Coming to a DC Near You: Robotics and Automation
By: Natalie Bode and Diana Mueller

Coming to a DC Near You: Robotics and Automation

Companies are having to innovate their supply chains to keep pace with e-commerce growth. Robotics and automation offer a way to optimize the management of inventory movement and labor through the warehouse. As an end-to-end design-build firm, Fortna is at the forefront of helping businesses identify and select technologies that best meet their fulfillment needs. In this article, Natalie Bode of esrp interviews Diana Mueller of Fortna to explore the role robotics are playing in the warehousing industry today. Is the investment worth it?

Bode: Diana, what is fueling the growth in robotics?

Mueller: I see that there are three, main components fueling the growth:

1)     the labor market,

2)     customer expectations, and

3)     board and leadership commitments.

The biggest driver right now is labor. Whether it's the jobless rate or the cost of warehouse associates, the labor market is causing the shift to robotics. Then, you have customer expectations. Everyone is talking about how to meet two-day delivery windows and increased order cycle times through their facilities. So, how do you do that? If you have a smaller labor pool, you need to augment some of the functions to meet customer expectations. Our clients are adding robotics to fulfill their orders faster through their DCs. Finally, board commitments are always at top of the list.  When we’re working with clients and ask why they want to add any kind of robotics to their facilities, they say they want to improve the bottom line, accelerate growth and improve their supply chain networks.

Bode: What are the different types of robots that exist in warehouses today?

Mueller: There are really five category segments, including:

1.      roaming shuttles,

2.      robotic arms,

3.      collaborative bots,

4.      mobile robotic racks, and

5.      transport bots.

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Bode: Nike recently added 1,000 new collaborative robots to assist with sorting and packing as labor constraints continue. Prologis has invested hundreds of millions of dollars in startup companies focused on warehouse robotics and automation. However, many of the clients and prospective clients we talk to say they don’t want to invest in robotics because it’s cost prohibitive. If you are not Nike or Prologis, how can you afford robotics?

Mueller: Regardless of your company size, you have to weigh labor versus automation and define what is the right mix for you. Robotics is really for anyone who wants to see labor cost savings. There are other factors, such as decreasing travel time within a facility and increasing flexibility and scalability.

There are also intangible factors, an example being employee fatigue and safety. For example, let's say safety is a big corporate initiative. If you can attribute a dollar amount to safety and enhanced safety would improve your business case, then you could justify automation.

Bode: We have clients and prospective clients who evaluated adding robotics and automation three to five years ago. However, it did not make financial sense at the time. Do you think the return on investment now is better than it was three to five years ago?

Mueller: From a labor point of view, a warehouse associate costs dramatically more than that person did three to five years ago. We've seen companies incur costs for items like hazardous pay through the pandemic, increased healthcare costs and increased absenteeism. I would challenge companies to reevaluate their business case for automation and see if it works for them now because everything has changed in this post COVID world.

Bode: When you're looking at the business case, is there any rule of thumb for what a company's return on investment should be? How many years will it typically take for a company to recoup the cost of their robotics in investment?

Mueller: I would say that's pretty company specific. We've had some clients that have challenged us and said, “It needs to be paid back within three years.” Others really look at it as a long-term strategy and understand it may take seven years to recoup their investment. It depends on what the goals are for each organization. We often tell our clients is this is not a just a distribution center decision anymore. This is more of a C-Suite level alignment on decisions.

Bode: If the C-Suite does not want to incur the upfront capital expense of buying robots, could they lease robots instead and treat them as an operating expense?

Mueller: Absolutely. There are a lot of robotics companies that are offering lease to own or different types of lease structures to allow companies to make these purchases an operating expense rather than a capital expense.

Bode: What if, at the end of three to seven years, you've outgrown your DC. Can you relocate the robots or parts of the system?

Mueller: Yes, but it depends on what type of robot or type of automation you have. A lot of these robots – whether they are collaborative bots or mobile bots – can be moved wherever you need them to be moved.

Bode: That’s great. Are there any specific industry verticals you’ve seen that have a high adoption rate of robotics?

Mueller: I do a lot of work in the footwear and apparel space, so I’m seeing a lot of e-commerce, apparel and footwear clients jump into robotics. Each picking robotic arms are in high demand. I do have colleagues in the food, beverage and grocery space that are also seeing high adoption rates in all different types of robotics and automation. They are seeing more collaborative type robotics applications. It varies on the need.

Bode: We have a client who knew that they wanted to use robotics in their new Houston DC. For them, floor flatness and a clear height of at least 32 feet was most important. What other factors do you think are important in the site selection process?

Mueller: It depends on what kind of technology you are looking to add. I would say floor flatness is definitely on top of the list to make you meet the local regulations. If you're looking at any kind of storage structure system, there are building height requirements. You also need to look at the labor pool for more technical, skilled maintenance associates. As we look at these robotics solutions, our clients will have to have a maintenance staff and a technical support team to operate these systems.

Bode: The labor piece is an excellent point. Investing in robotics would enable a company to hire significantly less associates in a warehouse. However, the cost per associate would increase with technical skills aspect.

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Bode: Looking towards the future, if you add a crystal ball, what percentage of warehouses do you think will have robots?

Mueller: I don't know if a crystal ball is necessarily. The research we have done says that the robotics market is growing at 100% to 200% year over year. So I would say, “coming to a warehouse new year near you!”

 Natalie Bode specializes in industrial and office tenant representation. She develops data-driven strategies that enable her clients to make better-informed decisions on optimal locations for operations.

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Diana Mueller is an Account Executive at Fortna. She is an accomplished and passionate supply chain and logistics professional with a proven track record of supporting her clients’ business growth and cost reduction goals through DC initiatives. 

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Diana Mueller

Account Executive @ Fortna | Logistics Engineering, Transportation Management

1y

Natalie Snyder Bode, CCIM It was a pleasure speaking with you!

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Ken Robertson

Candid insights based on my 30 years in real estate. Regional CRE investor. Coastal boutique advisor (all property types) in The OC.

1y
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Ward Richmond, SIOR

Vice Chairman @ Colliers/ Podcaster @ TruckinOn.com 🔥

1y

Awesome interview! Almost all of the questions you asked are things I constantly think about! 🙌

Brian Lloyd French

Top Advisor to Corporate Real Estate Execs & CRE Brokers

1y

Still on top of your biz...

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