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Can Warehousing Withstand the E-Commerce Boom?

Robotics and intelligent vehicle systems are creating opportunities for companies to grow their e-commerce infrastructure.

If you recently checked out using a virtual cart, you’re not alone. E-commerce across all sectors of the retail space continues to grow exponentially, with sales expected to hit $4.5 trillion by 2021. In fact, Q1 2018 saw a 14% increase in e-commerce sales as compared to that same period last year and the international community may still be unboxing some of the more than 100 million products sold during this year’s Amazon Prime Day, which Amazon dubbed its biggest in history.

Changing Consumer Shopping Habits

Today’s retail markets are dominated by millennials who now make 54% of their purchases online, with 40% of U.S. male millennials claiming they would “ideally buy everything online” if they could. This grand ambition is quickly becoming a reality.

In the past few months, we’ve seen a growing number of grocers, such as Kroger, accelerating delivery options as a means to gain market share back from Amazon, which acquired Whole Foods last year. Walmart also announced a stream of high-tech innovations aimed at today’s convenience-oriented, click-and-go customers, including plans to test a robotics system to speed up its growing online grocery pickup services.

Similarly, the fashion industry is seeing an unprecedented boom in e-commerce sales, with worldwide revenue from online clothes shopping expected to hit $731 billion by 2022.

Growing Demand for Industrial Property

This mad dash to keep pace with Amazon is placing an immense strain on today’s industrial real estate market, which is simply unable to keep up with demand.

According to real estate firm CBRE, the availability of U.S. industrial real estate dipped 7.2% in the second quarter of 2018, marking its lowest point since 2000. The limited availability of land suitable for fulfillment centers has significantly driven up prices, with some plots of land now costing twice as much as they did a year ago.

This price hike isn’t limited to massive parcels of land (50-100 acres) typically snatched up by giant players such as Amazon or Walmart. Small plots, often located closer to major cities, are also feeling this pressure, as smaller companies entering the delivery game look to these locations to more quickly complete last-mile deliveries for customers expecting orders within 24 hours or even 30 minutes.

The intense competition for industrial space is compounded further by the natural aging of today’s existing infrastructure. According to CBRE, the average age of a U.S. warehouse is 34 years. While these facilities may be located on high-value land in major markets like Boston and Philadelphia, they often lack the basic modernizations necessary to accommodate growing e-commerce demands, such as tall ceilings. They are also commonly far smaller than what is considered desirable for today’s operations. In turn, technology is being relied upon to make the most of these older environments.

Rise of the Robots

While robotic equipment has played a role in e-commerce for the past few years, we’re starting to see a significantly greater number of automated machines coming into warehouse settings.

Traditionally, this has been common in larger facilities, such as Amazon’s fulfillment centers. In 2017 alone, the company added 55,000 robots to its fleet, more than doubling its total number of robotic workers from 2016.

However, as industrial land becomes harder to find and consumer expectations for delivery timelines become more aggressive, we’re seeing a growing number of companies turning to smaller spaces and seeking new ways to enhance productivity in these settings through automation.

An emerging trend coming out of this shift is micro-fulfillment, which is quickly becoming popular among grocery brands, like Walmart, as mentioned earlier, that are looking to improve and expand their grocery pickup and delivery options. As a result, companies are racing to provide advanced robotic systems capable of automating operations in much smaller spaces, such as in the 6,000-10,000 square foot range. This is enabling grocers like Walmart and Kroger to establish streamlined fulfilment centers within or nearby their traditional storefronts.

On the Backs of Batteries

These various market forces are creating a convergence of diverse technologies that is upending the long-established market underpinning supply chain operations: batteries and chargers.

Increased scrutiny on efficiency, rising energy costs, and the proliferation of robots and intelligent devices, such as automated guided vehicles (AGVs), are necessitating new power solutions that can support this robotic workforce.

Among the changes we’re seeing is a shift to lithium-ion batteries, which can dramatically improve the efficiency of supply chain operations for the growing e-commerce market around refrigerated and frozen goods. Traditional lead-acid batteries often prove inefficient for these purposes, forcing warehouse operators to swap them out frequently for charging. Lithium-ion batteries, on the other hand, are entirely sealed, enabling them to operate for longer periods before the cold temperatures impact the internal components. Additionally, the modules within the enclosure are individually heated for maximum efficiency, which allows the battery to capitalize on the heat retained within the system for longer operation. Finally, and most importantly, unlike lead-acid batteries, lithium-Ion batteries can safely be fast-charged in the cold and even in freezers.

Similarly, increased scrutiny on energy usage and concerns around operation costs has led to a shift in the industrial charging market from large monolithic linear chargers with very low-efficiency and limited capabilities to high-frequency, high-efficiency designs. These factors have also led more companies to look toward modular charging stations, which allow for greater standardization to cover a wider range of battery options. As a result, companies can eliminate the need for multiple single-purchase chargers in favor of versatile options that can power a wider range of batteries.

Notably, one of the most disruptive innovations by far has been wireless or contactless charging. With these solutions, material handling and assembly professionals can automate many of the menial and repetitive tasks associated with burgeoning robotic workforces, enabling them to shift their focus to more complex projects.

Furthermore, wireless solutions eliminate the need for many high-cost components that require constant maintenance and replacement, such as DC contactors, connectors and cables—saving valuable time and expenses. These technologies offer a superior alternative to conventional methods of docking with copper contacts, which are prone to wear-and-tear and require constant cleaning to be effective.

Looking Ahead

The e-commerce market shows no signs of slowing down, but as viable industrial real estate disappears, companies will be forced to become more creative in how they operate. Fortunately, emerging technological breakthroughs in robotics and intelligent vehicle systems are creating major opportunities for companies looking to break into or grow their e-commerce infrastructure.

Don Nasca is business development manager with Delta Electronics (Americas), a provider of power and thermal management solutions.

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