2018 Order Fulfillment Trends - Automation, AI, and People
This is a guest post by Rakuten Super Logistics. Founded in 2001, Rakuten Super Logistics is a leader in ecommerce order fulfillment, serving hundreds of ecommerce retailers to increase speed of delivery, improve order accuracy, decrease shipping costs, and increase customer satisfaction.
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Every January, as predictable as the introduction of New Year’s resolutions often left behind before month’s end, are vast articles and theories of predicted business trends for the year. In keeping with that tradition, the order fulfillment industry, although not as trendsetting as the technology industry, is also poised for some revolutionary trends in 2018; all signs point to the fact that 2018 will be a year of revelation and adaptation for the order fulfillment industry. The often ‘low-key’ order fulfillment industry will most likely be placed front and center due to a multitude of external factors such as automation, AI, and people.
People- The New American Commodity
Let’s start with one of the core ingredients in any business’ success—its people. For American businesses, including the order fulfillment sector, in 2018 people will become a huge commodity. Nationwide, unemployment remains at 4.1% for the second month in a row*, the lowest level recorded in over eight years. While this translates into more Americans working—and an accompanying strong economic boom, it also makes for a tight labor market. Order fulfillment companies are currently struggling to fill their vacant positions. To further aggravate the situation, this labor shortage comes at a time when consumers bring with them high expectations regarding products and services offered by eCommerce order fulfillment. Consumers are accustomed to—and have come to expect—same day shipment and next day delivery. These expectations are driving a 24/7 order fulfillment operation, adding to the labor shortage. Still, while the order fulfillment providers are experiencing a labor shortage, they are not the only ones. For many years, there has also been a looming shortage of truck drivers nationwide.
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Will the Demand be Met?
Since 2012, when the shortage of truck drivers was estimated to be about 20,000, the shortage has grown five-fold, and thus by 2017 there was a national shortage of over 100,000 drivers.* This shortage is expected to grow even more acute, rising to 160,000 by 2022. While much of the shortage of truck drivers can be attributed to retirement, in the coming years the number will also increase due to a lack of qualified truckers joining the workforce, as well as industry turnover.
The issue now is not just that of under-qualified truck drivers – there is also the issue of bondable truck drivers. With the newest delivery options, consumers can now schedule in-home delivery even when there is no one at home. By allowing a delivery person access to their home, consumers are inherently trusting a complete stranger to access their home. Amazon Key In-Home gives delivery people (as well as other individuals such as dog walkers) physical access to a consumer’s home.
This delivery method is most often promoted as being a more secure method, since the package will be left in the home instead of the more traditional method of delivery: on the porch. However, this raises the question: Since the delivery person will have access to the consumer’s home, what additional security and background checks will be required? Complicating matters even further, there is the next question: With such a tight labor market, will the demand be met?
This competitive labor market will most likely lead to the next significant order fulfillment trend—automation.
The Fourth Industrial Revolution
Of course, in reality, machines have been “replacing” human labor for decades. Over 5.6 million manufacturing jobs were eliminated between 2000 and 2010. Further, of the 5.6 million manufacturing jobs lost, about 85% (or 4.7 million) of them, were lost to technology and automation. The bottom line: We are in the middle of the Fourth Industrial Revolution.
During the next five to ten years, most experts believe we will be in the middle of an automation and artificial intelligence revolution that is historically unprecedented. There will be a growing number of driverless cars, factories manned by robots, and algorithms that replace people.Technology will, effectively, disrupt all aspects of human life.
In January 2016, the World Economic Forum published The Future of Jobs. In that document, the WEF discussed two main topics – the Fourth Industrial Revolution and Industry, Regional and Gender Gap profiles. By far, the primary focus was on the first topic, to the extent that the resulting paper’s preface began with the statement: “This (Industrial Revolution) will lay the foundation for a revolution more comprehensive and all-encompassing than anything we have ever seen. Smart systems—homes, factories, farms, grids or cities—will help tackle problems ranging from supply chain management to climate change.”
As consumers’ order fulfillment and delivery time expectations are increasingly shortened, combined with the current labor shortage, companies will become more and more reliant on automation. The WEF expressed serious concern about addressing problems, including supply chain and climate change. While companies are using robotics to assist with order fulfillment, scientists are also using automation as bee drones for pollination in the hope that technology can address a wide range of pending, growing concerns.
Warehouse Workers 2.0
In order fulfillment, automation comes in many different forms—however, one primary robotic task is to pick orders. LocusBots creates robots that “work collaboratively with your workers, helping them deliver higher throughput and improved accuracy”. Over time, LocusBots also learn the most efficient warehouse routes. By reducing the walking time, LocusBots are able to help improve productivity by up to five times that of traditional picking methods.
However, these robots are collaborative; they work alongside human counterparts – at least for now. Additionally, they are expensive–a collaborative robot can cost between $36,000 and $48,000 per year. The average warehouse worker earns about $15 per hour—or $30,000 per year. For now, human labor remains more cost effective, however, over time that could definitely change.
At the beginning of 2017, 1984 was listed as one of the best-selling books on Amazon. Several articles in national publications followed, stating opinions that 2017 was even “stranger” than the world portrayed in George Orwell’s 1984. From 1949, when 1984 was first published, to 1999’s The Matrix—in which machines ruled humans—fear of automation has consistently grown. Given that reality, it is also interesting to note that in 1921, Karel Capek produced a science fiction play, “R.U.R.” or Rossum’s Universal Robots. Capek’s plot was simple–man creates a robot, then the robot kills man. That fear remains very much alive and well as we enter 2018.
Drones and Automation
Perhaps automation has become too vilified. The indisputable fact is that not all technology and automation is—nor should be perceived—as either dangerous or ‘bad’. Drones, for example, have evolved from a passive hobby to an elaborate delivery system for eCommerce. Drone delivery has been evangelized by many companies, including Amazon, UPS, Wal-Mart, and Google. Drone traffic is also increasing, so much so that Rakuten Air Map has launched an unmanned traffic management platform in Japan. This platform will help drone operators and airspace managers share flight plans, flight areas, and flight conditions. This will reduce any flight errors, including near misses.
As to drones and automation, their use simply makes sense for many companies—though not all. According to Dan Wang at Flexport, a UPS truck averages 120 stops a day. With this high average, a drone would not be able to compete over the long haul. The average drone delivery takes approximately 30 minutes. Perhaps, UPS would be better served to use their new Tesla trucks, rather than rely upon drones.
But drone delivery can work for some companies. Most Wal-Mart customers are located within five miles of the store; Wal-Mart drone delivery could, in theory, be both efficient and cost effective in this scenario. The drone delivery could happen within the half hour and thereby save both time and money for both the customer and Wal-Mart.
The Internet of Things
Thanks to social media outlets such as Twitter, Facebook, and SnapChat, society is more “dialed in” to current events in real-time. In the Internet of Things (IoT), users can switch from desktops to phones and, in doing so, never miss a thing. In the IoT world, people can access their refrigerators and washing machines as easily as they can access real-time events. That reality then begs the question: Why can’t consumers also use the IoT to access live updates on their packages?
The next automation phenomenon will likely be improved package tracking. Today, we receive updates when packages reach a checkpoint. Soon, however, it will be possible to see where a package is during the entire shipping process, including on the semi-truck that is traveling along I-65.
As automation improves, the next question will likely pertain to artificial intelligence (AI). In an effort to attract more customers and increase sales and revenue, businesses are increasingly turning to AI. Artificial intelligence can be, quite simply, defined as intelligence displayed by machines. Over time, machines can identify human patterns and habits. Several online retailers currently use this remarkable ability. As more and more people shop on a website, AI is able to identify shoppers’ habits and patterns and display product recommendations based on this information.
But AI can also be applied to more than just online shipping. LocusBots, collaborative robots, and their ability to learn the most efficient picking path is in fact a form of AI. Time and efficiency, combined with handling vast amounts of data, AI will be able to streamline processes, eliminate redundancies, and improve ROI for virtually any industry.
Looking Back and Pushing Forward
Technology has been improving human existence since the Oldwan, a simple stone chopper tool, was created by Homo habilis. As recently as 100 years ago, technology and innovation were propelling society forward. In 1918, for example, the superheterodyne receiver was invented– and still used today to fix and stabilize intermediate radio frequencies. During that same period, the torque wrench was invented, as well as the hydraulic brake, and the fortune cookie.
As we welcome 2018, automation, artificial intelligence, and (the availability of) people will most likely lead the defining trends of the year. While the labor pool remains limited, it is little wonder that an increasing number of companies will rely on technology–automation and artificial intelligence, to compete in today’s eCommerce world.
As the order fulfillment industry becomes more stressed, caught between increasing consumer and labor demands, as well as antiquated picking and delivery systems, 2018 will likely be a pivotal year. Order fulfillment will be pushed forward–perhaps ‘kicking and screaming’ at times– as the industry finds ways to deal with change. With increasing reliance on automation and AI, order fulfillment centers will be transformed into facilities where humans and machines move in a fluid waltz of picking, receiving, and shipping. But the dance likely won’t end there–it will continue to take flight, sometimes literally, as drones deliver packages in as little as 30 minutes.