Automation in Logistics and Warehousing: New Performance Frontier

Volodymyr Horovyi
RPA ARCHITECT / CONSULTANT
Alina Ampilogova
COMMUNICATIONS MANAGER

Previously considered a slow investor, the logistics sector is becoming an active adopter of innovative technology. Such a change is triggered by e-commerce accelerating the flow of goods across supply chains, thus making digital transformation a matter of survival rather than a good-to-adopt trend. 

Producers and distributors realize that traditional approaches are no longer sufficient for dealing with the pressure and new buyers' demands. The necessity of facilitating logistical processes and restructuring routines pushes them to seek and adopt new solutions. Among them, intelligent automation often becomes the problem-solver they need—and yet, the adoption rate remains slow despite the present industry pain points. 

Why does it happen? And what does it say about the future of logistics automation?

Why is logistics automation important?

The growth of e-commerce (estimated to increase its sales revenue by $8 billion by 2026) is one of the main factors defining the urgency of introducing innovation to logistics. While the increase in online sales is a good sign, it became a double-edged sword for logistics companies and warehouses that needed to prepare for the new pace. There is too much bureaucracy, too many manual processes, steps, and so little time to manage it all—and since e-commerce keeps growing, the problems are expected to pile up, which is something business organization leaders can't afford.

Implementing automation in logistics enables companies to address all these issues and prevent emerging ones by cutting out redundant processes and offering a new, time-saving framework of operations. 

That capability is evidenced by a steady growth of the logistics automation market size, which is expected to grow by $162.5 billion in 2030. Additionally, the Deloitte and MHI survey predicted that around 75% of warehouses would adopt automation solutions by the end of 2023. 

Another way how automation changes the world of logistics is demonstrated by the rise of third-party logistics (3PL) companies—enterprises that outsource their warehouses, fleet, and supply chain management to businesses wanting to move their goods across regions (without investing in equipment and employee training). 

Despite 3PL not being new to the sector, such organizations are enjoying a steady increase in demand, which they achieved by leveraging new technologies (including logistics automation) to their advantage. Expected to increase their CAGR by 7% in 2028, the 3PL service market sees high demand among companies that prefer to outsource their logistics operations, saving budget and resources. 

To get a clearer picture of the value behind these numbers, it’s important to dissect every advantage of logistics automation and see how it guarantees a return on investment.

How can logistics automation solutions solve top industry pain points?

Logistics automation is fueled by personalization. Every system is developed and tuned specifically under a certain logistics company's specific business model (whether it’s a retail business investing in personal logistics networks or a third-party logistics enterprise tailoring its assets to a specific segment of partners). Accordingly, a productive logistics automation platform is tailored to the company’s needs and assets (number of fleet vehicles, warehouses, routes, geographic regions). Therefore, every solution delivers individual benefits essential to the enterprise and its objectives. So, when we talk about the advantages of automation in logistics, it'd be better to look at them in the context of the pain points that logistics automation solutions can address.

Workers shortage

Around 45% of companies admitted searching for employees to address transportation and logistics issues as well as operational challenges at warehouses. So, the labor shortage issue is still quite relevant and sensitive to logistics leaders. The aftermath of the massive shift in priorities which affected all employees across every sector as well as the intense competition between various logistics enterprises, affects supply chain processes and cargo transportation, and leaves decision-makers at a loss. 

Should they mitigate the issue by wrestling high-value candidates from their competitors? Or should they invest in training and onboarding employees from scratch? 

Logistics automation is the answer to these questions, and contrary to common assumptions, it has nothing to do with replacing humans with robots…not really

Logistics operations rely on thousands of processes that are usually hand-managed and, therefore, require the involvement of large amounts of employees. For instance, logistics automation platforms often outfit companies with a multi-client architecture that enables them to interact with several customers, vendors, producers, and distributors simultaneously. Such platforms add more flexibility by automating procedures like order placement and inventory management. As a result, teams can manage their schedule more efficiently without compromising business relationships.

Additionally, automation in logistics takes out extra steps from operations, keeping only the relevant activities and polishing their execution to maximum efficiency. 

For example, it's not uncommon for logistics companies to use different service platforms for performing tasks related to fleet management, cargo transportation, and financial operations—and while all these processes are interconnected since they're executed from different platforms and managed manually, the lack of working hands or knowledge can lead to delays and setbacks. 

Moreover, even when there is no shortage of educated employees, completing all the procedures still consumes a lot of time that could have been invested into more rewarding activities. With a customized logistics automation system, the technology becomes a smart mediator between all services, handling the monotony and swiftly letting employees (truck drivers, warehouse managers) proceed further. 

So, essentially, logistics automation solutions introduce a third option for decision-makers—streamline and automate these manual processes, liberating current employees for other, more relevant activities. Within such a framework, logistics companies could do more with less, closing their objectives in time and being relieved of the pressure to find new workers to keep supply chains moving.

Intense competition

The logistics sector is growing more and more competitive every year amidst the shifting business landscape. The cases of major e-commerce companies like Amazon creating logistics departments of their own to satisfy the buyers' demand for speedy delivery aren't making matters any easier—it's a clear sign that the growth of e-commerce organizations enabled them to do more than dictate the rules and pace for logistics companies. Instead, it's slowly turning them from partners to new competitors. 

For that reason, logistics decision-makers are constantly racing to reduce spending, increase productivity, and weaponize new approaches—just to keep their place in the system that keeps commerce going and continue building from their position.

Such an urgency also emphasizes the value of data—the more companies can learn from the results of their past and current operations, their supply chain performance, and even incidents, the easier it becomes for them to adjust to new conditions and implement new strategies. It also allows decision-makers to locate expenses that can be optimized and identify the most profitable or productive directions that they can nurture into value streams. 

Logistics automation solutions make it possible to meet all the competitiveness-boosting needs mentioned above. Embedded into a workflow of a logistics enterprise, a logistics automation system gives employees access to real-time data on financial operations, cargo movement and management, warehousing operations, and many other activities (based on the individual company's needs).

To maximize this value even more, automation in logistics empowers companies with demand forecasting—smart bots can analyze massive amounts of data, noting recurring trends, and revealing underlying factors that repeatedly affect the performance across supply chains.

Paired with AI and time series analysis, logistics automation brings transparency to logistics operations, making workers and enterprise leaders more aware of what happens within their logistics system and how it can be improved.

Learn the practical use of AI in logistics and warehousing

High error cost

Human error often costs businesses millions of dollars. But in the logistics sector, errors can lead to more than just financial losses. Aside from reputational damage, the cost of human error can include botched time management, retail rejection, and even putting entire logistics to a halt—the latter is certainly the scenario that many companies want to avoid.

It's also worth noting that no amount of digital transformation will ever bring the risk of human error down to zero. Amidst labor shortages and intense environments, even the most qualified employees are bound to make mistakes. So, instead of placing the responsibility of error prevention solely on the workers, decision-makers prefer to equip them with the tools and means to identify, isolate, and avoid issues that would have otherwise impacted an entire supply chain.

To provide an example, implementing a warehouse management system (WMS) helps employees take an in-depth look into the operations executed and managed within each warehouse. An automated WMS system is capable of boosting productivity by efficiently navigating workers through the warehouse, automatically generating pick lists, validating items, revealing item location, and instantly notifying the personnel whenever an item is missing, or there is insufficient stock. Each one of these features potentially saves companies millions of dollars while keeping the work productive.

Introducing a logistics automation system into the employee workflow significantly reduces it. Logistics solutions prevent accidental data duplication, wrong order placement, and information inaccuracies by relieving employees of manual data management, item selection, and customer processing. As a result, provide them with more control over their operations and help them identify potential problems before they can affect the enterprise. 

What prevents companies from implementing automation in logistics?

Logistics automation's benefits create a vision for a better, brighter future for the logistics industry. These benefits promise faster supply chains, accurate warehouse management, and productive cargo deliveries—with zero setbacks and 100% process transparency. And while there is no doubt regarding the certainty of such a future, we still need to address the issue of the present, i.e., the slow adoption rate of logistics automation solutions rate across companies.

From our point of view, there are several reasons for such hesitation—and none of them is related directly to technology.

  • Needing more accurate navigation across candidates and priorities
    Even though shippers, supply chain managers, and distributors are familiar with the concept of automation and have more knowledge than they used to possess five years ago, there is still a lot of uncertainty when it comes to planning an automation journey for their enterprise. 

    Decision makers may know what's on the market. Still, it gives them little idea of how it can be applied to their business needs and goals—which, in turn, leads to concerns regarding budget, the time needed to adopt the logistics automation solution, onboard employees, and the value gained in the end. Logistics business leaders want a system that would be the perfect fit for their specific goals, but they only can map out such a solution after a detailed analysis of their processes and compiling a list of the most appropriate and actionable candidates.

  • Being overwhelmed by innovation
    While decision-makers learn, so does technology. New logistics automation solutions appear, and new opportunities are unlocked—the evolution is impressive but, at the same time, confusing. Logistics business leaders often find themselves on the fence, not wanting to invest in a solution that will soon become obsolete or overshadowed by a new, improved iteration.

    Decision makers expect their investment to deliver long-lasting results for years to come, keep up with new challenges, and cover emerging pain points. Their concerns are reasonable: making a bad investment decision would result in new expenses.

    However, at the same time, automation isn't a one-time process—it's a constant work in progress targeted at improving the processes within the company and maintaining efficiency at its highest. Therefore, personalized logistics automation solutions are developed with scalability, flexibility, and resilience in mind, outfitting adopters with all the means to face industry-related challenges.

  • Having misleading ideas about automation
    Despite decision-makers being more aware of the advantages of automation in logistics, there are still some myths and misconceptions that stand between them and the value they can obtain from the technology. For instance, there is a common belief that implementing RPA in logistics means replacing all human workers with machines and programs—or that a fully automated procedure excludes human intervention from the entire process.

    Therefore, decision-makers brace themselves for a full overhaul or struggle with mapping out the roles of their employees within a new, automated framework. Naturally, automation in logistics doesn’t eliminate the need for humans.

    Employees are and will be integral to keeping supply chains, logistics routes, and fleets moving—even the new industrial revolution sees the future of industries as the combination of human skill and technology-powered resilience.
Why human is still on top of the industrial revolution?

How to ensure a successful logistics automation journey?

Regardless of doubts and concerns, automation in logistics can make a difference for all the components of the industry—from fleet management to warehousing. Therefore, with a deep knowledge of company processes, an understanding of what the company needs, and a future-oriented vision, logistics automation solutions will bring companies to the new frontier of performance, communication, and control.

Ready to unlock the next level of business efficiency?

But what do decision-makers need to reach that frontier? From our point of view, they should ensure that their execution partner shares their business vision. Aside from technical skills and experience, the ability to synergize with the client's business goals and culture makes up the core of the automation center of excellence that will be handling candidate analysis and process automation. Such an in-depth approach from the execution partner's side will guarantee a smooth and productive automation adoption process that includes employee onboarding and best practices implementation, and secure long-term value.

If you’re currently in search of such a tech partner for your logistics automation project, let’s chat! Having successfully completed and launched numerous unique logistics automation systems, our RPA consultants, business analysts, and developers will assist you with creating a unique, competitive solution tailored to your specific needs.

FAQ

Automation in logistics is improving logistics operations with software that handles a fraction of human-managed processes or the machinery that takes over a part of manual tasks.
Automation in logistics essentially places companies into a new territory called "business to business to consumers" (B2B2C), where they become a link between consumers who place orders and purchase goods and businesses that need to deliver the goods as swiftly as possible. By automating a number of processes (order placement and processing, data management, inventory management, and warehousing), logistics automation solutions allow for a smooth and productive interaction between all the links of the B2B2C relationship.
Automation creates a new future of sustainability and resilience for the logistics industry, addressing such issues as labor shortages and letting logistics businesses navigate better across the uncertain landscape. The growing demand for personalized logistics automation solutions indicates that the number of logistics automation adopters will keep increasing, gradually eliminating the most pressing issues across the sector.
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