Warehouse Automation Makes e-Commerce Viable

In 2012, Amazon spent $775 million to acquire Kiva Systems, a distribution center robotics developer with about $100 million in revenues. Yes, that is a valuation multiple of seven times revenues. This is the most succinct way I can express the importance of warehouse automation to the e-commerce channel.

Warehouse Automation TechnologyARC is currently producing a market outlook study on the global warehouse automation & control market. This research project evolved from our interest in the evolution and ongoing convergence of the WMS, WCS, and warehouse automation markets.  The research process includes the analysis of large amounts of information and interviews with executives from numerous warehouse automation and control system providers; and the process concludes with the publication of ARC’s Warehouse Automation & Control Global Market Research Study.

If this research process has confirmed one thing, it is that the growth of e-commerce is propelling no market more than it is boosting the business of warehouse automation and control system providers. E-commerce has placed extraordinary strain on fulfillment operations.  The larger number of smaller orders has increased warehouse activity levels, labor costs, and complexity overall. What used to be pallet orders are now cases, and what was a case order is now a piece pick. Operations with low to medium complexity or volumes continue to use various levels of manual processes. However, those operations with increasing throughput requirements are stepping up technology investments to manage the increased volume and complexity. Some of the key technologies are pick and put-to-light to increase efficiency of labor when managing multiple line item orders, and mini load AS/RS to handle moderate sized loads, shuttle technology to handle smaller loads, and other goods to man automation to facilitate the organization and movement of these order items. However, e-commerce isn’t just increasing demand from retailers. Parcel carriers and 3PLs are also investing in warehouse automation to adapt to the increased volumes and changing requirements driven by e-commerce. Parcel carriers are experiencing increased shipment volumes from e-commerce orders, and they’re also witnessing increased returns processing exacerbated by flexible (free) return policies offered by retailers.

The changing order profile from e-commerce is also “backfilling” to increase demand for other warehouse automation technologies. For example, the ideal profile and geographic location of warehouses is changing from large DCs in rural areas to smaller DCs closer to urban centers. This progression increases the cost per square foot, making high-bay warehouses with stacker cranes more economically feasible and cost justifiable. In addition, the shipping of mixed pallets is becoming more common, increasing the value of technology that facilitates this process.  For example, packaging and palletizing optimization software is being applied to efficiently manage these types of processes. Also, many warehouses manage both traditional store replenishment and e-commerce order fulfillment. Many of these facilities are looking to automate their store replenishment processes along with e-commerce fulfillment. Finally, companies are getting innovative with the use of garment on hanger technology to sort a wide variety of items beyond the standard garment profile.

I find the progression and application of technology in the today’s warehouse to be fascinating, impressive, and exciting. Technology in this industry continues to progress to meet the market’s changing demands. And my discussions with automation and control vendors indicate that they are diligently developing their technology to meet these demands and to deliver capital investments with even greater returns.

ARC is conducting a Warehouse Performance Improvement survey.  Every valid respondent will get a detailed Strategic Report that explains the findings.   Click Here to take the survey

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