Steps have been taken. Hurdles have been cleared. Improvements have been made. But most importantly, benefits have been realized.
In my review of the 2016 MODEX show, I stated that autonomous mobile robotics had moved from the concept phase to commercial availability and practical consideration. In July, Steve Banker noted that 2017 was the year of pilots for these bots in e-commerce operations. As examples, XPO Logistics adopted 6 River Systems’ robotics solution and Geodis adopted Locus Robotics. Both companies stated that these robotics solutions more than doubled the productivity of associates that previously worked in a pick-to-cart environment. It is my opinion that collaborative autonomous robotics “cobots”, or at least the solutions from Locus Robotics and 6 River Systems, are now proven warehouse technologies.
It’s Not If, But When
The maturity of these solutions has progressed considerably over the last few years. This can be seen in the progression of the hurdles that the market put in their path. First it was the viability of the underlying technology, followed by the overall functioning of the system. Then it was the test of commercial availability. Now the solutions have proven their ability to increase productivity. The next hurdle is the return on investment (ROI), which factors costs and time-to-value in with productivity improvements and other financial benefits. This is really a good sign for a set of emerging technology. Think about it. If potential customers are evaluating the financial aspects of the solution, it is likely producing a return that needs to be quantified for comparison to other investment options. Cobots are now carving out their domain in the range of warehouse investments available to fulfillment operations.
Port Logistics Group Exemplifies the 3PL Business Case
Port Logistics Group (PLG) announced on November 15th that it will be deploying a fleet of LocusBots in its Chino California e-commerce fulfillment facility. I had a chance to speak with Greg Morello, the President and Chief Commercial Officer of PLG, about the journey that led his company to its adoption of Locus Robotics’ solution. In particular, I inquired about the profile of the operation/s in which PLG is going to apply the robotics solution and the financial merits of the investment, including costs and sources of return on investment (ROI). I chose this focus because warehouse order profile and project financials are currently central considerations to potential buyers. And these factors will determine the scenarios in which a cobot solution like Locus will be considered superior to the alternatives of a manual operation or a larger scale goods-to-man warehouse automation system.
Port Logistic Group’s analysis indicates that its Locus project will achieve similar productivity increases as Geodis realized. Namely, the company expects to triple the units per hour (UPH) of workers, with most of the efficiency gains coming from reduced worker travel time. There are secondary sources of productivity gains and financial savings, as well. For example, the LocusBots are going to be utilized over multiple shifts, allowing PLG to obtain additional reductions in its variable costs of fulfillment. PLG also expects the LocusBots to reduce the training time needed to get new workers up to speed. But interestingly, Greg Morello stated that workforce stability has become the most valuable benefit to the company’s Locus project. According to Greg, picking volume increases and accuracy improvements were the initial focus of the business case. But as the labor market tightened, the ability to use the LocusBots to support warehouse workers and overall staffing needs has become the primary value driver of the project.
Why Not Use Traditional Goods-to-Man Automation?
As a 3PL, PLG generally designs customer solutions for two to three-year contracts. This short horizon introduces heightened uncertainty into PLG’s operational planning. Most of the larger goods-to-man automation systems tend to have large fixed costs with substantial payback periods. Although these goods-to-man systems can reduce variable costs considerably, the high upfront investment costs require longer time horizons and higher cumulative throughput to pay back the fixed cost. The Locus system offers lower upfront costs, shorter payback periods, and greater adaptability than the goods-to-man alternative. It is relatively easy for PLG to redeploy the bots across client operations when the need arises. This flexibility, along with the ability to align costs with revenues, provide additional benefit to 3PL operations.
As my colleague Steve Banker previously noted, “autonomous mobile robots allow what would be a pick to cart methodology – used for slow moving inventory – which involves lots of travel time, to something that more closely resembles zone picking used in warehouses with fast moving inventory, and where associates don’t need to travel nearly as much.” Therefore, the greater the amount of travel time that is removed from an operation by implementing robotics, the greater the return on investment. However, there are additional considerations that play into the merits of the investment decision. This article discusses a number of those considerations including adaptability, labor stability, the ability to align costs with revenues, and payback period. The reduction of variable costs continues to be a primary consideration in warehouse automation investments, but it is one of many factors that are evaluated when determining the best solution for a given operational need.