Mallory says. “I think it boiled down to how tight the job market
However, the Coronavirus may change the calculus around
investments in automation and robotics, at least for the short-
term. With millions filing for unemployment, Robert Kolar,
executive vice president of the west Region for JLL, wonders if
those people may be a new factor when companies consider auto-
mation and robotics investments. The traditional rationale for
investing in these systems is that they won’t have to hire as many
people in a tight labor market.
“If the labor pool changes, that may change people’s posture
towards robotics if there are significantly more available workers,”
Silverman says. “But that’s probably still only a temporary delay
because the economy will ultimately recover, and the supply of
human capital will be seemingly constrained even under modest
economic growth circumstances.”
NKF’s Mallory thinks the uncertainty of employees not wanting
to go to a factory or distribution center out of fear of getting sick
may also accelerate investment in automation and robotics.
“We’re going to be in a fear-based environment likely until we’dget a vaccine or we have herd immunity,” Mallory says. “We’re talking about 12 to 24 months. So this potentially accelerates researchand development or implementation of those processes to head offthose concerns [of not having enough workers].”
PROCESSES RIPE FOR AUTOMATION
Automation in manufacturing has been around forever. Somepeg the earliest usage of machines to the 11th century. The industrial revolution and then the introduction of electricity pushedthe mechanization of manufacturing to even new levels.
“The automation in manufacturing is a lot of these articulating
robots that are doing repetitive tasks on an assembly line,”
Dunlap says. “If you imagine an automotive assembly line, the
materials are coming down the line in the same place and loca-
tion. The weld or the part gets added at the same place. It’s easier
For the handling, distribution and storage of goods, automa-
tion has moved slower. The warehouse environment is much
more difficult to automate with stock-keeping units carrying
packages of different sizes, shapes, weights and temperatures.
“The attributes of these SKUs have become so diverse,” Dunlap
says. “Trying to automate it with a single solution is nearly impos-
sible. Applying a particular type of automation to a segment of
that volume is how most companies tend to proceed.”
But there have been improvements. In the past, JLL’s Kolar
says there used to be a backlog of a few days when orders came in.
“Today we’re working on the orders we received yesterday.”
Warehouses have improved by doing a better job of consolidat-
ing orders and getting them ready to go out the door immedi-
ately. “They have all these small pieces of technology that have
come together and can be integrated to support that require-
ment in the operation,” Kolar says.
Outside of the warehouse, there are places still ripe for automation, including opportunities to gain visibility into arrivingshipments.
“If I can see what’s coming in that container that has been on
the water for 30 days, I can get a manifest of what SKUs and how
many cartons and how big and what shape they are,” Dunlap
says. “That helps me anticipate what’s going to hit the door and
have a more configurable form of automation.”
Over the last several years, Dunlap says there has been a surge
in AMRs, which helps handle the product once it arrives. But
there is still room for improvement. He says cross-docking is a vast
area that’s mostly manual today. But it could be automated with
longer-term contracts with clients, more visibility upstream of
what’s about to hit the door.
“I think things like that are ripe for automation, but they havea few other hurdles to overcome before we see a benefit from it,”he says.
THE BIG GET BIGGER
Traditionally it has been large companies, such as Amazon andCostco, that were the ones paying for these products. “You hadto have a critical mass of product running through, and you hadto be a pretty big company to afford those investments,”Thompson says.
Now JLL sees mid-market and even smaller-sized companiesmaking more significant investments in robotics as innovationshave come down in cost. “You don’t have to make a huge, sizableinvestment to get in the game,” Thompson says.
As technology and robotics improve and costs continue todecline, those investments should become more accessible fordifferent sized companies. “The operating cost savings certainlywould justify doing that [automation investments],” Thompsonsays.
But automation can remain painful for firms that operate onshort-term contracts. For instance, Dunlap cites an ocean freightcompany he works with that has trouble with this investment.
“Some companies tend to contract 3PLs for a relative term
basis—for a year, two years or maybe three years at a time,”
Dunlap says. “Until you hit a certain tipping point with that con-
tract, a company is going to be reticent to make a capital invest-
ment in automating. If that contract’s only a year or two long, the
company can’t pass that [cost] through at an economical rate to
the client as easily as they could with more manual processes.”
Smaller firms, which may be facing financial challenges from
the pandemic, may not be able to make these investments in the
“For smaller companies, it’s going to take time, but they’re not
necessarily the ones that are going to be leading the charge any-
ways,” Mallory says. “They’re not going to have the internal
research and development division or resources to be able to
invest. So they will be more reactive, and just kind of adapt to
what other companies do on a second-generation basis.”
At least momentarily, that could create a two-tiered group of
companies—ones that can afford to invest in robotics and auto-
mation and ones that don’t. “With liquidity issues for most
smaller companies, they’re going to be looking at every dollar,”
Mallory says. “For the near term, I think people are just going to
kind of scale back on that investment on the smaller level.” ◆