A scarcity of workers for warehouses and fulfillment centers threatens to throw a monkey wrench into e-commerce operations and other businesses. But robots are coming to the rescue, as warehouse automation picks up steam amid the labor shortage.
E-commerce giant Amazon has been leading the charge to automate fulfillment centers to speed the processing of orders and enable next-day and even same-day delivery.
The reason: Leaked Amazon internal research warned that the company could run out of people to hire for its U.S. warehouses by 2024. In some markets, such as Phoenix and California's Inland Empire region, Amazon has already exhausted much of the labor pool.
Amazon could postpone its labor crisis by a few years by raising wages and increasing warehouse automation, the company's report said, according to Recode.
"If we continue business as usual, Amazon will deplete the available labor supply in the U.S. network by 2024," the research said. The report noted high worker turnover and employee dissatisfaction at its fulfillment centers. On Sept. 28, Amazon announced increases in pay and benefits for its front-line workers in order fulfillment and transportation.
Take This Job And Shove It
The U.S. Bureau of Labor Statistics reported 505,000 job openings in transportation and warehousing in August. It also reported that 244,000 workers in that segment quit their jobs in August, an all-time high.
This is occurring during an acute labor shortage. The U.S. unemployment rate was 3.7% in August.
"The new generation wants to work in offices and in computing," Ash Sharma, senior research director at Interact Analysis, a market intelligence firm, told Investor's Business Daily. "They don't want to be working in warehouses — it's dirty, it's tiring, it's monotonous, it's not a lot of fun."
That's created an opportunity for companies to provide warehouse automation technology to reduce the required manpower. The technology includes mobile robots to shuttle goods and robotic arms to lift boxes as well as intelligent tracking and conveyor systems.
"The decreasing labor workforce is happening everywhere and that's really what's driving logistics companies and retailers and manufacturers to invest in automation to fill the gap," Sharma said.
Warehouse Automation Firms Big And Small
The market is fragmented among several industrial giants and numerous smaller companies playing in the space.
Kion Group of Germany is the market leader, with 16% of the global supply chain and warehouse automation market, based on 2021 sales, investment bank UBS said in a recent report. Honeywell and Toyota Industries are tied for second place, each with 11% market share.
U.S. stocks involved in warehouse automation include Berkshire Grey, Cognex, Symbotic and Zebra Technologies.
Zebra purchased Fetch Robotics in August 2021 to add mobile robots to its portfolio of inventory management technologies.
"We saw that as a key growth driver for the company," Zebra Chief Financial Officer Nathan Winters told IBD. "Driving throughput and efficiency is obviously the main goal of the warehouse. Now they need automation because they can't find the workforce."
Massive Market Opportunity Amid Labor Shortage
The warehouse automation market this year will generate $42.15 billion in revenue worldwide, according to Interact Analysis. That's up 17% from last year but below the Covid-fueled investment growth of 21% in 2021. The firm predicts the market will reach $78.82 billion in annual sales in 2026.
However, the weakening macroeconomic climate has led some customers to slow their purchases of new equipment. Even Amazon is cutting its spending on warehouses to shore up its finances after two disappointing quarterly reports this year.
At the same time, the demand for new warehouses globally is surging. Last year, there were about 170,000 warehouses with more than 50,000 square feet each. Companies are likely to add 44,000 new warehouses over the next five years, Interact Analysis says.
The market opportunity for warehouse automation is huge because only about 10% of warehouses today have some sort of automation, Sharma says.
"The market opportunity is massive, which can be a little bit daunting," Symbotic Chief Financial Officer Tom Ernst told IBD. Symbotic has had to limit its addressable market as it scales up, he says.
Labor Shortage Fuels Automation Trend
Symbotic has a firm backlog of $11 billion in orders, Ernst says. It is now deploying its systems in 13 distribution centers for five customers, he says. And it has six production systems already fully deployed.
"Obviously, the labor challenges are one of the things fueling this market," Mike Dunn, Symbotic vice president of sales, marketing and strategy, told IBD. "The number of people in the world that want to do these jobs in traditional warehouses is dwindling every day. And every customer we talk to is worried about that for the future."
But customers are just as interested in the productivity and efficiency gains that can be gained from warehouse automation, Dunn says.
Warehouse automation is not about replacing human workers even though companies face rising wages and unionization calls, industry officials say. The increased automation could make warehouse work more appealing, Sharma says.
Amazon Uses Half Million Mobile Robots
Another major driver is the need to speed deliveries. Consumers want their online purchases ASAP, and that's as much a factor behind the warehouse automation trend as labor shortages.
Amazon accounted for 38% of warehouse automation spending in the U.S. last year, Interact Analysis says.
Amazon ramped up automation in its fulfillment centers after it bought robotics company Kiva Systems in 2012. Kiva developed mobile robots that deliver shelves of goods to workers at packing stations.
Ten years later, Amazon has 520,000 robotic drive units in use at its fulfillment centers worldwide. Plus, it has more than a dozen other types of robotic systems in its facilities around the world, including sort centers and air hubs.
In June, Amazon announced several new robotic systems. They included Proteus, its first fully autonomous mobile robot that moves large carts, and Cardinal, a robotic arm that identifies and lifts packages and stacks them into carts.
On Sept. 9, Amazon announced a deal to buy Cloostermans. Based in Belgium, Cloostermans designs and manufactures "mechatronics solutions" — advanced technology used in Amazon operations to help move and stack heavy pallets and totes or package products together for customer delivery.
Symbotic Supplies Warehouse Automation To Walmart
Rival Walmart is accelerating its investment in warehouse automation. Walmart has hired newly public Symbotic to automate its 42 regional distribution centers in the U.S.
Grocer Kroger is working with U.K.-based Ocado to automate 20 U.S. warehouses for packing and shipping groceries for e-commerce fulfillment.
Some companies specialize in retrofitting existing warehouses for automation, while others focus on new warehouses custom-built with automation in mind.
Most warehouse automation projects involve shuttle systems — mobile robots that ferry goods when and where they're needed in a facility. A newer business model involves cube storage systems, or densely packed towers with many small robots inside for retrieving items from bins.
The holy grail of warehouse automation is a so-called "lights-out" operation. That's a warehouse that runs without humans inside and can even operate literally with the lights out.
But true lights-out facilities are likely a decade away from happening, Sharma says.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
