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For those who believe that the surge of interest in warehouse automation and robotics was just a pandemic fling that will fade as the labor market loosens, meet Malcolm Wilson.
He’s the chief executive officer of GXO Logistics Inc., which operates about 900 warehouses, mostly in the US and Europe for customers including Nike Inc. and Nestle SA. The Greenwich, Connecticut-based company, which cobbles together different types of robots tailored to a client’s needs, signed up a record $475 million of new business in the second quarter and has a pipeline of automated logistics projects that extend into 2024.
Even though GXO is one of the most advanced warehouse operators, the trend of adopting automation is only getting started. About a third of GXO’s warehouses are automated, double the percentage of about five years ago. GXO expects to have 60% to 70% of its warehouses operating mostly with machines in the next five years, he said. The warehousing industry as a whole is only about 5% automated, he said in a phone interview.
That will change, and it’s a transformation that is picking up speed. In the US, orders for industrial robots rose to a record 40,000 last year from 31,000 in 2020 and 30,000 in 2019. If anything, the US lags behind on robot adoption. In the latest worldwide data from the International Federation of Robotics, Asia’s installations of 266,000 robots in 2020 topped those in the Americas by more than sixfold. For robot density, which measures the number of these machines for every 10,000 workers, the US is seventh, trailing manufacturing powerhouses such as South Korea, Japan and Germany.
The pandemic and the lingering labor shortage that came with it will accelerate this adoption of automation, which should be viewed as beneficial for the economy, for companies and even for workers. It bolsters productivity, which allows salaries to rise without adding to inflation. This latest wave of US warehouse and factory automation is unique because it comes at a time of near full employment, which helps allay some of the fears that the robots are coming to take everyone’s job. This rapid rise of robot demand hasn’t put thousands of workers on the street. Manufacturing employment increased by 271,000 in the first six months of this year, and the unemployment rate has dropped to 3.5%, matching the pre-pandemic level in 2019 that was the lowest since the late 1960s.
There will still be warehouse jobs for people for a long time to come. In some of GXO’s operations, such as performing sub-assembly work for Boeing Co., the volume isn’t large enough to justify the automation. Workers will always be needed to tend to the machines and do the tasks that involve solving problems. And although the end-of-arm tools for robots have advanced rapidly, nothing comes close to the dexterity of the human hand — and won’t for decades.
Still, that doesn’t mean there won’t be some labor force disruption. About 6.2 million people work as hand laborers and material movers, the US Bureau of Labor Statistics category that most closely matches warehouse work. They make just less than $15 an hour, and even with automation jobs in the industry are expected to increase 7% from 2020 to 2030, which is as fast as average, the bureau says.
Companies were forced to think during the pandemic about which work can be done remotely and which must be done in person, McKinsey & Co. said in a study last year.
—Bloomberg