warehouses – Page 3 – The OM Blog by Heizer, Render, & Munson

OM in the News: Score One for Hydrogen

Fuel-cell-powered warehouse forklifts gaining on electric

Ever since a Swiss inventor named François Isaac de Rivaz built the first hydrogen-powered automobile in 1808, inventors and futurists have pinned their dreams and fortunes on the clean technology that converts water to energy. But hydrogen never caught on as a fuel, mainly because of its relatively high costs.

“Now, thanks to the thriving warehouse networks of online and big-box retailers, hydrogen has found a place inside growing fleets of forklifts,” reports Businessweek (Aug. 7, 2017). The numbers work out: Although a forklift outfitted with a hydrogen fuel-cell pack costs up to $58,000 — about twice as much as one with a standard lead-acid battery — hydrogen models are 10% cheaper over the 10-year life span of an average forklift. That’s because they can be charged in minutes instead of hours, eliminating the labor cost of charging batteries, freeing up warehouse space and keeping goods flowing around the clock.

Fewer than 3% of the 600,000 forklifts used in U.S. warehouses run on hydrogen, but that number is growing. Amazon recently agreed to try out the technology in forklift fleets at 10 of its warehouses. And last month, Wal-Mart matched Amazon’s $600 million deal, committing to double, to 58, the number of its warehouses that use forklifts running on hydrogen cells.

Fuel-cell companies are also pushing beyond forklifts, using hydrogen to power buses, delivery trucks and drone aircraft. In each of those markets, the vehicles return to a central depot for refueling, eliminating the need for a sprawling network of hydrogen stations.

If you are covering Supplement 5, Sustainability in the Supply Chain, this is a perfect real life example to illustrate Life Cycle Ownership (see Example S2).

Classroom discussion questions:

How can the operations manager decide which forklift is the best choice?
What are the advantages and disadvantages of hydrogen-powered vehicles?

OM in the News: The Rise of the Collaborative Robot

Locus Robotics makes a type of collaborative robot that is designed to work with humans.

“In the battle of humans versus machine on the warehouse floor, some companies have found common ground,” writes The Wall Street Journal (Aug. 4, 2017). Instead of developing technology to completely replace manpower, the firms are designing robots meant to work alongside people. These robots, for example, can guide workers to items to be picked or can transport goods across a warehouse to be packed and shipped. Known as “collaborative” robots, they are small and relatively cheap—costing tens of thousands of dollars—compared with miles of conveyor belts and automation systems that run into the tens of millions. Many collaborative robots resemble motorized platforms fitted with shelves and touch screens. They use sensors to navigate past people and forklifts.

The new robots are designed with the majority of warehouses world-wide in mind, where orders continue to be fulfilled manually by people pushing carts up and down aisles. Robotics firms pitch them as a way to help people work faster and boost productivity during busy times, such as the holidays, when extra labor is harder to find. (Surging online sales and a tight labor market have made it more difficult and expensive to fill warehouse jobs.) For example, the robots can slash the number of steps workers take to fulfill an order. But they don’t grab objects off shelves, a task that is simple for humans but tricky to automate, though developers are getting close.

Such robots aren’t yet widespread compared to more-established technologies, like the shelf-moving robots developed in the mid-2000s by Kiva Systems, which Amazon bought in 2012. But collaborative robot’s lower price point could speed adoption.

Classroom discussion questions:

Can robots completely take over warehouse fulfillment in the next few years?
What is the difference between a collaborative robot and a Kiva robot?

OM in the News: Robots Picking, Retailers Grinning

An engineer adjusts a robotic arm at RightHand Robotics

“Robot developers are close to a breakthrough—getting a machine to pick up a toy and put it in a box,” writes The Wall Street Journal (July 24, 2017). It is a simple task for a child, but for retailers it has been a big hurdle to automating one of the most labor-intensive aspects of e-commerce: grabbing items off shelves and packing them for shipping. Several companies, including Saks Fifth Avenue and Chinese online-retail giant JD.com have recently begun testing robotic “pickers” in their distribution centers. Robotics companies say their machines can move gadgets, toys and consumer products 50% faster than human workers.

Retailers and logistics companies are counting on the new advances to help them keep pace with explosive growth in online sales and pressure to ship faster. Picking is the biggest labor cost in most e-commerce distribution centers, and among the least automated. Swapping in robots could cut the labor cost of fulfilling online orders by a fifth.

Until recently, robots had to be trained to identify and grab each item, which is impractical in a distribution center that might stock an ever-changing array of millions of products. Now, several automation companies are working on automating picking. Hudson’s Bay is testing startup RightHand Robotics’ robots in an Ontario distribution center. “This thing could run 24 hours a day,” said Hudson’s SCM VP. “They don’t get sick; they don’t smoke.”

Previous waves of warehouse automation didn’t lead to sudden mass layoffs, partly because order volumes have been growing so fast. And automated picking is still at least a year away from commercial use. The main challenge lies in creating the enormous databases of 3D-rendered objects that robots need to determine the best way to grip new objects. (There is also 4 minute video that accompanies the WSJ article).

Classroom discussion questions:

Compare this change to other advances in warehouse automation.
Why is robotics so important in order fulfillment?

Video Tip: Robots and Humans Learning to Work Together in Warehouses

It was Amazon that drove America’s warehouse operators into the robot business, writes Businessweek (April 5-12, 2017). Amazon’s acquisition of Kiva (as we discussed in several earlier blogs) set off an arms race among robot makers and shippers across the U.S. who scurried to keep up with the e-commerce giant. For decades, warehouse operators were focused on the task of loading pallets and shipping them to retailers, who broke up the shipments and routed them to retail locations. Fulfilling online orders, on the other hand, requires shippers to pack boxes with a diverse set of individual items and route them on to customers’ homes.

That shift has given way to what people in the business call collaborative robotics, in which a human warehouse worker toils alongside an autonomous machine.

At the Quiet Logistics warehouse shown in this 1.5 minute video, the robots shorten the distance a warehouse worker travels on a typical day from 14 miles to less than 5 miles. The robots, meanwhile, park themselves directly in front of the shelf that the worker is supposed to pick from, decreasing the risk the human will pick the wrong item. That makes the job easier, and is appealing to employees.

What that means for warehouse humans is an open question. There are almost 1 million people working in the industry recently, up 44% over the past 10 years. The rise of e-commerce has created a need for more hands to pick items and pack boxes. Amazon’s rapid shipping times have taught customers to expect goods on their doorstep in 2 days or less, fueling a warehouse boom as retailers scramble to amass distribution hubs closer to their shoppers.

Logistics firms can have a hard time hiring enough people, particularly during peak shopping seasons. Adding robots should ease some of the seasonal shortages, and may make the work less physically demanding.

Video Tip: Inside Amazon’s New NYC Warehouse

The shelf arrangement makes sense for many small orders that “look” random.

Inside Amazon’s New York warehouse for Prime Now, nothing is organized. Or actually it is, but its driven by a random stocking algorithm. The one-floor warehouse on 34th Street is full of everything marked as currently available on Prime Now, Amazon’s service that has couriers deliver orders within 2 hours.

The 25,000 products aren’t grouped by type. Instead, they’re stashed in cubbies and tracked in a kind of organized chaos. A copy of Hamilton by Ron Chernow, for example, sits next to a box of candy canes or a jar of mayonnaise. Yet it seems to make sense to randomly stock items of similar popularity.

Once an order is placed, warehouse staff remove the products from inventory and bag them. The paper-bagged orders are grouped by their destination — in New York, anywhere in Manhattan or Brooklyn.

Prime Now is available only to Prime members, and so far it’s in about 30 cities. Amazon chooses where to launch Prime Now based in part on which cities have a high proportion of Prime members. The service first launched in 2014 in New York.

This 1.5 minute YouTube video can be shown when you cover warehouse layout (Ch. 9), supply chains (Ch.11), or service technology (Ch.7).

OM in the News: Amazon Revs Up Its Warehouses

An employee at Amazon's center in Schertz, Texas — An employee at Amazon’s center in Schertz, Texas

“This year alone, Amazon has built 26 new warehouses, bringing its world-wide total to 149,” reports The Wall Street Journal (Nov. 29, 2016). And it wants its new warehouse employees to get to work—fast. To prepare for the flood of holiday orders already under way, Amazon has been using technology ranging from touch screens to scanners to robots to shrink the time it takes to train new hires to as little as 2 days, compared with up to 6 weeks for a conventional warehouse job. The shorter training period saves Amazon money as it expands its workforce by 40%, adding 120,000 U.S. temporary workers for the peak holiday sales season. These types of workers can stay on from 6 weeks to 3 months to drive forklifts or pick orders.

Amazon trainees get hands-on training as early as their first day on the job. On the warehouse floor, they learn how to pack up shipments, coached by a screen that tells them which box size to use and automatically spits out a piece of tape to fit it. In conventional warehouses, by contrast, new employees typically spend their first days in classroom training.

A typical Amazon warehouse has loading docks for trucks to pull up to on either side to keep merchandise moving through. Two shifts keep operations running nearly 24 hours a day as the holidays approach, with groups of employees keeping goods moving along an 8-mile maze of conveyor belts. Orange robots that move faster than humans carry shelves full of merchandise to stations where workers can reach them. Screens show the workers what the desired item looks like and where it is placed so they can pluck it off the shelf quickly and accurately. That’s a far cry from a conventional warehouse, where workers have to memorize—often by location number—where items are stored, and then go looking for them when needed.

Classroom discussion questions:

Is it difficult to recruit workers for these short seasonal jobs?
Who are the typical recruits?

OM in the News: Beyond Kiva–How Amazon Triggered a Robotic Arms Race

“An Amazon warehouse is a flurry of activity,” writes Industry Week (June 29, 2016). Workers jog around a man-made cavern plopping items into yellow and black crates. Towering hydraulic arms lift heavy boxes toward the rafters. And an army of stubby orange robots slide along the floor like giant hockey pucks, piled high with towers of consumer products.

Those are Kiva robots, once the marvel of warehouses everywhere. But Amazon whipped out its wallet and threw down $775 million to purchase Kiva in 2012. The acquisition effectively gave the firm command of an entire industry. And it decided to use the robots for Amazon and Amazon alone, ending the sale of Kiva’s products to competitors that had come to rely on them. As contracts expired, they had to find other options to keep up with an ever-increasing consumer need for speed. The only problem was that there were no other options. Kiva was pretty much it. The world’s biggest retailers, including Wal-Mart, Macy’s, and Target, have yet to populate their warehouses with widespread robotic systems. They rely on the old method humans: Hordes of pickers and packers who send boxes down conveyor belts.

It has taken 4 years, but a handful of startups are finally ready to compete with Kiva and equip the world’s warehouses with new robotics. Meanwhile, Amazon has about 30,000 Kiva robots at its warehouses across the globe, which has reduced operating expenses by about 20%. Adding them to one new warehouse saves $22 million in fulfillment expenses. Bringing the Kivas to the 100 or so distribution centers that still haven’t implemented them will save Amazon a further $2.5 billion.

About half the 856,000 U.S. warehouse laborers slog away on simple, arduous tasks that involve moving stuff around. It’s strenuous work, with employees often walking more than 12 miles a day. As new robots become available, particularly to e-commerce warehouses, these jobs will be at risk.

Classroom discussion questions:

1. Discuss Amazon CEO Bezos’ decision to buy Kiva.

2. Why are robots so important to warehouse operations?

OM in the News: The Warehouse Explosion

Maybe warehousing is not the most exciting topic we teach in OM (see Chapter 9). But giant warehouses are springing up across the country as surging online sales send retailers scrambling to find space to house products destined for delivery to customers’ homes. Much of the construction is happening in the South, writes The Wall Street Journal (June 9, 2016), where land and labor are cheap. New warehouses can top 1 million square feet and contain hundreds of thousands of different types of items. Here is an interesting graphic.

Classroom discussion questions:

What is driving the growth?
What company is leading the way?

OM in the News: The Robots Chasing Amazon

The Fetch warehouse robot can carry as much as 150 pounds at a time

In Fetch Robotic’s mock warehouse, stocked with granola bars, breakfast cereal, sponges, and other household goods, a worker plucks items from shelves and places them in a plastic bin. The bin is set atop a small wheeled robot that follows the employee’s every step like a puppy. When the container is full, the robot darts off with it to a packing area; a second robot with an empty bin then picks up where the first left off, allowing the worker to keep gathering items without pausing or having to push around a heavy cart. Fetch Robotics, reports BusinessWeek (Oct.26-Nov. 1, 2015), is one of a handful of startups working on warehouse robots aimed specifically at e-commerce companies.

As with most things in the world of online retail, Fetch exists because of something Amazon.com did. In 2012, Amazon paid $775 million for warehouse robot maker Kiva Systems; shortly after, it stopped Kiva from selling its machines to anyone else. “When Amazon drops nearly $1 billion on something just to keep it out of the hands of competitors, it sends a really strong message to the market,” says an industry analyst. With a goal of plugging that hole, Fetch says its robots can keep up with a briskly walking person for 8 hours on a fully charged battery. It has just started selling its robots, for $25,000 apiece, and is considering renting them for $4 an hour–meaning the full purchase price should pay for itself in 6 months.

The cost of greater automation, of course, is fewer jobs. But the rise of online shopping created one of the relative bright spots in the U.S. job market: The warehousing industry employed 778,000 people in September, up 22% from 5 years earlier. For now, the Fetch robots are meant to be mechanical pack mules, supplementing humans who have the vision and dexterity to quickly recognize and retrieve the desired products. Fetch, however, is developing a robot with cameras and clawed arms that it says will eventually be able to grab items from the shelves, too.

Classroom discussion questions:

How does the Fetch robot differ from Amazon’s Kiva?
Why is robotics so important in warehouse management?

OM in the News: Reinventing Federal-Mogul’s Supply Chain

Federal-Mogul handles more than 400 million auto parts annually

For more than a century, Federal-Mogul has handled the gritty task of producing hundreds of thousands of auto parts, sticking them in boxes and shipping them to warehouses or stores across the country. Now—aggravated by how much time is lost in the process—the company is spending $100 million to upgrade its supply chain from end to end. Improvements range from an online parts catalog with 360-degree views of products to “picking robots” in its warehouses to help ensure that parts are delivered to customers on time. The $7 billion company produces everything from pistons and engine bearings to windshield wipers and exhaust gaskets.

Over the years, Federal-Mogul has become a patchwork of IT systems adopted from the companies it acquired, writes The Wall Street Journal (Oct. 14, 2015). The push under the new plan is to move the entire company onto SAP enterprise software. “We are facing a proliferation of parts,” says the supply chain chief. “Cars are staying on road longer, so you need to keep those parts, and meanwhile, auto makers are adding more models.”

So Federal-Mogul has opened additional warehouses that feature robotics systems that allow the company to consolidate storage space and offer all of the parts the company makes under one roof. (Using robotics is a page right out of Amazon’s playbook, which has used robots to speed the picking of individual pieces of merchandise for shipping). Radio-controlled, battery-operated robots run across the grid picking up requested containers when orders are received and put them onto a conveyor that will take them to the sorting area–a much more efficient system than at the older warehouses. “You have hundreds of people walking miles every day within the warehouses to get these parts, and that takes time,” says the head of logistics. “There is also the chance that parts get mixed up or broken. Now we have the parts come to the employees.”

Classroom discussion questions:

Why does the firm need the SAP system, and what will the new software do?
What is the advantage to using robots in the warehouses?

OM in the News: Georgia’s Massive Distribution Centers

Hidden behind the green curtain of Georgia pine forests that surround the Port of Savannah (the nation’s 4th largest container port) are 45.3 million square feet of logistics, storage and distribution centers. Run by some of the most recognizable brands in the country — Walmart, Ikea, Home Depot, Target and Pier 1 Imports — the immense buildings are essential links in the flow of farm, construction and manufactured products streaming out of or into the country through the port, one of the country’s most modern maritime transport installations.

“Traffic, which includes everything from containers of frozen Georgia chicken parts heading to Asia and stuffed dog beds coming in from China, is about evenly divided between exports and imports,” writes The New York Times (March 25, 2015). (Incidentally, companies in the region are leery about opening the interior of their buildings to public view, partly because of the proprietary nature of some of the newer equipment used to move and ship products. Even the systems for storing freight and organizational warehousing techniques are tightly held, a reflection of steep competition).

The largest distribution center is the 2.5-million-square-foot facility owned by Schneider Logistics. Walmart operates a 2-million-square-foot center. Both are expansive enough to completely enclose two typical suburban shopping malls, or all the businesses in Savannah’s historic downtown. Demand for new warehouse and distribution space is intensifying with the economic recovery.

Another significant factor behind the flurry of activity is the expansion of the Panama Canal, a $6 billion project to add a third set of much larger locks to enable bigger container ships to navigate the maritime shortcut across the isthmus. The canal expansion, which is scheduled to open for commercial traffic in 2016, is expected to double the volume of goods making the 50-mile crossing each year to 660 million metric tons.

Classroom discussion questions:

1. Why are these firms building massive distribution centers and warehouses near Savannah?

2. What is the impact of the Panama Canal expansion?

OM in the News: Amazon’s Robots Get Ready for the Holidays

These orange robots are the fruits of Amazon's 2012 purchase of Kiva Systems for $775 million — These orange robots are the fruits of Amazon’s 2012 purchase of Kiva Systems for $775 million

“Amazon‘s robot army is finally falling into place,” writes The Wall Street Journal (Nov. 20, 2014). The Seattle online retailer has outfitted several U.S. warehouses with squat, orange, wheeled Kiva robots that move stocked shelves to workers, instead of having employees seek items amid long aisles of merchandise. At a 1.2-million-square-foot warehouse in Tracy, Calif., Amazon just replaced 4 floors of fixed shelving with the robots. Now, “pickers” at the facility stand in one place and wait for robots to bring 4-foot-by-6-foot shelving units to them, sparing them what amounted to as much as 20 miles a day of walking through the warehouse. Employees at robot-equipped warehouses are expected to pick and scan at least 300 items an hour, compared with 100 under the old system.

In May, Amazon said it planned to deploy 10,000 Kiva robots by year-end, up from 1,400 at the time. At the heart of the robot rollout is Amazon’s relentless drive to compete with the immediacy of shopping at brick-and-mortar retailers by improving the efficiency of its logistics. If Amazon can shrink the time it takes to sort and pack goods at its 80 U.S. warehouses, it can guarantee same-day or overnight delivery for more products to more customers. The robots could also help Amazon save $400 million to $900 million a year in fulfillment costs by reducing the number of times a product is “touched.” The robots may pare 20% to 40% from the average $3.50-to-$3.75 cost of sorting, picking and boxing an order.

This is our 4th blog about the Kiva robots at Amazon over the past few years. To read earlier posts and view a short video, just type Kiva into the search engine box on the right.

Classroom discussion questions:

1. Why did Amazon buy Kiva Systems?

2. What are the advantages and disadvantages of using robots in the fulfillment process.

OM in the News: Before the Drones, Amazon Lets Loose the Robots

Amazon received a lot of news coverage for its sci-fi drone-delivery idea last week. But an immediate robotics effort under way in the Seattle retailer’s warehouses could save the company more than $900 million a year. Amazon’s rollout of robots from a company it bought last year, Kiva Systems Inc., could help pare 20% to 40% off the $3.50 to $3.75 cost of fulfilling a typical order, reports The Wall Street Journal (Dec. 9, 2013). The robots can shuttle shelves full of merchandise to warehouse workers, relieving of the workers of having to dash throughout the warehouse. “We believe this could be a significant opportunity to drive higher operating efficiency across Amazon’s massive fulfillment-center network,” says one industry expert.

Amazon has been working to reduce order costs and speed delivery, in part by constructing more warehouses closer to urban centers. While many of its latest efforts focus on deliveries themselves, Kiva robots could improve efficiency within warehouses, where humans—and human error—still rule the day. Amazon just disclosed that it has 1,400 Kiva robots in 3 of its warehouses. A broad rollout of Kiva robots could save Amazon $458 million to $916 million a year.

Perhaps more tantalizing is the potential for Amazon to sell the robots to other companies. Before Amazon bought Kiva, the robotics company was charging about $2 million for a kit of robots and as much as $20 million for large installations. Meanwhile, warehouse robots will remain a source of fascination. Indeed, Amazon’s announcement of its drone-delivery idea appeared to have prompted to disclose its effort to build robots.

Classroom discussion questions:

1. What are the advantages and disadvantages of introducing robots in the Amazon system?

2. Compare the use of drones vs. robots in improving OM efficiency.

OM in the News (and Video): Quality of Life at Amazon

Amazon's warehouse in Wales. — Amazon’s warehouse in Wales.

“On its home territory, Amazon.com is routinely hailed as a jobs machine,” writes The New York Times (Dec.2, 2013). Thanks to its warehouse building spree, it is hiring tens of thousands of workers, plus many more for the holidays. President Obama has called Amazon “a great example of what’s possible… the kind of approach that we need from America’s businesses.”

The recession might have cut deeper in Europe, making the question of new jobs even more crucial, but the attitude there is much cooler toward Amazon and its high-tech ways. In Germany, there is continuing labor strife. France is erecting barriers against the company’s aggressive discounting. And in Britain, the warehouses have been compared, in a story in The Financial Times, with a “slave camp.”

That shocking charge resurfaced in the latest investigation when a BBC reporter, Adam Littler, briefly went to work undercover at Amazon’s Wales warehouse. His report, broadcast last week on the show “Panorama,” (click here for the 1/2 hour video) showed him hustling to keep up with the demands of his hand-held scanner, which gave him only a few moments to find each product. In his 10-hour night shift, Littler said: “I managed to walk or hobble nearly 11 miles. We are machines, we are robots, we plug our scanner in, we’re holding it, but we might as well be plugging it into ourselves.”

Michael Marmot, a labor expert identified by the BBC as “one of Britain’s leading experts on stress at work,” told the TV show that with “the characteristics of this type of job, the evidence shows increased risk of mental illness and physical illness.” Amazon’s own expert disagrees, of course, and we have to question the shock value displayed in the video. The real question for your students is how are labor standards set–and whether they are fair to both the company and employees. For another view altogether of Amazon’s sophisticated warehouses in the US, watch this 3 minute video.

Classroom discussion questions:

1. How can labor standards for this job be set (see Chapter 10)?

2. What are the ergonomic issues addressed in the video?

OM in the News: Amazon Moves In With P&G

At the end of a road in Tunkhannock, PA., called P&G Warehouse Way, sits a warehouse stocked with Pampers diapers, Bounty paper towels and other items made by P&G. Inside the distribution center, reports The Wall Street Journal (Oct.15, 2013), is another company: Amazon.com. Each day, P&G loads products onto pallets and passes them over to Amazon inside a small, fenced-off area. Amazon employees then package, label and ship the items directly to the people who ordered them.

The e-commerce giant is quietly setting up shop inside the warehouses of a number of important suppliers as it works to open up the next big frontier for Internet sales: everyday products like toilet paper, diapers and shampoo. The under-the-tent arrangement is one Amazon’s competitors don’t currently enjoy, and it offers a rare glimpse at how the company is trying to stay ahead of rivals.

Logistics have long been crucial to success in retail. Years ago, Wal-Mart set up a system that lets suppliers monitor what needs to be replenished. Amazon instead is going out to its suppliers by piggybacking on their warehouses and distribution networks. Amazon is able to reduce its own costs of moving and storing goods, better compete on price with Wal-Mart and club stores like Costco, and cut the time it takes to get items to doorsteps. P&G began sharing warehouse space with Amazon 3 years ago and has expanded the practice. Amazon is now inside at least 7 P&G distribution centers world-wide.

The economics of the arrangement benefit both sides. For Amazon, “co-location” reduces the cost of storing bulky items like diapers and toilet paper and frees up space for the Web retailer to stock higher-margin goods in its own distribution centers. P&G, meanwhile, saves on the transportation costs that it would have incurred trucking products to Amazon’s regional distribution centers. Plus, it gets Amazon’s help in boosting online sales, a priority for many in the industry.

Classroom discussion questions:

1. What is the advantage of “co-location” to P&G?

2. The advantage to Amazon?