Warehouse automation

Smart technology has been around for well over a decade, but a look at recent survey data suggests the pace of change is picking up — particularly in warehouses and manufacturing facilities.

It's a change that was happening pre-pandemic. But continued worker shortages and supply chain disruptions have accelerated technology adoption over the past two years, according to John Paxton, CEO of MHI.

For the past nine years, MHI has been surveying materials handling professionals and asking them how likely their facility is to implement a series of technologies. Each year, there are new adoption trends, shifts in use cases, and evidence some technologies may be more hype than ripe for use.

"One thing we have learned over the past nine years we have been producing the MHI Annual Industry Report is that supply chains are becoming more and more a technology-driven industry," Paxton said in an email.

Some technologies are on the fast-track with supply chains: cloud computing, AI and IoT come to mind. Others, like 3D printing or blockchain, are struggling to show a business case. Overall, Paxton said two factors — disruption and consumer demand — are driving the adoption of technology.

"What we expect to see over the next few years is really a revolution in the adoption of these technologies," said Paxton.

In an effort to keep supply chain managers up to date on the latest technology trends, Supply Chain Dive reached out to MHI for an in-depth look at adoption trends.

This story will be updated each year as new data is released by MHI. (The next report is expected in March 2022.) Take a look at the table above, and the charts and stories linked below, to dive deeper on the 2021 technology trends.

Article top image credit: Getty Image edited by Ryan McKnight

Warehouse picking has long been the thorn in the side of the fully automated warehouse.

"Humans are way better at the simple task of looking at something, seeing, 'oh that's what I actually want,' and then grasping it," said Jennifer Pazour, associate professor of industrial and systems engineering at Rensselaer Polytechnic Institute. "It's one of the first things toddlers learn how to do."

Humans are also better than robots at recognizing how to grasp something without damaging it, she added.

However, the automated picking technology is getting better — and fast. According to the 2021 MHI Annual Industry Report, which was conducted with Deloitte, supply chain professionals see the following top uses for robotics and automation revolving around warehouse movements such as:

• Picking/packing/sorting orders (42%)
• Loading/unloading/stacking (34%)
• Material/product movement within a facility (30%)

In addition, 15% of respondents anticipate fully automated warehouses.

"The rate that I'm seeing technology and automation being deployed far exceeds anything that I've seen in my 35 years of experience," said Chris Riemann, managing director of supply chain and network operations at Deloitte.

E-commerce retailers have no choice. Online sales have grown, which requires warehouses to quickly pick and fulfill orders. Warehouse workers are coming back onto the job, but there's still a labor shortage, Reimann said. Plus, customer demands have changed.

It used to be that "you'd call into a call center, they would take your order, and five to seven days later it would show up on your doorstep. Now you go into your smartphone and the expectation is you're going to get it tomorrow," he said.

Supply Chain Dive looked at four startups that are working in the automated picking space. We set a few parameters in who we chose to highlight. The startup had to be located in North America, be less than seven years old and have under $1 billion in funding according to Crunchbase data. The startup still must also be in startup phase and not been acquired or formed an IPO.

inVia Robotics

Funding: $29 million | Founded: 2015

The inVia Robotics system "optimizes routine, manual, and generally inefficient warehouse tasks, including picking, replenishment/returns and sortation," Lior Elazary, inVia Robotics co-founder and CEO wrote in an email.

That system includes inVia Picker Robots, which can increase productivity by four to five times, Elazary said. It also includes inVia Logic, which calculates and synchronizes inventory movement, and inVia SmartPath, which identifies the optimal route for retrieving inventory.

inVia is currently being used by Cargo Cove, GnarlyWood and Wagner Logistics. The company also offers its products through a monthly subscription service, including the robots, in a Robotics-as-a-Service model.

"Customers can start by just implementing inVia Logic to optimize an existing workforce," Elazary said.

XYZ Robotics

Funding: $28 million | Founded: 2018

The XYZ Robotics picking robot can sort 900 pieces of products per hour. It does so via a 3D vision system, advance motion planning and an "adaptive switching of suction cups or grippers based on the SKU geometry and material property, broadening the range a single workstation can handle," according to the company website, with a single switch speed of 0.6 seconds.

In a holiday shopping volume test, the picking robot was also 99.9% accurate, according to The Robot Report.

"From mobility to grasping, robots' capabilities are getting closer to [those of] human beings," said Runze Chen, a vice president at Source Code Capital, a series A+ funder. "More data, better algorithms, and growing compute power will enable more robots in various scenarios."

Pickle Robot Co.

Funding: $5.75 million | Founded: 2018

The Pickle Robot system, which is called Dill (of course), sorts packages and will soon unload trailers using "a unique combination of [artificial intelligence], computer vision, and motion planning technologies to handle the variety and complexity of warehouse tasks," Dan Paluska, co-founder and vice president of the company, wrote in an email.

Dill is designed to work with people to increase performance and throughput for package handling.

Dill can also be "retrofitted into existing operations with minimal integration and customization, leading to fast install and quick ROIs," he said.

Paluska wouldn't disclose who Pickle is working with, but said its "sortation system has been deployed in production to several East Coast fulfillment warehouses since November 2020."

RightHand Robotics

Funding: $34.4 million | Founded: 2014

RightHand Robotics' solution is the RightPick, an autonomous piece-picking solution that works with logistics and existing manual or automated systems to provide "businesses with a vital productivity boost as part of a lean and highly efficient material handling process," Vince Martinelli, head of product and marketing at RightHand Robotics, wrote in an email.

The RightPick 3, the latest iteration, is "the world's first autonomous piece-picking solution designed from the ground up to be integrator-friendly with a modular, industrialized hardware design, well-defined software APIs and international compliance," he wrote.

Right now, the company is working with Paltac Corporation, which is Japan's largest wholesaler of consumer packaged goods, and Apologistics GmbH. The robotics company recently announced the opening of its RightPick Center Europe in Nürnberg, Germany.

Article top image credit: Creative Commons

Chewy's fulfillment operation is in the early stages of a 180-degree turn.

After years of research and searching, vetting and testing, the pet supplies e-tailer opened its first automated fulfillment center in Archbald, Pennsylvania, last month. The plan has been in the works for years, Mike Gilbert, Chewy's vice president of operations, said in October, the day after launching the inbound operations of the automated facility.

The timing turned out better than the operations team could have known.

"Growth curves that were supposed to play out over years have been compressed into quarters and even months," said CEO Sumit Singh on an earnings call in September, touting the company's investment in technology and talent to handle the growth. Chewy's sales have grown 47% YoY for the last two quarters.

The final tech stack in the Pennsylvania facility is the result of four priorities Singh brought to Gilbert: worker safety, cost structure, delivery speed, and minimizing product damaged during fulfillment and delivery.

Gilbert expects a 45% improvement in operational efficiency in terms of cycle time between a customer order submission and a box landing on a truck. He also expects greater picking accuracy and 30% lower fulfillment costs. With a pandemic to contend with and a digital holiday shopping season ahead, Chewy's technological decisions are in for the ultimate test.

Sorting through the tech market

Gilbert assembled a team two years ago to come up with an automation plan and spearhead the implementation. Experts in mechanical and industrial engineering, fulfillment processes, and warehouse software from around the company came together to cover every corner of the fulfillment process and choose the best-fitting technology. Gilbert, an Amazon alum, said the team's past experiences were invaluable in whittling down the vast array of automation solutions on the market.

Chewy specifically wanted to lessen warehouse traffic and eliminate or reduce heavy lifts for workers. Both changes should lead to faster throughput and fewer on-the-job injuries.

Safety is a top concern for the Chewy team, and experts say the concern is climbing the list of priorities for warehouse operators seeking new technology.

"Crucially, this doesn’t mean getting employees out of warehouses but rather optimizing workflows to automate repetitive tasks that put them in close contact with their coworkers," said Adam Kline, senior director of product management for Manhattan Associates.

In Chewy's existing facilities, people move around the facilities to pick stationery goods, walking miles per shift, said Gilbert.

"You get a lot of congestion in the site as a result of it, especially as you scale up an operation. There becomes a point where it's almost a point of diminishing returns — where you can't really get more out of the building because you have so much congestion inside," he said. ​

It's a common problem, according to Kline. "We can look at a non-automated facility and see forktrucks, pallet jacks and people moving product on foot, and it looks not dissimilar to the congestion we see on our roadways – right down to the daily rush hour and seasonal holiday peaks," Kline said. "You can see the improvement in the transition to an automated facility in which aisles and cross-aisles are mapped, tasks are deliberately constructed, and traffic is minimized."

The solution Chewy landed on was a goods-to-persons system orchestrated by a network of conveyor belts and pneumatic rollers. Gilbert said he expects a significant drop in the time between a customer clicking submit on an order and that order landing on a truck.

Building the tech stack

Chewy's new automated model for fulfillment knits together technology from multiple vendors (which Gilbert declined to name for competitive reasons). High-speed sortation systems will ferry goods to pickers on conveyor belts, rollers and some robots — complemented by a top-to-bottom redesign of storage tailored to Chewy's assortment.

"It can range from small toys and treats all the way up to 50-pound bags of dog food ... so we've really focused on how we slot the building," Gilbert said. The building will be divided into zones based on SKU velocity, with slightly different technology and systems in each.

"We have one area of the building where we have robotics that are bringing products to team members to select and then place into picking containers that will ultimately convey their way through the rest of the processes," he said, adding that workers in this zone will be stationary.

Other pickers will still make lateral movements but nothing near the miles they walked previously. Plus, each order will need fewer overall touches.

The Chewy select team scoured trade shows and found a lot of interesting technology, according to Gilbert, but very little that was a perfect fit. Much of the automation Gilbert and his team found was excellent at doing one task, in consistent conditions, but add varied box sizes, and you're out of luck.

The patchwork nature of the solution the team landed on is the norm, said Joe Dunlap, managing director at CBRE. Vendors tend to be experts in one technology, and fulfillment operations leaders often create a custom cocktail to fit their business — leading to a rise in importance, and number, of integrators.

"This automation trend that's occurring these last few years has brought more integrators out of the woodwork who specialize in certain kinds of automation. And in some of these [robotics-as-a-service] solutions, the vendors themselves are integrating them because it's so unique," Dunlap said.

Gilbert's team brought Chewy's real order volume to potential vendors and integrators to run simulations. The team traveled across the U.S. to get honest feedback from users. Running scenarios quickly whittled down the field.

"It basically shrunk the pool down until about 30% was remaining. And then it started going through the vetting process of really getting into detailed design work and understanding differences in cost," Gilbert said.

Don't call it a test

Even in a normal business environment, supply chain technology slip-ups can cost millions. But retailers doing well in the pandemic will take the risk — as long as the right controls are in place to ensure a smooth rollout, Dunlap said.

"You have to be careful about tearing down racking and implementing it in sort of a phased fashion so that you can light it up or turn it on in sequence and keep the business running," Dunlap said.

Chewy's warehouse management system team has been there every step of the way to ensure a smooth transition, according to Gilbert. Chewy doesn't have a custom WMS, but after years of iterating and custom coding on top of third-party product, it might as well, Gilbert explained.

"Our WMS team played a huge role in integrating with this new technology because there's a lot of handoffs when you have a warehouse control system and on top, our WMS," he said.

The e-tailer's planning cycle for new facilities is generally three to four years out — present circumstance excepted — so Chewy's operations team will soon be tasked with predicting how much of the current flood of demand will stick. For now, the focus is on executing the transition to the new automated processes without any hiccups.

"This is not a test," Gilbert said. The Chewy team will analyze this first automated facility to plan its next move. Changing the width of an aisle by inches could make a difference for efficiency, Gilbert said as an example.

"While we've all had experience with these types of technology and equipment, there are always things that you learn along the way," he said.

Article top image credit: Permission granted by Chewy

Robots are often in the news for sensational reasons: The Boston Dynamics robot dog impersonates Mick Jagger; a Spider-Man "stuntronic" flies over Disneyland visitors.

But in supply chain, robotics and automation have gone from something radical, even fringe, to mainstream.

"It's considered low risk. And, pretty soon, it's going to be table stakes for operations within supply chain, where 10 years ago it was considered either cutting, or bleeding edge, or risky," said Jeff Christensen, vice president of product at Seegrid.

Annual installations of industrial robots will jump from 450,000 a year in 2015 to 600,000 in 2022, according to a McKinsey projection. The firm also predicted that 10% of today's manufacturing processes will be replaced by additive manufacturing by 2030.

A confluence of factors — including the pandemic, labor shortages, and technology maturing at the right time — is pushing robotics ahead in 2021 and beyond.

Robotics mature, along with AI

Like most technologies, robots became more widespread when they improved as a technology, and when they dropped in price.

The introduction of the robots-as-a-service model has allowed enterprises to supplement their operations when they need help, or try adding robots without having to make a major capital investment.

The progression of artificial intelligence has also helped, said Christensen. The sheer amount of data being collected changes what's possible. What people can do on any computing device today is vastly different than 10 or 20 years ago.

Better robots, better sensors and AI "have hit the maturity threshold at the right time, at the time the market demands what it needs to do," Christensen said. "That doesn't always happen. Lots of time there is technology that comes to maturity in a vacuum or in a lab with no real key demand for it."

A pandemic push

Right now, there is demand: increased e-commerce business, labor shortages, truck driver shortages and instability in the supply chain has robots stepping up to the plate, especially when it comes to building resiliency.

In the 2021 MHI Annual Industry Report, 53% of the more than 1,000 supply chain professionals surveyed said they were increasing or substantially increasing their investment in robotics and automation to make the supply chain more resilient. The study also found that 38% have robotics and automation in use today and an additional 38% predict it will be in use within five years.

The need for efficiency and error reduction is pushing robotics and automation in manufacturing, too, especially for companies working on the COVID-19 response.

The pandemic has put a "particular strain" on diagnostics companies, Samantha Betancourt, vice president of supply chain and external operations at Ortho Clinical Diagnostics, said via email.

"We are seeing our volumes increase at the same time we may have to limit the number of people in a facility. That made us realize we need to find more creative ways to ensure we could continue to move our products even when [we're] limited by the ability to physically touch the products," Betancourt wrote.

She said assigning tasks to robots also allows their team members "to be thought leaders," which is critical right now. "Employees can focus on strategic work and leave repetitive activities, whether in a spreadsheet or in a warehouse, to robotics."

Overcoming hurdles to adoption

While robots are becoming more common, they're still new and "with anything new, there needs to be time to build trust," wrote Betancourt.

"Until team members are used to working alongside robots and can truly trust their work product, oversight adds additional tasks," she said.

Not every company has the money to make a capital investment right now, either. That, plus concerns about maintenance and upkeep costs, are keeping companies on the sidelines, said Bill Ferrell, supply chain professor and associate dean of the Graduate School at Clemson University.

Seeing successful applications in other enterprises will help, Ferrell added. He pointed to autonomous forklifts already being used in warehouses and Walmart's roll out of autonomous trucks.

"We're starting to see the beginning of applications and implementation in the real world," he said. "It's not to scale yet but it's not that far in the future."

Article top image credit: Bill Pugliano via Getty Images

Robotic arms, autonomous goods-to-person systems and knots of electric conveyor systems attract a lot of attention in the world of warehouse automation. But behind the scenes is technology controlling automation. And in recent years, a new kind of software emerged to help orchestrate automation: the warehouse execution system, or WES.

"WES was essentially born, I think in 2012, so it doesn't have the legacy that [the warehouse management system] does going back in the late '80s," according to John Sidell, the managing principal at New Course Group.

In the last few years, the technology made a name for itself as a vital component of warehouse automation. A recent survey by KRC Research and Honeywell of 434 U.S.-based professionals that manage warehouses, DCs or fulfillment centers found that 27% of respondents consider a WES essential to automating their business while another 33% consider the technology very important.

The WES is meant to be a single software that fills the roles previously handled by two systems:

1. A Warehouse Management System (WMS): These systems focus on managing inventory and resources. "I know exactly what I have on that pallet, know exactly where that pallet is, I know a complete audit trail of everything that's happened to that pallet or case from the time it entered my building to the time it left and everything in between," Sidell said.
2. A Warehouse Control System (WCS): These systems manage warehouse automation and integration. Automated systems need to know what sensors to turn on to read a package or what direction to send a parcel on the conveyor. That mechanization is happening at the level of a WCS.

Over the last few years, WCS vendors have begun adding WMS functionality to their system and vice versa, according to Nick Leonard, the director of solutions architecture at Swisslog Warehouse and Distribution Solutions.

"A warehouse execution system ... is not only a simple controller of subsystems, such as robotics, or conveyor or automation components, but it's also executing business logic to satisfy an order profile" while managing the flow of goods throughout a warehouse, Leonard said. "It's making intelligent decisions about the flow of people and goods in the warehouse," he said.

A WES creates a digital twin of the physical space in the warehouse, allowing it to update at the exact time inventory is moving. When a customer places an order, details and payment information feed into the ERP system. Once the supplier determines the inventory is available, the customer order is sent into the WES, which generates pick and pack instructions based on specific business rules at a warehouse location. It will manage the execution of the order, whether that involves manual picking or automated systems. It will update an order as each component of the order is picked, Sidell said.

The hard part is finding a software vendor that does all of this well, he said. Some of the software vendors that started out doing WMS struggle with WCS functionality, and some original WCS vendors have yet to perfect the inventory aspect of the software. He specifically pointed to Locanis, a Germany-based software company, as a provider that is doing this well. But companies including Swisslog, Honeywell, Fortna and Manhattan Associates all highlight some level of WES functionality on their websites.

Leonard noted some customers will keep their WMS even as they transition to a WES, because the WMS may have functionalities like transportation management. A Bastian Solutions webinar on WES similarly highlighted that WES might not have functionality like yard management that could result in warehouses maintaining a WMS.

Each system will end up being used slightly differently based on the differences in the inventory, labor and levels of automation at a given warehouse. Figuring out all those business rules and getting them running will take a minimum of 12 to 24 months for a complex, 1-million-square-foot warehouse operation, Sidell said.

Swisslog will try to schedule a site visit, talk with the customer and discuss goals for where it would like operations to end up, Leonard said.

"If the customer can satisfy all the requirements with our standard modules, then these engagements can be rather quick, like within a few months in some cases," he said. "When we have a really highly complex system, that's using multiple automated subsystems that are new to the environment, new to the business ... it could take upwards of a few years from start to finish."

But not everyone needs a WES.

"If I just put in a simple conveyor, I don't need a warehouse execution system, because I can integrate that conveyor within the WMS and it runs just fine," Sidell said.

As an operation becomes more automated, the more a WES makes sense, though.

"So if the majority of the outbound order pool touches the automation, then yeah, that's a definition for warehouse execution," Sidell said, later adding that every warehouse can use WMS, but only a subset needs WES.

Article top image credit: Permission granted by Locus Robotics

Before the coronavirus pandemic, many retailers saw warehouse management systems (WMS) as an important investment area. The State of Retailing Online 2020 report from the National Retail Federation and Forrester found 73% of retailers are investing in WMS. And 63% of respondents said WMS technology expense was simply the cost of doing business, according to the survey.

Procuring and deploying WMS was also a face-to-face process before COVID-19. But the pandemic has driven many firms to work remotely and warehouses to enact social distancing measures, complicating the process for standing up a new WMS, experts told Supply Chain Dive.

One forecast from Arc Advisory Group predicts the WMS market will decline slightly in 2020 before rebounding, but the "mission-critical" role of the technology will keep the market somewhat stable through the current financial downturn.

"I do think 2020 is probably going to be a tough year for some of the vendors for a couple reasons," Dwight Klappich, a VP analyst focused on supply chain at Gartner, told Supply Chain Dive in an interview. The current work environment has made it harder to deliver software, which could hurt vendors that rely heavily on consulting revenue. It can also be difficult to sell these products over the phone, he said.

"During the pandemic, it was hard for [clients] to implement those kinds of systems because usually, you need people on site to help with it," George Lawrie, a VP and principal analyst working in serving application development and delivery professionals at Forrester, told Supply Chain Dive in an interview.

Many warehouse operators have placed greater focus on new priorities like figuring out how to get employees to social distance while at work, Lawrie said.

"But it's not disastrous, which actually I think bodes well," Klappich said. "I think the need and the demand continue to be there."

An in-person process moves to FaceTime

For the last 30 years, vendors have largely sold complex software systems like WMS through in-person meetings, Klappich said.

The sales process can include a multi-day demonstration in a conference that includes multiple people from each company so the vendor can learn about the buyer's company and the buyer can learn about the WMS.

"You don't get that same experience on the video," Klappich said, adding that there is a lot that can be done remotely and people are beginning to make the move.

Implementing a WMS in the past required the buyer and vendor to come together with a whiteboard to talk about process mapping and building the software model. During these meetings, the company goes through its pick, pack and ship processes, replenishment plans, and other details that will need to be included in the WMS.

"That piece we've struggled with [is] how do we do that completely remote?" Klappich said, adding that the process can require eight to 10 hours of meetings every day for up to 15 weeks.

Jeremy Hudson​, the director of consulting services for Open Sky Group, a WMS provider, acknowledged the struggle of this new reality, but said his team was finding ways to make long video calls more bearable. He has worked on three WMS projects going live since March.

"I've droned on into a webcam for three hours at a time," Hudson said. "We've had to find ways to creatively have fun and break that up." This could include short five to 10 minute segments to allow for a team talent show, or anything to break up the monotony of an all-day video call, he said.

Of the three projects Hudson has worked on since March, two were done completely remotely. The difficulty of the project depended on the company, he said.

One company working with Open Sky was manufacturing cold and flu medicine, but its suppliers weren't considered essential, which allowed for a slower, easier implementation.

"It gave us a kind of slower ramp-up period in terms of going live," he said. "Where we expected potentially 15 to 20 trucks the first week, it ended up being two trucks the first week."

But the other project was for a business that saw the commodity price skyrocket "basically the moment we turned on their new WMS," he said. "It was incredibly complicated to try to support that both on site and remotely."

Training and support in a remote world has involved a lot of screen sharing, virtual whiteboarding, process mapping technology and video chats. When Open Sky was on site, it was able to monitor the process and help out right away if something pops up. When issues started arriving remotely, investigators had to retrace the steps of the process, so Open Sky asked customers to call as soon as the WMS started to produce unusual results.

"It's been as simple as they'll FaceTime my support resource and literally be showing them what the screen looks like in front of them," Hudson said. "As simplistic as that sounds, it's 'here's the RF gun in my hand, right? The mobile unit that I'm scanning the product with, why does that say this?'"

From there, Open Sky can help to figure out the problem. Was the master data incorrect? Were the order dimensions wrong?

Hudson has even taken an entire tour of a California warehouse through FaceTime. "It was effective for what we needed to accomplish," he said, adding that these meetings are helpful for understanding a company's complexity level.

How a WMS helps in the pandemic and beyond

WMS implementation and usage is different during the pandemic not only for companies using WMS for the first time, but also for warehouses with the software already in place but seeking more creative ways to use the systems.

"Warehouses don't stop operating during a pandemic," Klappich said.

Some managers see WMS as a tool that can help keep workers safe from infection.

Hudson said one customer approached Open Sky about creating a prompt on the WMS that asked employees if they were wearing their personal protective equipment (PPE) before work. Another client asked about limiting the number of users within a zone to enforce social distancing.

Others are interested in bringing in more robotics to automate tasks and keep humans safe. WMS can help a user understand patterns in the most frequently requested SKUs and locations where pickers frequently travel, which is data that's nice to have before building out a robotics application, Lawrie said.

"I do believe there'll be a lot more investment in this afterwards," Lawrie said of WMS investment following the pandemic.

Gartner has seen a lot of WMS proposal reviews in the second quarter, the busy time for which is usually during the fourth and first quarters, Klappich said.

"They said, 'Hey, this is a good time. Let's push forward to this evaluation and be ready to make a move when things turn around,"' he said. "Saying that bodes well that there's a lot of customers doing that."

Article top image credit: Permission granted by Home Depot

ATLANTA — Change management isn't what it used to be. 

In the past, managers could start with a well-known process, said Jeremy Davidson, vice president of sales at Fortna. Begin with a future state and work backward to map out the change management process.

"There's a lot that's less known right now in this environment, and it poses some unique challenges with change management," Davidson told Modex attendees in Atlanta Monday. 

Warehouse automation technology has advanced far beyond conveyor belts. Implementation of automated picking or mobile sortation can drastically change what a worker does on a daily, or even hourly, basis. The job function could take a 180-degree turn, from moving around and picking products to working in a large station where product comes to the worker, said John Seidl, partner at GreyOrange. 

"This isn't handing them an RF gun and teaching them how to use it," Seidl told Modex attendees. 

He said new technologies and job functions can result in different KPIs, too. Because of that, today's change management requires a strategic, often individualized approach, especially at a time when low unemployment has shrunk the available pool of workers and made retention a critical issue.

"You have to be thinking about labor from an onboarding, a training and a turnover perspective," said Roger Counihan, vice president of sales at Fortna. "We're seeing 80% turnover with some of our clients." 

Turnover is especially problematic in areas with high concentrations of warehouses, as workers can jump ship for higher pay to a facility down the street.

When Amazon opened a Chicago facility with $15 hourly pay, 80 of the 220 workers at a 3PL in Chicago called in sick, Michael Wohlwend, managing principal at Alpine Supply Chain Solutions, told Supply Chain Dive. Pay is important, but it's only part of workers' calculus. Many eventually returned to the more favorable working conditions at the 3PL, he said.

Counihan said mitigating retention issues and high turnover in warehousing often begins with making worker tasks simpler and easier. Robotics vendors have responded to operations managers' calls for solutions that automate functions while simultaneously improving the work environment.

Some automated tools reduce walking time (a major productivity drain), others remove the need for workers to bend or reach, and others take over repetitive tasks, freeing humans to focus on strategy. No worker wants to stand all day placing items from one tote into another, Vince Martinelli, head of product and marketing at RightHand Robotics, told Supply Chain Dive. 

Regardless of the automation's function or how much it improves the labor environment, warehouses still require a top-down leadership approach to guide workers through the changing nature of their job functions. 

"There are some very creative things being done around how you're going to account for labor performance and change management during the initial deployment," Seidl said.

He described one Chilean retailer's autonomous mobile robot (AMR) implementation and its piecemeal approach to change management. Instead of replacing all forklifts with AMRs, the retailer removed 80% of its forklifts, he said. Then the retailer made several of the top forklift drivers each responsible for four AMRs. Executives modified the labor management system (LMS) to monitor how well the AMRs performed and how well the forklift drivers performed as supervisors. 

Today, the retailer uses forklifts to move product only during peak season. The remainder of the year, the forklifts are not in use. 

The deployment of AMRs and strategy of making forklift drivers into robotic supervisors altered KPIs for the retailer, according to Seidl. Metrics go well beyond picker productivity to instead focus on the value that a picker adds to the overall business, he said.

"The people [who] understand how to leverage human resources to enable that broader value proposition are going to be the real winners," Seidl said.

Article top image credit: GreyOrange

A warehouse worker plucks an item from a shelf and drops it into a bin, and with each action earns digital currency that can be redeemed for prizes. While the worker earns rewards, managers monitor worker speed and accuracy.

That's the process at warehouses where Amazon has rolled out FC Games, a suite of digital games in which workers can voluntarily participate.

Like many other things, Amazon leads the supply chain industry in gamification — adding a game or competitive component to daily tasks like picking and packing to engage and reward workers.

Some employees reportedly enjoy the distractions provided by playing games during a day of repetitive tasks. But employee advocates fear the big-brother-is-watching aspect, turning humans into automatons driven by rewards and penalties that could lead to injuries and burnout.

So far, Amazon hasn't made public its performance gains from the gamification approach. But other supply chain operators using gamification have started to see and publicize the benefits.

Chattanooga, Tennessee-based 3PL Kenco Logistics uses elements of gamification in its warehouses and its brokerage business. On the warehouse side, the company has seen productivity improvements in the 3% to 5% range in locations that didn't have real-time visibility into performance measurements. In its brokerage group, productivity improved 10% to 15%, according to Kristi Montgomery, vice president of innovation for Kenco.

The brokerage operation uses a system call Ambition that tracks call volumes and deals in a fantasy-football-like system. It's designed to drive team-based competition, so the winning team might be rewarded with a pizza party.

"There's a leaderboard, and you can see who's on top, but it's not at the virtual worlds level," Montgomery said.

Kenco's labor management system provides real-time visibility into an individual's performance and allows managers to compare employees in its warehouses. Standards are developed for each warehouse based on the customer, the product mix and workforce.

"Someone who picks refrigerators all day won't move the same numbers as someone picking microwaves, so we have to figure out how to normalize the data among the workforce," Montgomery said.

In some warehouses, the company has started sharing individual performance data in real time on handheld devices. Or the data may be shared on displays in breakrooms or posted on bulletin boards. If the employee uses a digital device like an RF Gun, it will show if they're behind or ahead of the standard.

"With the standards, you have a foundational basis for being able to reward the employees that should be rewarded and coach the ones who need some help," Montgomery said.

It's not just about speed. Kenco's system uses an algorithm that looks at pick accuracy, product damage, near misses with a lift truck and other safety aspects to display a performance metric.

"They get direct feedback at the moment about their performance and how they're doing against the standard," Montgomery said.

Montgomery said some warehouses use an incentive-based pay system, and employees are quick to let managers know if the information is out of date.

Incentivizing workers in a tight labor market

Even before the pandemic, logistics companies struggled with hiring and retaining enough staff to keep up with the work. Gamification is seen as a new way to engage employees faced with a shift of repetitive tasks.

Companies have measured productivity in the past, but it was used as more of a stick than a carrot, said Peter Schnorbach, senior director of product management at Atlanta-based Manhattan Associates.

"They tended to focus on the negatives of people who weren't performing well, rather than those that were performing the way they should," he said.

Coming out of the pandemic lockdowns, labor shortage problems of recruiting, retention and turnover loom larger than ever.

"We need to figure out how we incentivize people, keep them engaged in what they're doing and keep them happy," Schnorbach said.

Rather than responding to blinking lights like rats in a maze, humans are driven by the self-determination theory. Schnorbach noted people want to know what's expected of them, they are good at what they do and they have autonomy over what they do.

"Gamification reinforces those kinds of behaviors," Schnorbach said.

The most effective warehouse games are those where employees compete against a standard. That could be the number of items picked or boxes packed per hour. Schnorbach emphasized it's not just about speed but also working safely and accurately.

While adding a game element is relatively new, Manhattan Associates has worked with customers on employee performance monitoring as a part of its labor management system. With the game element added, workers receive hourly performance updates on handheld devices.

The system is built on the concept of challenges: 100% productivity, 100% pick accuracy and no accidents. Every time an employee meets the challenge, they earn points that can be redeemed for a reward like a gift card or put in a drawing for a flat-screen TV.

Montgomery and Schnorbach were quick to point out the difference between the video-game-like concepts Amazon uses and their approach to gamification.

"It's not necessarily about making work fun; it's about driving performance and making people feel valued for doing a good job," Schnorbach said.

So far, one customer has used the system in a pilot program, and others are considering it.

Roadmap to gamification

To be successful, gamification must be built on a solid foundation of standard operating procedures and a labor-management system that measures performance compared to the established standards.

Supply chain managers must consider the pros and cons of gamification, and weigh the benefits on incentives and productivity versus the stress a game could place on workers.

"If a process can't work manually with your staff as they exist in their processes as they exist, it's not going to work if you throw in an electronic system," Montgomery said. "You have to have an idea of what you're trying to gamify before you put a system behind it."

Once decisions and tech systems are in place, then employee feedback can be added to the mix. Performance information can be available on bulletin boards, kiosks or mobile devices.

"You don't have to wait to talk to your supervisor to find out how you're doing," Schnorbach said. "You're getting systematic feedback all the time."

One fear was that employees would slow down their performance if they worked ahead of the standard, but so far, that hasn't happened. It appears the incentive for points is helping to motivate workers.

Based on the pilot program, Manhattan Associates has limited updates to hourly, so employees don't check the dashboard too often. Access can be restricted to break times also.

Kenco sees gamification as a tool to attract and retain newer workers but is also sensitive to veteran workers.

"We have a really long-tenured workforce, and they do a phenomenal job every day, and we don't need to put digital avatars out there to make them better," Montgomery said. "We are careful about where we introduce some of these things because it can have a negative impact as well."

Article top image credit: Courtesy of Amazon

An average-sized package traveling through one of FedEx Ground's automated facilities requires human contact at only two points: unloading and loading.

"When they're taken off the truck on the unload side, they go through the conveyors and through the whole sortation system," Ted Dengel, FedEx Ground managing director of operations technology and innovation, said in an interview. "Then, they get loaded onto a trailer on the other side for the second touch."

FedEx Ground has more than 150 fully automated facilities in its network after adding 16 ahead of the peak holiday shipping season. Fewer steps involving manual inputs are vital for the company to keep service levels high amid a challenging labor environment and a boom in e-commerce volume since the COVID-19 pandemic began. FedEx as a whole is expected to deliver 100 million more holiday packages than in 2019.

But some of these packages won't be able to travel through a fully automated sortation system due to their unwieldy dimensions. As consumers become more comfortable ordering anything and everything online, FedEx is encountering more oddly-sized items like furniture, tires and televisions that don't mesh well with its automated facilities.

"Robotic arms do the same thing over and over and over really well," Dengel said. "But in our world, every transaction is almost a different challenge for the robot. So we started looking at other ways on how to combine bulk material handling and some robotics to try and get the throughput we needed to match what humans could do, as well as to handle the variability."

FedEx's recent automation investments targeted what Dengel calls the package bell curve. The majority of the carrier's volume that constitutes the middle of the curve can be handled through automated sorters. But the ends of the curve — the smallest and largest-sized packages — have always been handled in a more manual fashion.

These investments allow FedEx to redeploy its employees into other facility areas, giving it more operational flexibility in a time of high shipping demand. Berkshire Grey's Robotic Product Sortation and Identification systems, for example, match the human throughput of roughly 1,000 packages sorted per hour while also being "practically 100% accurate" in their sortations, Dengel said.

The consistent efficiency of warehouse robotics, spikes in demand and difficulties hiring enough frontline workers is accelerating interest in automation since the pandemic took hold.

"Now at least when I hear about warehouses and robotics, it's a very immediate short-term mindset to fulfill a very immediate need with the labor shortage," said John Seidl, a partner at GreyOrange, in October. "The mindset of a lot of your clients nowadays is pretty different than what it was earlier."

FedEx rival UPS is also pushing for greater automation in its network. Employees who load UPS' delivery vehicles will use wearable devices to eliminate 20 million manual scans a day, CEO Carol Tomé said on the company's Q3 earnings call.

"When you think about the cool technology that we're going to introduce into our buildings — automated label application, automated bagging, robotic induction into the package cars — there's just a ton of opportunity here to drive automation in ways that we haven't done before," Tomé said.

Greater levels of automation will help UPS and FedEx handle the deluge of packages more effectively. However, this can also introduce limitations within facilities when volume levels peak.

Automated facilities tend to have "a plateau you cannot exceed," said Todd Benge, senior vice president of parcel operations at Transportation Insight, in an October webinar. This means they can't simply add more employees to increase the amount of packages they can handle per hour.

"The best thing to try to do as a customer is forecast the volume ahead of time and get it to the carriers and make good communication with the carriers" to see if they can meet the level of service required, Benge said.

FedEx works closely with its largest shippers to anticipate volume surges and avoid capacity constraints ahead of the busiest shipping days, Dengel said. The company's facilities also have ways to bolster their sortation capabilities — they can extend package sortation periods at its facilities, reduce the hours between sorts and run more of them if warranted, he added. FedEx can push less time-sensitive deliveries to later sorts that aren't overwhelmed, as well.

"Really it's more about expanding the hours that we operate in a day as opposed to trying to cram more packages through a system that's already at capacity," Dengel said.

Beyond further robotics capabilities to better handle small and large packages, FedEx Ground is exploring ways to automate the trailer loading and unloading process, the only manual steps left for the core of the company's package volume.

"It's very tricky getting various kinds of packages on and off of a trailer in an autonomous fashion, so we're looking at different solutions there," Dengel said. "That's where I can see things going in the next five to ten years is really trying to solve those problems as well."

Article top image credit: Permission granted by FedEx

Prior to the pandemic, micro-fulfillment companies like Fabric, Takeoff Technologies and AutoStore, along with some industry experts, touted scaled-down automation systems as must-have technology for grocers facing a future of escalating e-commerce sales.

That future arrived early — and all at once — in 2020, when the global health crisis hit and pressed grocery e-commerce to its limit. But the expected rapid expansion by grocers of MFC technology, which seems made for the moment with its focus on quickly and efficiently assembling online orders in tight spaces, has not materialized at the level many expected.

Instead of rapid-fire partnership announcements and scale-ups with retailers, rollouts have come in dribs and drabs, with retailers seeming to take a cautious approach to implementing the systems in their stores and in dedicated facilities.

"There's a lot of misinformation out there. And I think for the retailers, it's very difficult to navigate this minefield because they don't really know enough about the technology and the automation to be able to accurately say whether or not they should go one way or another," said Marc Wulfraat, a supply chain expert and president of MWPVL International, who frequently consults with retailers on MFC technology.

There are some exceptions, most notably Walmart, which in January announced it would test micro-fulfillment technology at dozens of stores, covering a range of providers and configurations. Albertsons has enthusiastically endorsed MFCs, having forged a commercial agreement with Takeoff Technologies in 2019. The company opened its third MFC in April and plans to open six more in 2021, for a total of nine, President and CEO Vivek Sankaran said during the company's fourth-quarter earnings call.

Technology firms say the underwhelming expansion so far is partly due to retailers pausing negotiations and implementation plans for several months last year as they contended with strained supply chains and enacting safety measures. Grocers halted negotiations and plans to test facilities for anywhere from six to nine months and are now back on track, said Steve Hornyak, former chief customer officer at Fabric. He said 2021 will be more of a "test and learn" year than a period of dramatic expansion, with larger rollouts more likely to happen in 2022 and 2023.

Activity in the MFC space has indeed picked up in recent months, with H-E-B, The Giant Company and H-Mart all announcing deployments. This summer, SpartanNash plans to open an MFC in Grand Rapids, Michigan, to serve delivery and pickup orders for some of its retail stores, CEO Tony Sarsam said.

And then there’s Instacart, which has sent out requests for proposals to MFC vendors as it explores offering fulfillment as a service for retailers. According to one source with direct knowledge of the company’s plans, Instacart aims to offer fulfillment services for small and mid-size retailers as large chains like Kroger increasingly forge their own fulfillment services.

The need for high volumes

Despite this recent momentum, some analysts say grocers that have started testing MFCs are struggling to wring promised cost savings out of the systems.

Wulfraat said systems require a higher volume of incoming orders than many grocers realize to justify their hefty price tags, which can range from a few million dollars to around $10 million. He also said grocers are struggling to come out ahead financially in the face of ongoing costs, like transaction fees of up to several cents per unit shipped, and system maintenance, he noted.

The systems are also dizzyingly complex, Wulfraat said, with additional processes often cutting into efficiency. Some systems only have 50% of a store’s assortment in automated storage, requiring retailers to operate separate, sizable manual-picking operations and venture into stores to "top off" orders, which adds time and labor costs. If grocers run a hub-and-spoke model where a greenfield MFC fulfills pickup orders for multiple stores, that can add handling costs and complexity.

"The pennies really add up when you look at the journey of an order tote through these systems," Wulfraat said.

What makes more sense at this point, Wulfraat said, are medium-sized automated facilities that handle a high volume of online orders — in the range of 10,000 to 15,000 per week — and can serve incremental demand.

Wulfraat cited the 124,000-square-foot e-commerce facility The Giant Company is building in Philadelphia in conjunction with AutoStore and Swisslog, which is set to open in November, as an example of how micro-fulfillment technology can help a grocer's bottom line. That system is projected to process around 15,000 weekly orders.

"They'll be able to do semi order fulfillment out of that building for this new population of customers that they currently don't necessarily serve," Wulfraat said. "[It] makes total sense to me to go about doing it this way … because you're getting new sales."

Mike Demko, global head of the MFC business line at AutoStore, said the Norwegian automation company has lately been seeing strong interest from retailers in its technology, in large part because of the sharp focus the pandemic has placed on e-commerce. But he acknowledged it's challenging to convince potential clients that the investment needed to automate their fulfillment operations is worthwhile.

"MFCs are really about trying to provide faster service for the consumer … but the flip side of that is it's got to make economic sense," Demko said. "Grocers are scratching their heads to make sure the math works, so that they just don't plow money into something that can [help] meet consumer demand but doesn't help the bottom line."

Bill Bishop, chief architect with Brick Meets Click, who also consults with retailers on fulfillment strategies, said many grocers have landed on less-expensive fulfillment options like manual dark stores, backroom picking and in-store picking using handheld devices. Companies are also watching to see how automation ventures like those at Walmart and Kroger, which recently began delivering from two robot-powered Ocado warehouses, pan out before investing.

Bishop said many grocers struggle to evaluate automated micro-fulfillment along with other leading-edge technologies that come before them against the backdrop of mounting industry disruption.

"I think [grocers] take a deep breath when they're being asked to make the kinds of investments they're being asked to make," he said. "And sadly, I don't think a lot of the C-suite folks are in the best position to evaluate the total economic benefits."

John Lert, founder of Alert Innovation, acknowledged the complexity of MFCs, calling them an "imperfect" solution that retailers have approached cautiously so far.

"Retailers everywhere are looking at this. They're experimenting, they're deploying these systems and investing in them. But so far, there's also been enough dissatisfaction or complexity or lack of economic return that you don't see a large-scale rollout yet," Lert said.

Wulfraat says grocers are increasingly aware of the fact they need to get online picking away from store floors in high-volume areas. He says there is no perfect fulfillment system right now: "All of the options out there have upsides and downsides, including manual dark stores."

Demko said the fact that there are limits to using human workers to fulfilling e-commerce orders represents a big opportunity for MFC companies that can come up with a balance of hardware, software and processes that enables retailers to become more efficient without sagging under the weight of the technology.

"What we're seeing is that technology is getting sold, but what is not going with that technology is helping the retailer understand how their process engineering has to change as well," Demko said.

Making MFC technology more valuable to retailers

MFC vendors are working to hone their offerings and make them more appealing to retailers. One way they're looking to accomplish that is by allying with companies that make technology complementary to their automation systems.

Takeoff, for example, entered a strategic alliance in March with refrigeration company Hussmann that gives the MFC supplier direct access to systems designed to keep food cold while it is being handled. In a press release, Takeoff CEO José Aguerrevere described the partnership as a significant advance in the company's efforts to meet retailers' needs.

"Any e-grocery solution relies on safe product temperature control to ensure food integrity of refrigerated and frozen items. This alliance represents an incredible opportunity to strengthen our solution," Aguerrevere said in a statement.

In January, AutoStore acquired Locai Solutions, a provider of pick-and-pack software to retailers, after concluding that offering MFC technology alone might not be enough to enable some grocers to use it effectively, according to Demko, who co-founded Locai and joined AutoStore as part of the acquisition in January.

Demko added that companies like his that specialize in warehouse automation play an important role in helping smaller retailers compete with larger competitors that have deeper resources. "We make the tools that an Amazon has cost-effective for the small independent retailer" that doesn't have the ability to develop technology on its own, but is looking for new tools to help it compete, Demko said.

Industry sources and officials note that even as the MFC industry continues to mature, it is ripe for consolidation in the years ahead.

"A lot of capital to your point is being thrown at this but I don't think it's something that a small player will be able to survive at," Demko said, adding that he expects two to four players to ultimately remain standing in the MFC sector. "The reality is there will be consolidation through either acquisition and or just companies failing."

Article top image credit: Permission granted by AutoStore