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Robots on the March: The Supply Chain Gang

By Erika Morphy
Sep 7, 2009 4:00 AM PT

This story was originally published on May 19, 2009, and is brought to you today as part of our Best of ECT News series.

Robots on the March: The Supply Chain Gang

Zappos, online shoe emporium extraordinaire, has been expanding its line of merchandise in recent years -- offering clothes, watches and other jewelry, and even housewares. For the consumer, the shift has appeared effortless -- just more categories to explore on the Web site. Behind the scenes, though, Zappos had to realign its warehouse operations to accommodate the new items. Specifically, the sophisticated automated conveyor-based technology that routed the shoe purchases so well didn't work so well for anything else.

Zappos turned to Kiva Systems, which provides wireless automated and mobile fulfillment systems: robots, in sci-fi parlance, although Kiva executives frown on the word. Indeed, the ottoman-shaped devices do not resemble anything like the robots we see in movies or imagine, based on descriptions in books.

Essentially, though, that is what they are, sliding beneath four-shelf storage units, also designed by Kiva, and "humaned" by an employee at a workstation designed to oversee the overall operations.

They sort and deliver the products accordingly. Today, Zappos' order fulfillment facility is divided into two zones: a conventional automated zone and one that is based on Kiva's systems, Mitch Rosenberg, vice president of marketing for Kiva, told CRM Buyer. A conveyor belt connecting the two zones is used to handle mixed orders, which are completed in the Kiva zone.

A year after it implemented the Kiva system, Zappos has cut its order cycle time by a factor of four, Rosenberg said, noting that even if the existing system had been flexible enough to handle the new merchandise, Zappos still would have found its investment cost-effective.

"It's less expensive than other alternatives, offering not only strategic benefits but also a boost to [everyday] operations," he said.

Zappos has publicly stated several times that it expects to shift most, if not all, of its warehouse operations over to a Kiva-based system, according to Rosenberg.

Other companies are also automating parts of their warehouse operations with these devices; Kiva counts Walgreens, the Gap and Staples among its clients.

Brave New World?

As jobs continue to vanish in the country's manufacturing base, the above scenario is no doubt alarming -- despite assurances that robots rarely replace actual jobs. That alarm should be tempered by the fact that there are a few obstacles to widespread adoption of robotics in the supply chain, starting with the fact that Kiva is about the only provider of this specialized technology.

There are other challenges, though.

"I don't know if anyone can tell you with any certainty that yes, we will see robots as mainstream components of the supply chain in five, 10 or even 25 years," Tom Bonkenburg, director of European operations for the St. Onge Company, based in the Netherlands, told CRM Buyer.

The global economic downturn is delaying investment of any sort -- especially in forward-looking technologies such as robotics. Even the most-advanced systems on the market today cannot actually duplicate the ability of humans to reach into a box and grab just the right item in order to place it somewhere else.

Kiva has a response to that -- but first, there's a case burning to be made for implementing robotics despite the limitations.

Have to Admit It's Getting Better

Robots are currently used for multifaceted activities and across various industry verticals, Muthuraman Ramasamy, a senior research analyst in Frost & Sullivan's industrial automation and process control team, told CRM Buyer.

The benefits include improvements in worker productivity, better workplace ergonomics and maximization of order-fulfillment for end-users, Ramasamy said.

Energy savings is another factor: Robots, for instance, do not require air conditioning, Pat Penfield, assistant professor of supply chain management in the Whitman School of Management at Syracuse University, told the E-Commerce Times.

The list of immediate benefits is a long one, Bonkenburg agreed: labor reduction, elimination of repetitive tasks, increased order accuracy, working nonstop 24/7, protection from hazardous products, and so on.

The reasons start to resonate even more when long term trends are factored in.

"More recently, however, we see our customers looking strategically at robotics to protect themselves from the challenges of the coming demographic and labor market shifts," noted Bonkenburg.

These include rising healthcare costs, shrinking labor forces in many markets, new governmental safety standards, and the ever-present fact that quality people are hard to find.

"Many warehouses are struggling to compete with McDonald's for employees, and over the next 10 to 20 years, these pressures will only increase as the baby boomers retire."

Bonkenburg's illustration of these pressures comes from the owner of a beer bottling franchise: "He invested (US)$8 million dollars of his own family money to buy an automated case-picking system that gave a long, 10-year payback. When I asked him why would he do this, he said, 'Tom, I could have bought a yacht, but I felt that eliminating my third-shift headaches would make my life much happier.'"

The Supply Chain Gang, Part 2: Man vs. Metal

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