There is a looming warehouse labor shortage. Logistics service providers (LSPs) are beginning to think that robots are the answer.
The Looming Warehouse Labor Shortage
We (ARC Advisory Group) had the CEO of a large North American logistics service provider in to visit us recently. He told us that a few years ago they had ten applicants for every open warehouse job they had; today it is just one. “If an ex-con with a burglary record shows up, we say ‘We know you will steal from us, but we can really use the help. You’re hired!’”
There is a greater need for warehouse workers because of ecommerce. Historically, consumers went to stores and picked their goods off the shelves. Now warehouse workers are increasingly doing the labor consumers use to do for themselves. Not surprisingly, this CEO also believes warehouse wages are poised to rise significantly.
Robots to the Rescue
When wages are high, or labor is difficult to attract, automation is a natural solution. In warehousing, attention is increasingly focusing on autonomous mobile robots. One of the hotter companies in this space is Locus Robotics.
I happened to be flying to Indianapolis, a prime location for ecommerce warehousing, when Bruce Welty sat down next to me. Mr. Welty is the founder and Chairman of Locus Robotics. Locus Robotics has a trial implementation in progress with a very large LSP in the Indianapolis metro area.
Mr. Welty said they have close to 200 robots in use. Trials with two of the largest LSPs in the world are going well, and growth next year could be as much as one thousand percent. Mr. Welty believes that the main limitation to growth will be based on the capacity of their factory in Wilmington, Massachusetts.
The Locus robots – called LocusBots – and humans engage in waves of picks; A wave is a large batch of orders passed down from a warehouse management system and worked until all orders in that wave have been completed. The order selector moves in a straight path down an aisle. Robots are doing interleaved order fulfillment – the bot stands next to slot to be picked before the picker gets there. Once that location has been picked, the bot moves to a separate row, which is being picked by a different picker, and stands in front of a different slot, until the picker in that row gets there and picks the order.
Totes are located on top of the robot. The robot also has a scanner attached to it. A user interface of the robot tells the picker how many items to pick from a slot. Then the robot goes to the next pick location. A tote may hold the contents of one large customer order or up to 12 small orders.
When a tote is filled, the robot moves to the pack station where a packer takes items out, packs them, and then the packages move to the loading dock. The fact that the robot is taking the totes to the pack station helps allow humans to minimize what is known as “empty” travel.
Optimization logic ensures totes come close to cubing out if the LSP has product cube information. There is also optimization logic for ensuring that the bots move through the warehouse efficiently. But minimizing human travel takes priority over minimizing the travel of the bots, it is really the elimination of empty travel that accounts for most of the productivity gains.
The optimization is driven by a layer of software known as a robotic control system. The optimization allows the robots to double the productivity of the human order selector.
Let’s take a quick look at the economics of this. Locus rents their LocusBots – they call it Robots as a Service – for $1,000 per month. There are typically three or four robots that support each order selector. That means that it costs between $36,000 and $48,000 to eliminate one human. The average pay for a warehouse worker is roughly $15 per hour – $30,000 per year. Throw in benefits, and a fully loaded worker is probably about $35,00 to $40,000. That means a large part of the value proposition of the Locus robots is replacing warehouse labor, which is increasingly hard to find and poised to become more expensive.
Mr. Welty will be speaking more on this topic at ARC’s Annual Industry Forum – Digitizing and Securing Industry, Infrastructure, and Cities – in February in Orlando. Please join us!