rates.
Automation & AI in Warehouse Navigation
A logistics company in Belgium is using automation to tackle one of their biggest barriers to efficiency. 2XL discovered that the size of their large warehouses led to their workers spending most of their time in transit from one area to another.
To solve this issue, the company introduced automatic guided vehicles that move inventory around the warehouse. The change created several efficiencies for the company, enough that their investment in the system was paid back within a year.
Automation & AI in Trucking
Nearly two-thirds of all goods shipped in the United States move by truck. And although it has been called “deeply traditional,” the trucking industry has started adopting automation in a few key ways.
For example, UPS has been using automation technology to identify the fastest route for its delivery vans. Other industry experts have discussed the possibility of autonomous truck deliveries. In 2016, Uber and Anheuser-Busch partnered to deliver 45,000 cans of Budweiser over 120 miles in a self-driving truck.
Although the future of self-driving cars and trucks is far from certain, it’s clear that advances in automation will create significant impacts in the trucking industry.
Automation & AI in Ports
A fully-automated port terminal in Shanghai opened in 2018. The Yangshan Deep Water Port automated the movement of containers from ships to the container yard, then onto the trucks that transport containers out of the port.
The goal? To deliver consistent and precise handling, reduce costs and reduce emissions. Other ports in Rotterdam and Hamburg have introduced automation into their operations, as have U.S. ports in Virginia and California.
Despite the positives, some questions remain. McKinsey questions how long it will take some of these ports to recoup the costs of automation. The Middle Harbor terminal in Long Beach has invested nearly $1.5 billion in their automation efforts—quite a significant number. However, upon completion, it’s estimated that Middle Harbor will be able to handle twice the capacity of its manual operation.
Additionally, it’s expected that ports will see some resistance from longshoremen, who fear they will lose their jobs to automation.
However, many see the benefits of automation within ports. Increased efficiency and shorter wait times for truck drivers top the list, as well as opportunities for decreased emissions, which have long been an issue.
Staying at the Forefront of Emerging AI in Supply Chain Technology
Businesses of all sizes are looking to automation to deliver solutions to their business challenges. As technology improves, we expect to see more innovation in the logistics sector, especially since the upsides of lowered costs and greater efficiencies are so attractive. Even if you’re not ready to make a significant investment in automation, staying current on automation advances may spark some ideas for creating new efficiencies in your own business.
Have questions about automation or creating efficiencies in your business? Our experts would be happy to help. Just get in touch with us for a free consultation. We’d be happy to work with you on any link of your supply chain to help your logistics move more smoothly.
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