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How Robotics and Automation are Impacting Third-Party Logistics

With total cost of ownership down and return on investment easier to achieve, a growing number of 3PLs are infusing robotics and automation into their operations.

As third-party logistics firms (3PLs) turn to technology to gain efficiencies and improve their customer service levels, many of them are deploying robotics and automation that help reduce manual tasks, improve productivity, and enable competitive advantage.

By reducing labor needs and total cost of ownership (TCO), robotics and automation converge to help 3PLs better service their customers in today’s competitive logistics environment. In return, those customers gain access to better economies of scale and the knowledge that their products will be in the right place and at the right time and in the right condition—every time.

“Logistics is quickly changing due to the demands of customers, service providers, and a tightening worldwide labor market,” says John Stikes, DB Schenker’s Director of Innovation and E-Commerce.

Robotics Get Affordable and Within Reach  

In the past, robotics was confined primarily to repeatable tasks such as manufacturing assembly. For example, an automobile maker used robots to select and sort parts based on part geometry (shape, size, etc.), barcode, color, markings, and other features.

Reserved for high-volume and long-term installations, most logistics automation projects had multi-year return on investment (ROI) horizons and required tremendous amounts of volume to be justified. “These systems worked well,” says Stikes, “as long as processes and business needs themselves didn’t change very much.”

Today, logistics automation and robotics continues to prove that shorter ROIs are achievable on smaller, less predictable volumes. At the same time, the rapidly-evolving pace of change and technology adoption are both pushing more 3PLs to invest in automation and robotics for their warehouses and yards.

“Total cost of ownership of automation is plummeting because flexible automation has really taken off,” says Stikes. “We’re no longer relegated to using large, monolithic, pieces of steel bolted to the ground.”

Speed to Market Counts

In 2017, U.S. e-commerce sales grew faster than they have since 2011. E-commerce represented 13% of total retail sales in 2017 (and 49% of the growth), with a blockbuster fourth quarter contributing to the strongest year-over-year growth for U.S. e-commerce in six years.

Consumers spent $453.46 billion on the web for retail purchases in 2017, a 16.0% increase compared with $390.99 billion in 2016. That’s the highest growth rate since 2011, when online sales grew 17.5% over 2010.

This growth has pushed more companies to speed up their logistics processes in an effort to meet customers’ 2-day, next-day, and same-day shipment demands—all of which are being driven by “The Amazon Effect.” This directly impacts 3PLs, which must adjust their operations to reflect these demands.

“Coupled with the change in the market towards faster shipping necessitating a move away from centralized static processes,” says Stikes, “the pace of innovation is rapid and developing across a spectrum of solutions.”

In response to these shifts, automation and robotics makers are developing mobile carts, mobile robots, static robots, and other innovations that can work side-by-side with human labor forces to get the job done. Here’s how it’s positively impacting 3PLs:

It’s a cheaper alternative to full-time labor. Because the automation itself is much more affordable than it was, say, five years ago, 3PLs like DB Schenker can effectively “test out” one or more pieces of automation, blend it into their operations, and then monitor its effectiveness without having to make a huge initial capital outlay.

The breadth of flexible solutions is unprecedented. Never before have we seen so many different automated/robotic innovations come to market so quickly. This level of innovation has created a breadth of flexible solutions that are literally there for the taking. “With mainline automation, you needed a lot of boxes transported via conveyor in order to justify the cost of that equipment,” Stikes explains. “Now, the breadth of options is incredible—including those designed for packaging, piece-picking, re-packing, vendor-packing, moving pallets…you name it. All of these activities can be handled in a very automated environment.”

3PLs no longer need large customers with millions of shipments to justify an investment in automation. Rewind just a few years and it literally took millions of cases to make a robotic or automation investment worthwhile. As TCO has gone down—and as the breadth of product options has increased exponentially—using automation for multiple clients (or, commingling inventories for those multiple clients)—is becoming much more feasible.

Getting the right product to the right place at the right time. Fulfilling orders for other entities—the very heart of the 3PL model—requires fine attention to detail when it comes to selecting the right products and then picking, packing, and shipping them to the right place. None of this has gotten any easier in the e-commerce era, where every second counts. “Being able to pull the correct inventory for the first client is of utmost importance,” says Stikes, “and preferably without having to conduct a whole lot of extra manual checks. That’s where automation comes into play.”

There’s More to Come

As robotics and automation continue to infiltrate the logistics space, expect to see more 3PLs taking advantage of them and leveraging them to their advantage. The proof is in the numbers:   Worldwide sales of warehousing and logistics robots reached $1.9 billion in 2016, and research firm Tractica expects the market to grow rapidly and reach a market value of $22.4 billion by the end of 2021.

Tractica also expects worldwide warehousing and logistics robot unit shipments to increase from 40,000 in 2016 to 620,000 units annually by 2021. “The market is experiencing strong growth,” Tractica points out, “with many prominent companies showing greater confidence in new robotics technologies that can yield an ROI in less time than it took a few years ago.” For 3PLs, this is just the beginning of a long and fruitful relationship with advanced technology like autonomous robots, stationary robots, and automated solutions.

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