Automation in Logistics

As e-commerce volumes soar, many logistics and parcel companies hope that automation is the answer

The history of logistics is also a history of automation, from the steam engine to the forklift to today’s robotic pickers and packers. So today’s fevered interest in new machinery, after a lull of several years, has plenty of precedent. Many trends are thrusting automation toward the top of the logistics CEO’s agenda, not least these three: a growing shortage of labor, an explosion in demand from online retailers, and some intriguing technical advances. Put it all together, and McKinsey Global Institute estimates that the transportation-and-warehousing industry has the third-highest automation potential of any sector 1 . Contract logistics and parcel companies (which, for sake of convenience, we will call simply “logistics companies”) particularly stand to benefit. (Automation is also on the table at other transport companies, such as trucking companies and port operators. See sidebar “Automating freight flows: Changes for every sector”.)

Yet for all the excitement, most logistics companies have not yet taken the plunge. For every force pushing companies to automate, countervailing factors suggest they should go slowly. We see five reasons companies are hesitating: the unusual competitive dynamics of e-commerce, a lack of clarity about which technologies will triumph, problems obtaining the new gizmos, uncertainties arising from shippers’ new omnichannel-distribution schemes, and an asymmetry between the length of contracts with shippers and the much-longer lifetimes of automation equipment and distribution centers.

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