By: Raffaello D’Andrea, Founder of Verity & ROBO Global Strategic Advisor
2020 was a year full of surprises, with tremendous impacts on industries worldwide. One area that saw perhaps the greatest influx? Online shopping and delivery services. The pandemic transformed the global supply chain, raising expectations of logistics services for companies both small and large. In 2021 and beyond, these companies will require their logistics providers to offer much greater agility, financial stability, transparency, and speed.
There is no turning back from here. This e-commerce boom is expected to increase the adoption of warehouse automation solutions to help keep costs and operational complexity in check. Post-pandemic, consumer goods suppliers are looking to bump up safety-stock inventory by an estimated 5%, a shift that will require about 750 million square feet of additional industrial space. The sales of autonomous mobile robots alone are estimated to double to $27 billion by 2025.
While this demand is greater than ever, my logistics automation story backtracks to a time when a little company called Amazon was transitioning beyond just book sales. Perhaps you’ve heard of their fleet of orange warehouse robots. Together with Kiva Systems co-founders Mick Mountz and Peter Wurman, we developed mobile robotic material handling systems with the goal of transforming the process of distribution and order fulfillment. In 2012, we sold Kiva Systems to Amazon, allowing its logistics service to increase by a massive scale.
Almost 10 years later, with Verity, my focus remains in the same vein: to create innovative autonomous systems to streamline the supply chain. We believe this starts with inventory checks and management using fully autonomous indoor drone systems in warehouses.
Interestingly enough, through our recent application analysis, we’re witnessing a societal benefit that stretches beyond the demands of this unprecedented moment. Verity’s preliminary analysis is actually showing that warehouses utilizing these systems can massively shrink their output of CO2 emissions. Depending on the type of product, we’re talking a savings equivalent to taking up to 5,000 cars off the road per 100,000-pallet warehouse.
Now, how’s that for a robotics revolution?
Increasing Inventory Accuracy and Impact on CO2 Emissions
As the demand for personalized, on-demand deliveries continues to soar, autonomous technologies don’t make just the lives of warehouse workers easier anymore. COVID-19 has brought online shopping to new highs. It’s imperative for companies to incorporate smart tech into every step of the e-commerce cycle, not just to thrive, but survive.
Verity’s autonomous indoor drone system allows warehouses to fully automate inventory checks with the goal of achieving a zero-error warehouse.
So how do we get from point A to point B?
Our indoor drones fly autonomously in a warehouse facility, gathering data on pallet locations and systematically comparing actual pallet state in the physical warehouse to data stored in the warehouse management software. To put it in brief, we’re automating previously manual inventory validation efforts, completing a tedious job for a fraction of the cost, at a much higher frequency and more reliably.
While the warehouse management software market is expected to reach $5 billion by 2025[i], warehouse operators have continued to struggle with controlling errors. The industry’s median inventory count accuracy today remains at 98%[ii], with the majority of inventory checking processes still being conducted manually. Using a fully automated system allows checking inventory 50 times more frequently with consistently high quality. The result is accuracy rates close to 100% – a zero-error warehouse.
While a move from 98% to 100% count accuracy may not seem significant at first, the quantity of CO2 and CO2-equivalent (together CO2e) emissions that can be saved is striking.
In a study conducted in one of a Verity customer’s primary warehouses, it was found that about 11% of inventory count inaccuracies resulted in inventory write-offs. When goods are written off, they are re-ordered and need to be re-produced, resulting in emissions that could have been avoided if the physical inventory had been tracked accurately.
Warehouses storing perishable goods like fruit or meat as well as pharmaceuticals are particularly hurt by write-offs. When an inventory error is not found quickly enough, goods are no longer safe to use and have to be scrapped.
These same warehouses typically have high inventory turnover, which means that they service products many times their storage capacity in a given year. For example, a warehouse with 10,000 pallet locations used for food and fast-moving consumer goods may have a turnover time of one week. With an average utilization of 85%, that warehouse will turn over 52x10,000x85% = 442,000 pallets of product per year.
CO2e emissions differ widely by product type. For example, while writing off a pallet of bananas will result in 270 kilograms of CO2e emissions, a pallet of beef will result in 24 tons – a factor 86 more[iii].
This is the premise by which we have conducted our latest sustainability report. Our estimates reflect the greenhouse gas reduction potential estimates for Verity’s Autonomous Indoor Drone System for inventory automation and are based solely on the avoidance of CO2e emissions associated with the inventory write-offs.
With about 2 billion pallets in circulation in the U.S. alone, warehousing is a massive industry – and a 2% warehouse error rate is decidedly too high for businesses and for our planet.
Impact on CO2 Emissions Reductions – Beyond Inventory Accuracy
By introducing our indoor drone inventory check to a 100,000-pallet-location warehouse, we’re seeing up to 20,000 tons of CO2e emissions savings per year. But the sustainability impact doesn’t stop there. In addition to 100% accuracy of inventory checks, the following factors create an even stronger case for reduced emissions and sustainability:
- System’s ability to perform work in complete darkness, reducing the required lighting used in a warehouse facility.
- Reduction of mobile elevating work platforms currently required to manually scan pallets on upper levels, reducing not only electricity consumption but also the emissions associated with the production and maintenance of such equipment.
- Improved planning and reorder points, eliminating ordering and storage of excess inventory currently necessary to cover inaccuracies.
- Reduction of inventory theft by automatically checking for missing items daily and immediately reporting any discrepancies found. Inventory theft is a significant problem today and causes CO2e emissions due to stock shortages triggering reorders.
- Reductions of CO2e emissions related directly to automating manual labor, which covers a broad range of categories, including emissions due to daily commuting requirements for workers, production and running cost of facilities dedicated to workers (warehouse heating, cafeteria, and amenities, etc.), and indirect CO2e emissions related to human work.
- Improved safety and ergonomics in warehouse facilities and related reduction of CO2e emissions by avoiding emergency situations and long-term health costs for warehouse workers.
Residual Benefits for Sustainability Efforts & Investment Opportunities
The case for automating inventory checks is clear. Beyond the productivity gains and cost reductions for companies, incorporating autonomous systems into today’s warehousing industry can make a significant contribution to reduction of CO2e emissions. The power in this sustainability solution is that today’s e-commerce boom stretches across sectors. From consumer goods through healthcare, energy, transportation and electronics to industrial manufacturing, large warehouses exist that can be automated.
These societal benefits also translate into a sustainable investment opportunity. Technologies like logistics automation will continue to disrupt and deliver. Investors looking to capture this sustainable growth opportunity can look to the ROBO Global Robotics & Automation Index, a stock portfolio composed of both the biggest names and the up-and-coming companies paving the path for the robotics revolution.
I, for one, am inspired by the possibilities and unexpected positive impacts that continue to be born through innovation. Follow the Verity story and our efforts developing indoor drone systems at @Verity_AG on Twitter, or learn more about our work at Verity.ch.
In early 2020, Raffaello D’Andrea’s work with Kiva Systems co-founders Mick Mountz and Peter Wurman landed him an induction into the Inventors Hall of Fame. He was also elected to the National Academy of Engineering that same year. He is a co-founder and strategic advisor here at ROBO Global, where his expertise provides us with powerful insights into innovation. We apply the industry knowledge from our Strategic Advisory Board to our financial research process, bringing our disruptive technology portfolios to life for investors.
[i] ABI research report, Intelligent Supply Chain market data report June 2019
[ii] Annual Survey and Report on Industry Metrics, Warehousing Education and Research Council, 2018 Trends & Challenges, 2018
[iii] Science, Poore and Nemecek, “Reducing food’s environmental impacts through producers and consumers,” 2018