Current Issues

Regular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.

How will automation impact warehouse operations and management?

17-Oct-2017
How will automation impact warehouse operations and management?
The warehouse is one of the areas within a business where the adoption of automation and artificial intelligence has progressed more quickly than in other functions. Organisations like Amazon and Ocado, with their well publicised investments in robotics technology, offer wonderful examples of what’s possible and already happening in warehouses and DCs today. For the vast majority of mid-sized manufacturers and retailers however, envisaging a warehouse that is entirely run by robots is probably bit too futuristic – not to mention costly - and the final reality will be somewhere in between. Getting to this point will require a new generation of warehouse managers, who have the data analysis skills and competencies to work alongside artificial intelligence.

According to industry experts, warehousing and logistics is one of the sectors tipped to see higher levels of automation and artificial intelligence adoption over the next decade compared with other industries. McKinsey for example, has predicted that around 57% of existing warehousing and logistics functions will be automated and handled by a variety of different robots and machines. Contrast this with construction, where only 49% of job roles are predicted to be automated.

Although use of AI is expected to be on the higher end of the adoption spectrum for warehousing industries, it still leaves 40% of functions left un-automated. This means warehouse managers can expect to see their current roles supported by artificial intelligence and some of the workforce replaced by automation.

For operational warehouse managers in particular, this development will significantly change the skills they rely on to do their jobs. Today, quite a large proportion of this role is people management orientated whereas in the future, the job will become much more analytical and data focused. Most of the warehouse managers we work with have a highly strategic role, one that is instrumental in supporting an omnichannel or multichannel business and ensuring high customer satisfaction levels. But the daily reality of their working lives is somewhat different and many spend a large chunk of their day on firefighting activities or man management, rather than focusing on identifying ways to make strategic improvements to the supply chain.

Artificial intelligence will change all this because the technical capability of the machines and the changes taking place in the warehouse, will enable warehouse managers to step back from operational work and focus on doing what they were actually employed for in the first place. It will mean that data management and analytics skills will be far more in demand in the future than they are today because performance data will be more widely measured. Daily operations will become analytics driven and skills in big data and statistical analysis will be highly sought after. Overall, the warehouse manager’s role will become far more forward looking and focused on compliance and risk mitigation, rather than routine, task based monitoring.

In our view, the cost of migrating to AI and robotics is likely to polarise the manufacturing sector, with earlier adopters being the well funded start ups without a legacy infrastructure, or larger companies with deeper pockets. Midrange manufacturers or organisations without the same level of backing will find it more difficult to make the transition for financial, operational and cultural reasons. These companies already have a working infrastructure and processes plus a sizeable workforce. For them, the challenge will be identifying a way to efficiently make the transition to combining automation within their traditional warehouses and to obtain the new, data analysis skills this requires. This could be achieved either through training or by seeking different skillsets during the recruitment process. For example, adapting a warehouse to accommodate a much larger number of SKUs may require the introduction of dynamic slotting to improve picking efficiency, which is a highly analytical undertaking.

Overall, although AI and automation will inevitably replace some jobs in the warehouse, it won’t mean mass unemployment. Warehouse and logistics sector professionals, including management, will need to adapt to an environment where they are working alongside machines. Over the next 10 years or so, we can expect the warehouse and logistics functions to be transformed and rather than taking away employment opportunities, new jobs requiring new, highly analytical skills and a unique level of interaction between ‘man and machine’ will start emerging.

Authors
Eric Carter and Mark Wilkinson are supply chain consultants at Indigo Software.

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