“The consolidation of e-commerce has led to a huge increase in warehouse automation”
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Nils Boysen, Chair of Operations Management at Friedrich Schiller University Jena
About the expertNils Boysen (Hamburg, 1972) is a Professor and Chair of Operations Management at the Friedrich Schiller University Jena in Germany. A business economist by background, Prof. Boysen has published over 175 scientific articles in leading journals. His main areas of expertise are operations management and logistics processes in e-commerce, which involve using optimization algorithms to improve companies’ business outcomes. Boysen was ranked among the most productive authors from the European Journal of Operational Research in the last 40 years. His research has received several awards from prestigious associations, including the German Academic Association of Business Research (VHB) and the Association of European Operational Research Societies.
Mecalux talks with Nils Boysen (Friedrich Schiller Univ) about how e-commerce has boosted warehouse automation.
How is e-commerce transforming the warehouse?
If you ask people on the streets what they think about the term warehousing, they will probably picture long aisles with huge pallet racks and some forklifts operating at a slow pace. But these images have nothing to do with actual e-commerce warehouses. The ever-increasing sales volumes of e-commerce have given rise to a new generation of warehouses. E-commerce facilities are now bustling spaces brimming with people and technology. Every single process is closely monitored, optimized, and supported with robotics and digitization. It’s a very exciting time for research on warehousing.
How has the e-commerce boom affected key logistics processes such as storage, consolidation, and order picking?
We’re observing a market concentration process where a few global players account for a large percentage of the growing number of sales. Even smaller online retailers are utilizing the services of these giants. The e-commerce boom has pushed to increase the size of warehouses, which, in turn, has triggered economies of scale. Producing on a larger scale has allowed companies to afford even more technology, more robots, and more automated racks. The consolidation of e-commerce has led to a huge increase in warehouse automation in the last decade.
How has order picking evolved compared to the past?
In the past, operators used to drive a forklift to a specific pallet rack in the warehouse to obtain the products. But e-commerce sales are unique. Companies have to manage a much larger assortment compared to store-based retail. Also, customer households just order a few items. The typical order size for Amazon in Germany, for instance, is just 1.6 items. This combination of huge assortment and small purchases makes it very hard to predict what will be ordered together.
In a former warehouse, you could put frequently ordered products together to avoid operators having to walk long distances. But when you can’t predict what customers will order jointly and you have a huge assortment, e-commerce companies often apply scattered storage or mixed-shelves storage. In other words, they no longer store complete pallets of items on the shelf — they break up the pallets, individualize the items, and spread the different products all over the warehouse. With this method, it no longer matters what items are ordered together: somewhere in your huge warehouse, you will always have the products that are ordered together close by, saving the picker from having to walk long distances. This is the strategy many companies use to handle the particular order structure of e-commerce.
The ever-increasing sales volumes of e-commerce have given rise to a new generation of warehouses
How do you organize and distribute inventory and operations in an e-commerce warehouse?
When you have a picker-to-parts system — where operators walk through the warehouse to get the products — scattered storage is an effective method to organize processes and inventory. Another alternative is parts-to-picker systems, where automated solutions bring the products to the picker. For instance, Amazon uses small autonomous robots that lift racks and drive them to the picker so that they can concentrate on the picking process and don’t need to walk through the warehouse to get the products.
A similar idea is bag or pouch sorters, where you put individual items in small bags that hang from a conveyor suspended from the ceiling. The items are automatically delivered to huge buffers. The bags remain hanging until they are ordered and brought to a pick station, where the picker only has to retrieve the items. This system is very convenient and efficient for order picking. There are many organizational and technological solutions to cope with the special structure of e-commerce.
Why is it important for e-commerce businesses to have efficient logistics operations?
The straight answer is that their business depends on it. For retailers, it’s hard to gain competitive advantage from product differentiation because they lean on other people’s products. Their strength relies on a well-functioning website and logistics operations. The latter means that the items are delivered to customers fast, efficiently, and reliably. There are two main steps where retailers can improve their logistics processes: warehousing and the last mile, that is, when they deliver the parcels to the customers. Both steps are critical in logistics, so e-commerce retailers should put a lot of effort into implementing efficient processes in their distribution centers.
What role will new technologies such as process digitization, drones, and autonomous vehicles play in end-customer delivery?
The last mile is, after warehousing, the second most critical step for efficient logistics operations. Current transportation systems like delivery trucks are costly, and the harsh working conditions in package delivery make it difficult to find enough professionals, especially in industrialized countries where you have an aging society.
Possible solutions are new technologies, such as autonomous driving or drones for parcel delivery. Autonomous driving, in particular, can offer many opportunities for improved last-mile delivery of goods. However, I can imagine that drones might be a bit more complicated because of safety issues — nobody wants a drone to fall on their head.
Autonomous driving involves trucks carrying small autonomous robots, which drive over the sidewalk at a slow pace to deliver individual packages. Another idea is mobile parcel lockers, where many packages are stored in an autonomous vehicle; once it’s parked on the sidewalk, you get a notification on your smartphone that the locker is in front of your door, and you can unlock the compartment with your mobile phone. I imagine that these will be some of the solutions of the future because it will be harder and harder to find enough people to deliver all the stuff we’re ordering online.
Especially when orders keep getting smaller and more frequent…
Yes, and on top of this, people expect orders to be delivered faster and faster. So, there’s a huge desire for new, quick, and cost-efficient solutions.
How do you see the warehouse of the future?
I imagine that we will see a wide range of different technologies and different types of warehousing in the future, and not just one solution that fits all. Next-day deliveries will most likely be handled outside the city centers, in huge facilities, which will be mostly automated. These technology-driven facilities on the outskirts will be combined with additional warehouses based on a human workforce because they are more flexible.
Another trend that will grow is people’s expectation to get their orders delivered within the hour. This entails storing the products in the city centers, which requires completely different types of warehouses and storage solutions that work in condensed spaces, as the price per square foot in urban areas is very costly. To speed up order delivery, you also need completely different types of automation for stacking products efficiently and retrieving the items fast, which is often done with robot support.
We also see a trend towards autonomous mobile robots because these are among the most flexible solutions in the market. AMRs are scalable on short notice. For instance, you can just add robots when you expect much higher sales during peak season or leave them aside when you don’t need them. Autonomous robots that are small and standardized are quite affordable. Hence, flexibility is another driver for technology, and solutions like autonomous robots are certainly one trend that will shape the warehouses of the future.