As the logistics industry looks to drive down costs to maintain its competitive edge, Artificial Intelligence (AI) and robots are becoming mainstream in warehouse management.

According to a report by McKinsey Supply Chain 4.0, the Internet of Things (IoT), advanced robotics, analytics, and big data can potentially lower operational costs by 30 per cent, while reducing lost sales and inventories by up to 75 per cent.

A key reason for the increased use of robots and AI is the falling unit costs for the technology, making them more cost-effective.

In tandem, there has also been a rise in the skilled professional workforce who design, install, operate, and maintain AI and robots.

Several factors are making robots and AI more of a reality for many industries and warehouses. According to Supply Chain 4.0, over the past thirty years, robot prices have halved in real terms, and fallen even further when human labour costs are considered.

There are several warehouse management technology advancements currently in use and more on the horizon. Deb Ellis, Senior Partner at Gattorna Alignment in Australia, references myriad developments in the automation of supply chain management.

“There are different ends of the spectrum in terms of the use of AI including highly automated warehouses such as Ocado’s ‘hive’ warehouse.” Ocado is an online-only grocery store with highly automated warehouses in the UK. At a more basic level, there are also robotic aids, such as picking buddies that follow a human picker around and issue instructions and carry equipment, Ellis added.

Ocado’s ‘hive’ is a hive-grid machine run by robots. The hive stores over 45,000 products and the capacity to process 3.5 million items or around 65,000 orders per week, according to UK publication The Engineer. Humans still work in the facility, bagging and packing the items delivered by robotics for mailing and distribution. Forbes reported that Ocado is also selling the hive technology to supermarkets.

Robots are ideal for performing repetitive, high-volume production activities, and as technology advances, automating tasks will become less costly and less complex, and the companies currently using robots will acquire more, according to the McKinsey Supply Chain 4.0 report.

Warehousing on demand

The traditional warehousing model is facing the same disruption as the transport, hotel and cleaning industries. As Uber, Airbnb and Laundrapp start to increase market share in their respective sectors, start-ups in the US and the UK are focusing on flexible rental options for warehousing.

Flexe in the US and Stowga in the UK are offering warehouse owners the opportunity to lease out excess warehouse capacity to clients on demand. The apps and cloud platforms enable flexible leasing options for customers ranging from days to months.

The warehouse owners benefit from access to another customer source to fill unused capacity.

Source: PricewaterhouseCoopers