Warehouse automation part IIInterview of Renata Osiecka about automated warehouse
Renata Osiecka
Managing Partner“We do think automation will become more widespread, but this process is likely to be very gradual”
Automated warehouses have greater capacity for action: an exponential number of orders, unbeatable preparation times, and more precise execution than humans. Do you think that the number of automated warehouses will have an impact on the development of logistics in your country ? Do you think that the phenomenon of warehouse automation is set to increase, in particular to improve management of health and environmental risks? If so, could this increase result in fewer warehouses? Warehouse automation has started to emerge in Poland. However, due to its high cost and large scale required to make it financially viable, it has been limited mostly to BTS and BTO-type warehouses occupied by the very largest multinational players that have their own logistics operations or pay by themselves for automatization solutions. Labour shortages, speedy growth of ecommerce and the strive to meet rising customer expectations related to delivery times have forced more and more logistics companies to consider adopting devices that automate the picking, sorting and palletising of goods. However, the return on investment in such solutions still tends to be insufficient for the vast majority of logisticians. Logistic companies are cost-sensitive and try to implement an automation solutions’, but they always check effectives vs costs.The margins for logistics companies are low and makes it difficult for them to plunge into large investments in automation. Moreover, employing people is simply cheaper, especially in time of slow down, when the unemployment rate has upward trend. Hourly labour cost in Poland is just 10.1 euro, compared to Eurozone’s 30.6, according to Eurostat.
We do think automation will become more widespread, but this process is likely to be very gradual. Giants in the market will continue to invest in it and as it matures, it should also become more affordable to smaller players. But the incentive to innovate related to acute labour shortages is now disappearing as the economy slows and unemployment is likely to edge up. Pressures to provide a safe and healthy environment during the current pandemic is there but this aim is likely to be achieved by more affordable measures. We do not think the number of warehouses will decrease going forward. The rapid growth of ecommerce is translating into heightened demand for logistics space. E-commerce retailers use three time more logistics space compare to pure brick-and-mortar retailers. Although automation allows for a more efficient use of space, growth in aggregate demand for ecommerce should still boost aggregate demand for warehousing space. Automation technology should also allow warehouses to continue to grow vertically. Automated picking and sorting systems will facilitate further growth of multi-level storage systems. This will lead to lower land footprint and consequently – to increased value of land earmarked for logistics.
Your country has a very low level of unemployment (Poland 3.2% according to Eurostat). You are even experiencing difficulties in finding labour: do you think that the increase of warehouse automation will reverse the trend, or that it is a conceivable solution to address this shortage? In recent years, some occupiers decided to incorporate automation solutions in their warehouses in order to tackle the problem of acute labour shortages. We expect the pressure from the tight labour market to ease in the coming quarters due to the ongoing economic woes related to the Covid-19 pandemic, which will have knock-on effects on unemployment. The adoption of automation should be slower than previously expected in the short to medium term. Can warehouse automation create an imbalance between large companies, which are able to make huge investments, and small ones which will not be able to do so? Can a parallel be made with commercial operators, which have experienced a substantial transformation between independents and large national/international chains? Technology undoubtedly gives large players who can afford it a competitive edge. This is testified in the success of the very largest companies such as Amazon or Zalando. Other retailers continue to rely on logistics operators as it is still too expensive and complex for them to develop their omnichannel distribution networks by themselves. Logistics operators find it riskier to plunge into large automation investments due to the low margin nature of their business and short-term contracts. As mentioned earlier, returns on large investments in automation are therefore less sufficient for medium logistics players. However, the automation is the future of the industry and will be implemented widely when it will be more affordable.