Why warehouse automation isn’t yet widespread

Companies have been slow to bring in robots due to costs. Is that changing?

In some ultra-modern warehouses, workers don futuristic exoskeletons to lift loads exceeding their own bodyweight, while autonomous drones whiz overhead inspecting inventory.

These automation technologies can deliver outsized benefits, from enhancing safety to boosting operational efficiency and accuracy.

Yet the use of exoskeletons, and even the more typical robots, are far from commonplace — part of a wider lack of technology adoption by logistics companies.

Only six in 10 logistics occupiers across Asia Pacific have deployed some form of automation solutions such as Automated Guided Vehicles (AGVs) and telescopic conveyors, according to a recent JLL survey.

Most occupiers cited the high initial capital expenditure (CapEx) as the primary obstacle, although the long payback period is also a clear hurdle in the decision-making process, says Peter Guevarra, Director, Research Consultancy, Asia Pacific, JLL.

“The standard lease term for logistics facilities in the region is generally between three to five years, which makes it too short to recoup CapEx on many new solutions,” says Guevarra.

Take third-party logistics providers (3PLs) with multiple tenants on short-term contracts. “3PLs have little incentive to invest in technology within a logistics facility when their tenant isn’t willing to co-fund the investment or to commit on a long-term lease,” says Michael Ignatiadis, Head of Supply Chain and Logistics Solutions, Asia Pacific, JLL.

The business case for automation

Even with the right lease terms, not all occupiers may be suited for automation. The nature and scale of operations, as well as the occupier’s sector, must also be considered when building the business case.

“Automation is a far more viable option for an e-commerce operator or a spare parts distribution center than for a warehouse storing a small assortment of big and bulky items being shipped out at a slow rate,” says Ignatiadis.

In the UK, for instance, online retailer RangePlus rolled out a flexible robotic warehouse picking system — powered by Autonomous Mobile Robots — in one of its fulfillment centers, dramatically improving the picking rate and order-picking time by 300%.

Still, some occupiers remain hesitant because of concerns around the suitability of their existing facility for automation technology. A third of occupiers surveyed by JLL highlighted the design of their current facility as a major barrier to their uptake of automation.

“This issue may be more pronounced in speculatively-built facilities, which tend to adopt a more generic design to cater to a larger pool of occupiers,” says Guevarra.

“Since it’s less targeted and specific to a particular occupier group, introducing sophisticated solutions in these facilities may require structural modifications that call for additional capital,” Guevarra says.

But with automation costs likely to decrease in the years to come, there could still be a compelling case for automation in some markets.

“Markets with higher labor and operational costs, such as Australia, stand a better chance at recouping their investment in automation as compared to emerging Southeast Asian markets where manpower costs are significantly lower,” says Guevarra.

A balanced labor-tech strategy

Currently, around nine in 10 occupiers across Asia Pacific still rely more on labor than automation, data from the JLL survey shows.

However, most have set ambitious technological goals for the long term, with a majority expecting to transition to a balanced labor-technology strategy by 2030, where workloads are evenly split between both.

“Some of the more popular solutions used by occupiers today are conveyor belts and AGVs which are relatively easy to implement,” says Ignatiadis.

“But moving further along the automation journey will require them to carefully consider their individual circumstances from the type of facility and nature of products, down to the additional benefits that can be derived from deploying automation in their facility.”

This article was written for JLL’s Trends & Insights content hub.