There have been a handful of interesting article over the last week or two about online fulfillment centers. The first is from Bloomberg (Amazon’s Robot War Is Spreading, Apr 5) and discusses how many firms have followed Amazon’s lead and have invested in robots to help run their fulfillment centers. (Recall that Amazon bought Kiva, which we have discussed before.)
One interesting point made in the article is that the automation may not be quite what you think. For example, these robots are not reaching and grabbing items from the shelves (form something like that, see here). Rather, they are working with human pickers who load them up and then let the robot carry items from storage shelves to the packing area. That is, the robots takeover time-consuming schlepping so that humans can focus on identifying the right item on the shelves. Check out this video.
But why is automation all the rage? Costs, of course. As this graph shows, the number of people working in warehousing has been growing pretty quickly over the last decade. Augmenting/supplanting humans with robots reduces the need to hire.
The cost of all that hiring is the subject of another recent article (Online Retailers’ New Warehouses Heat Up Local Job Markets, Wall Street Journal, Apr 9). Here are some things that put the push for robots into perspective.
Starting pay for warehouse workers rose 6% over the past year to $12.15 an hour in February, according to an analysis by ProLogistix, a logistics staffing firm. Hourly earnings rose 2.8% across all professions over the same period, according to the Labor Department’s Bureau of Labor Statistics. …
Booming sales mean e-commerce operations have to ship more items faster, and pay increases are imposing new costs. E-commerce fulfillment centers require two to three times as many workers as traditional warehouses, says CBRE Group Inc., a real-estate brokerage. It estimates a $1-an-hour wage increase can raise labor costs by more than $2 million a year at “big box” warehouses employing as many as 1,000 workers.
Finally, investing in robots and building fulfillment with a thousand workers is not something readily available to small retailers. How can a smaller firm compete with the likes of Amazon? That’s the focus of another Wall Street Journal article (Amazon’s Free Shipping Pushes Small Retailers, Delivery Firms to Compete, Apr 8) that discusses service that FedEx and other firms are offering to support smaller retailers.