Accelerating automation of supply chains is having a major impact on the industrial real estate market, according to a research report prepared by the global IRE services firm Prologis.
“Automation has the power to revolutionize logistics operations. As capabilities expand alongside declining costs, faster returns on investment are fueling adoption,” Prologis states.
“This dramatic transformation cannot be overstated: What was expected to take years to gain traction is occurring in mere months. As a result, some logistics customers are making significant investments in automation.”
Fueling the adoption of automated systems in warehouses and distributions are three major factors, according to the company. First, Covid 19 has led to greater absenteeism in this workforce, further stressing labor availability.
Secondly, technology continues to improve, expanding capabilities and reducing costs. Third, labor-intensive operations, specifically ecommerce, are growing quickly. “These users benefit greatly from this technology and are leading adopters,” the researchers note.
Prologis divides warehouse automation technologies into two categories: One is fixed automation, such as conveyor belts, automatic sorters, palletizers, pallet shuttles, and automated storage and retrieval systems (AS/RS).
The second is mobile and semi-mobile automation, which covers automated guided vehicles (AGV), such as autonomous forklifts; autonomous mobile robots (AMR), including some co-bots; and specialized and niche automation, such as automated boxing and trailer unloaders.
“When done well, automated sites are more productive, run more smoothly, have faster processing times, improve worker safety and are more efficient from a total cost standpoint (operating and capital expenses),” the Prologis researchers point out.
They added that because logistics users tend to invest in automation to improve labor productivity and through-put – not to reduce square footage – the adoption rates of automation are linked to labor.
Ecommerce operations will routinely employ more than three employees per 1,000 square feet, the company says. The majority of these, which represented 15% of logistics space as of mid-2020, have adopted one or several forms of automation.
By contrast, traditional fulfillment operations employ one employee per 1,000 square feet on average, the researchers explain. As a result, automation adoption by these users is very low.
Taken together, adoption of one or more types of automation technologies is between 20-25% across logistics real estate facilities. “While operational density can be a by-product of automation, it is not the main goal nor it is common,” the researchers assert. “In fact, reduced congestion in the facility is an important benefit of many types of automation.”
How is automation changing logistics real estate requirements? Automation enables greater choice in location, and most types can be incorporated into any modern facility, Prologis observes.
Physical requirements for automation are not changing the rate of functional obsolescence of the physical buildings, it claims. “The shift toward mobile automation and modular fixed automation means that the physical characteristics of buildings matter less as technologies become more flexible. Most necessary features can be retrofitted (for example, enhanced power requirements).”
Prologis also says automation opens up new and more productive locations by spurring opportunities for expansion into markets with limited labor pools. “On the surface, the disconnect between logistics operations and labor needs may seem like a case for remotely located facilities,” the researchers note.
“However, reducing transportation costs and shortening the distance to consumers is mission-critical to most logistics users. As a result, they are showing more interest in how automation can help unlock infill and urban locations where labor costs and availability traditionally are hurdles.”
Automation allows customers to optimize their supply chains via proximity to better locations. However, uncertainty over the future has kept adoption rates low but rising, with pockets of higher adoption and growth in fast-changing segments such as e-fulfilment. (AA, 12-1-20, P. 1).
The fastest-growing automation solutions are seen as more flexible and mobile, and less tied to physical building characteristics than in the past.
“Of note, automation is not affecting the functional obsolescence of logistics facilities, but rather by decreasing the need to locate close to labor, is opening up newer and more productive locations close to end consumers,” Prologis says.
“In this way, automation is helping supply chains move more quickly into the future – a future where dynamic, productive and well-located logistics facilities help customers literally deliver the goods.”