E-Commerce Trends Drive Automation Initiatives
Q: Do you think the adoption of automated systems will increase with the accelerated e-commerce penetration rate?
A: Based on what we have seen in the past several months, the answer is a resounding yes. Someone a long time ago said, "necessity is the mother of invention." I recently had a 3PL prospect, who is now fast-tracking automation for a new apparel module, tell me, "We’ve been talking about this for years, it’s time to do something."
Where our company and our solutions come into this picture is offering what I call "point automation." As operations grow, managers typically do not have the resources to automate their entire operation. We look at the choke points; for example, getting merchandise off the docks, both coming into and out of the warehouse, as well as actually retrofitting racks with technology to assist picking and putting.
Q: What e-commerce developments support the increasing use of automation in supply chain operations?
A: The biggest trend, of course, is the sheer volume increase in e-commerce business. You can look at the growth of the sector in a couple of ways. One is the amount of total retail that e-commerce encompasses, what we call the "e-commerce penetration rate." The second look is the actual percentage growth of the e-commerce sector itself, which is driven by the first metric.
Back in 2009, around the time e-commerce retail really began to take off, e-commerce penetration of the retail sector was just over 5%. By the start of 2020, it had climbed to an astounding 16%.
E-commerce fulfillment operations were scrambling to keep up with demand. Which meant more space, more people, more of everything. Except that finding more people got more and more difficult with the economy at full employment for several years, as did finding more space as capacity tightened.
Then the pandemic hit. Over an eight week period (March-April 2020), e-commerce penetration spiked to 27%. All of a sudden, that mad rush for staff during peak became a yearlong endeavor. For the most part, anyone in the e-commerce fulfillment sector was operating at "peak" all year. Until the 2020 peak season when overall peak volumes were well over double the previous year.
Q: What are the biggest advantages of automating fulfillment operations?
A: When operations are small and find themselves growing, adding more of everything typically gets the job done. At some point, however, something’s got to give. When an operation doubles in size, the complexity of managing that operation more than doubles. Complexity grows exponentially with volume. The model of doing-more-of-the-same eventually breaks down.
That’s where automation comes in. It’s a tool set to make your employees more productive and more effective. Instead of bringing on more people, you increase the value of the people you have. Done right, it also increases their morale.