Delivering progress: how automation is transforming ecommerce logistics

Between 2014 and 2021 the proportion of retail sales conducted online in the UK doubled from around 14% to almost 29%.¹ While the pandemic led to a rapid acceleration in ecommerce globally among consumers confined to their homes, the reopening of brick-and-mortar shops has not reversed the long-term trend of ecommerce expansion.²

The rapid expansion of ecommerce has been accompanied by parallel advances in the logistics industry that enable it. While robots have been performing difficult, dangerous and dirty tasks on the factory floor for decades, their comparatively recent arrival in warehouses was only possible thanks to major advances in both hardware and software.

Today, with labour shortages and wage inflation adding to the pressure created by rising ecommerce demand, the logistics sector is again turning to technology for answers.

Robotics: how machines are transforming warehouse operations

In 2012, *Amazon paid $775 million for robotic fulfilment systems specialist Kiva Systems (since renamed Amazon Robotics), in what would turn out to be a landmark moment for the logistics industry. Kiva’s automated guided vehicles (AGVs) enabled efficiency gains in Amazon’s warehouse operations by reducing the amount of time human workers spent walking the warehouse floor.

A decade on, Amazon unveiled its first fully autonomous mobile robot (AMR).³ Unlike the earlier AGVs, which work in segregated areas to avoid contact with humans and rely on barcode stickers on the floor to demark fixed routes, AMRs can operate alongside humans on tasks requiring greater flexibility – hence the name ‘Proteus’ given to the machines.

While today’s warehouse robots – even Proteus – move around on wheels, the advent of ‘vertical warehouses’ could accelerate progress on flying robots. While using drones as last-mile parcel deliverers poses significant challenges given the unpredictable working environment, unmanned vehicles could perform stocktaking operations in warehouses at night.

Software: smart sorting and the metaverse

Alongside advances in hardware over the past decade has been a steady evolution of the software that provides the brains behind the robotic brawn.

Historically, warehouse work could be divided into mobile operations (fetching goods) and static operations (sorting and packaging goods). While sorting goods remains a challenge for automated systems, increasingly sophisticated software is enabling machines to help. Today, hybrid approaches are increasingly being adopted, with machines performing sorting functions while humans remain on hand to assist with particularly difficult instances.

Another much-discussed software development with potentially transformative implications for the ecommerce logistics industry is the metaverse. This immersive evolution of the internet could potentially blur the lines between the real and the virtual, leading people to spend even more of their real time (and money) in a digital environment.

The metaverse could eventually provide consumers with a fully immersive shopping mall experience from the comfort of their own homes. Not only could this enable users to view goods in detail, for instance checking sizing, it could also provide a space for social engagement – one of the important features of real-life shopping currently that is absent from ecommerce equivalents.  

As well as potentially driving continued gains in ecommerce’s share of retail sales, advances in virtual reality (VR) and augmented reality (AR) could herald the next big change in warehouse operations.

Inside the warehouse, human workers wearing AR headsets could be presented with real-time stock-locating data and optimal route plans. Alternatively, VR could potentially take human workers out of warehouses altogether, enabling them to guide robot operators while a safe distance from physical operations, reducing accidents and enabling robots to work at full speed.

Automation for the population

Despite the sophistication of today’s leading logistics operations, to say nothing of the next-generation systems currently in development, it’s worth remembering that more than 80% of warehouses globally have no automation whatsoever.⁴

With warehouse/logistics staffing costs rising fast, we believe it is very likely that automation will make inroads in the years ahead.

Learn more about the latest advances in ecommerce logistics

The above summarises some of the topics covered at our recent Global Thematics Forum, which was held in London. Below is the video of the session, which covers the topic in more depth.

*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.

1. Source: https://www.statista.com/statistics/281241/online-share-of-retail-trade-in-european-countries/

2. Source: https://www.morganstanley.com/ideas/global-ecommerce-growth-forecast-2022

3. Source: https://www.therobotreport.com/a-decade-after-acquiring-kiva-amazon-unveils-its-first-amr/

4. Source: https://www.businesswire.com/news/home/20210621005532/en/Global-Warehouse-Automation-Robots-Technologies-and-Solutions-Market-Report-2021-2030---ResearchAndMarkets.com