With 90% of Warehouses Still Manual, Robots Have Massive Retail Runway

“Build a better mousetrap, and the world will beat a path to your door.” So goes the old saying.

But when Amazon Robotics Fulfillment scoffed at an imminent warehouse automation revolution back in 2014, at least one firm thought it could do it better — and faster.

It was a crucial moment for the next three years of warehouse automation.

“When we started the company, we went to discuss it with many warehouse managers, many logistics people, and they all told us the same thing: They needed more performance from their warehouse, but the world they were evolving in was more and more volatile,” said Romain Moulin, CEO of Exotec, a Paris-based warehouse automation and robotics firm, in a conversation with Karen Webster for PYMNTS “Next Three Years” series.

As for volatility, whatever warehouse and logistics managers told Moulin and partners back in 2015 was nothing compared to the supply chain calamities of a pandemic still five years off.

Years of steadily increasing demand, most from eCommerce growth, went critical with COVID-19, putting logistics on the hot seat.

“This trend has been super-accelerated since the pandemic,” he said. “We saw eCommerce and all the needs of the warehouse rise and double.”

Even after lockdowns were eased, warehouses “were still producing 30% more than before,” Moulin said. “It has put a huge pressure on warehouses to deliver more, and at the same time, it has increased the labor shortage. Our customers need to deliver more but with less people, so it’s really critical to have a super high-end warehouse.”

See also: Exotec Raises $335M to Streamline Robotics Supply Chain

Automating Away Difficulty

Retailers typically approach Exotec to relieve specific pain points.

“We tend to see two things,” he said. “One that we face everywhere in all territories is not that much labor cost, but the labor shortage. There tends to be enough jobs for people, but also people are expecting better work conditions. The other pain point is the growth of eCommerce in an unpredictable manner.”

That comes about when companies “have tailored a whole supply chain for brick-and-mortar retail, and having eCommerce come with different expectation that is rising super-fast,” which can create a supply chain mess, Moulin said.

Citing Exotec studies that found that 90% of warehouse processes are still manual, Moulin said that some customers fear going deeper into use of automation — but they may not have a choice.

With customers’ eCommerce growth ranging between 10% and 40% annually, he said, “What we love to do is to be in front of a black board with our customer and rewrite the supply chain.”

What emerges from planning sessions can differ widely depending on the company, the sector and other variables. Whereas Moulin said warehouse automation firms generally use a five-year planning window, Exotec prefers to assess client needs each year, adding robots to its Skypod System of automated order pickers as throughput rises or falls.

“Being able to scale the system like that in several phases is super important for us, so that we provide to the customer only what it needs now, and then we scale the system later,” he said. “There’s much less industrial risk around that.”

After securing $335 million in Series D funding in January, Exotec plans to use the money to scale by hiring up to 500 new R&D engineers by 2025.

Read also: Sam’s Club Rolls out Inventory Analytics Robot Fleet

The Three-Year View

Although most warehouses begin as manual operations, he said, “At some point, you need to switch to automation or robotics. What should be your reason for switching?”

It could be about productivity, improving working conditions or reducing turnover. It’s likely a combination of all these factors — and the logistics challenges that come along with them.

“When we discuss [this] with major brands, we are already discussing the overall supply chain, and we say, ‘[Using robotics] how can you cover your territory, optimize your transportation costs, and deliver fast to your customer?’ It’s not just about optimizing a given process,” Moulin said.

As logistics organizations adapt to omnichannel strategies that support physical stores and eCommerce, companies need to rethink how warehouses and automation fit into the supply chain, striking the right balance between robots and human operators, he said.

Does that mean miles of automated warehouses will have taken over by 2025? Unlikely.

“I think in three years, we might get 20% [automated] warehouses, but there will still be a lot of manual warehouses,” Moulin said.

“New warehouses are created every day,” he added. “They start manual, and then they grow. At some point, they need to switch from manual to automation. You can imagine the overall size of market, and it’s growing very fast at 15% per year.”

See also: Walmart Aims to Revamp Regional Distribution Network With Robotics