According to a report by Supply Chain consultancy Armstrong and Associates; "U.S. warehousing costs for 2017 were estimated to be $148.7 billion, a 3.3% increase over 2016’s $143.7 billion. Nearly $70 billion of that tally, $68.6 billion, was attributed to commercial warehousing, and the third-party logistics (3PL) value-added warehousing and distribution (VAWD) market accounted for $39.1 billion in 2016, with a 2017 estimate of $40.5 billion." The revenues in e-commerce logistics with Amazon being the world leader is expected to double by 2020 from $9.5 billion in 2016 due to online sales and customized products, leading to an increase in shippers necessitating for more warehousing space.
The Indian market also witnesses a change after the initiatives taken by the government Make in India, GST rollout and the infrastructure status for the logistics sector have led to a change in the warehousing industry. Over the last four to five years, domestic as well as global institutional investors have invested over $3.4 billion in Indian warehousing amounting to 26% of the total private equity (PE) into real estate. Further, leasing transactions also increased to 25.4 million sq ft. in 2017 in the warehousing sector.
However, warehouses are facing numerous difficulties as they have less time for processing an order and possibly no or less Warehouse Management Systems (WMS) while ensuring lesser errors. But with WMS in place, processes are automated while making it easier to handle storing and movement of goods in and out of the warehouse. AI must be incorporated to track the constantly changing needs of the warehouse to expand effectiveness and profits.
Positive effects of AI in warehousing:
- Productivity: Production improves with the advent of AI in warehouse systems; where the pick-and-pack facility becomes easier with robots assisting in loading and unloading products. Inventory systems could be better handled with the use of AI. Robots can enhance operations by understanding the details of the delivery.
- Operations: It is expected that by 2030, several operations in the warehouse and logistics industry will be fully automated. In UK, 30% of the jobs will be automated - predictable physical activities (81%), processing data (69%) and collecting data (64%). But it must be noted that all employee jobs will not be redundant, instead automation possibilities will work alongside employees thereby improving productivity and efficiency.
- Communication:Robot interactions will reduce chances of mis-communication and human errors. Eg.Amazon’s Kiva robots, which can not only pick and distribute goods to different stations in the warehouse within a minute, but also can be charged in mere 5 minutes . Further, with speech recognition technology, workers' voice can be picked up, recognized and the worker be informed about the inventory.
- Data: Collecting data is significant to the company's growth and profits that come in from numerous data points such as orders, inventory, and shipping. Details from all internal and external systems and IoT frameworks will ensure that performances are optimized, the right number of workers are allotted at the right place and time, thereby increasing efficiency. The impact of enhanced alignment and coordination, will reflect in decreased warehouse response times.
- Location: Warehouses must use geo-coding for mapping and evaluating sites that can work as probable warehouse locations, enabling retailers to optimize routes to manage the workforce, and allocate appropriate vehicles for delivery functions.
- Machine Learning (ML): A constituent of AI, ML can assist in predicting insights such as customers’ requirements on the basis of orders and returns thereby eliminating waste. ML can not only give information on an item that needs to be replenished, but also predict the time it would take to complete a task.
AI and ML offer enormous probabilities to suppliers, manufacturers, and retailers to deliver value to customers through WMS. Not only is it revolutionizing the warehouse industry and driving critical improvements, it is also disrupting the way the industry operated, driving growth and development.