Robots and micro-fulfillment: The future of the logistics industry

Drees & Sommer: How are the current discussions about sustainability and the 1.5 degree target affecting the logistics industry in general? And how are they affecting you as a company and your projects?

Benzoni: We can see that the topic of sustainability is becoming more and more embedded within the business we make. Five or six years ago, sustainability was a bit more like a vision. The awareness of the climate or the planet being endangered was not as high. But now it is really coming tangible. Some forward thinking customers question us about what our policies are, what our strategy is, what our guidelines are, what the position is that we take on in such a field and also what kind of certifications we have in place when it comes to sustainability. So there is a growing demand. And it is not just about talking about sustainability for marketing purposes or just to keep up a facade. It's a real commitment to create medium or long term plans to reduce the carbon footprint and other parameters in this direction. Of course, logistics can have an impact here, because we can bring in technologies and efficiency improvements that are geared toward sustainability. In the past they were a little bit underestimated, now the impact can become much clearer because the picture of the framework in which we are operating is becoming clearer. So yes, it is coming. And yes, we need to adapt our business model and our offering as well.

Drees & Sommer: The topic of food is something that is very important to you. Currently, there are delivery problems due to the crisis in Ukraine, as the country is exporting wheat and oil. How should we deal with this situation?

Landener: When it comes to future and also business, we observe a lot of ongoing transformation processes. Supply chains are changing due to COVID, that's one topic, and due to the war in Ukraine, that is another topic. The third topic has also something to do with COVID, the harbor of Shanghai. Maybe you saw in the news that a lot of ships can't be unloaded because everyone is quarantined. The globalized supply chains are very fragile at the moment. We can observe that a lot of industries are thinking about reshoring and getting production back to a regional environment close to the facilities in order to not be as dependent on a globalized supply chains. Especially in the food and in the fashion industry, we can definitely see some ongoing transformation processes. Our technology is moving closer to the end consumer and cities are thinking about a more sustainable city infrastructure.

Benzoni: There are a lot of companies that are trying to protect themselves by raising their levels of stock. This is something which is the complete opposite of the trend prior to COVID. Before the pandemic, companies tried to keep their inventories as lean as possible along the entire supply chain. Now they understand the buffers they had are not enough to cope with the uncertainty of the continuous transformation of the globalized supply chain, geopolitical events, or the social transformation that started with COVID. Within our business this is good, because it means that there is more need for automation and more need for efficient infrastructures allowing those companies to protect themselves with safety stocks.

Landener: In the future there will be more hybrid supply chains. It will still be globalized, but nevertheless also have regional facilities in place around your own facility in order to be less dependent on the globalized supply chain. We can see that issue with wheat In Ukraine. Another, this time fictional, example: imagine there would be a war in Spain. Most of the tomatoes we consume are grown in Spain. We would have a worldwide problem with tomatoes. This is the dependency you have because of economies of scale. The industries are realizing that being this dependent is not a good thing in a very fragile world.

Drees & Sommer: Maybe every crisis can become a chance as well. From your point of view, what are the most urgent topics and exciting innovations that Switzerland has to deal with?

Landener: We already mentioned that there is a high need for automation, which has something to do with supply chain transformations, but also with shortage of labor. We definitely see more robotics coming into the logistics area. And what we at Swisslog have in place, so to speak, is an item pick robot. That is what we had observed five or six years ago when we started this project. And it is not there to replace a human being, that is currently not the case. We realized that on our journey to develop this robot that human beings have so much cognitive power. Human beings are able to do so many things automatically that robots do not know. You have to train them.

Benzoni: When we speak about sustainability, we tend to focus on green or on CO2, but we don't focus on people. People are also a big part of that topic. And automation is going to make the world of inter logistics and the related jobs a little bit more sustainable. Another topic that I would add is concerning artificial intelligence. It will enable robots to get deeper and deeper into the processes and  supply chains. Meaning we need to create provide them with enough intelligence to be capable to learn, to be flexible and to make autonomous decisions. In the case of moving an item from A to B, it is not just about executing a repetitive task but it is about  identifying the item, defining the best way of approaching  and manipulating it.  And what is the best way of doing a specific or executing a specific task? This needs to be autonomously decided by the robot at the moment in time when the task needs to be executed. Vision systems, artificial intelligence, robotics, these are the three major things which are going to make the approach of automation to intra logistics revolutionary. And last but not least, automation is getting closer and closer and closer to the receiver, being the expected level of service raising in terms of delivery time, overall in the e-commerce business. This is a real challenge because automation, via the concept of micro fulfillment centers, is entering urban centers wherethe cost of space is very high. Surface space is not available, which means having to use brownfields instead of greenfields. There are a lot of spots which are very interesting from a logistic point of view, but need to be significantly readapted. When you think, for example, about Q-commerce, which is the kind of e-commerce where goods are being delivered to your house in half an hour after you placed the order, companies are using micro hubs in apartments where they have a minimum store for goods. All these elements are pushing for need of high density storage solutions, and efficient space utilization.

Drees & Sommer: Robotics and automation is sometimes perceived as a danger. Will robots be more and more established as colleagues and partners to us humans in logistics processing?

Landener: I have to answer that from a philosophical point of view. The reason why I am in this industry, dealing with automation in both a digital way and a mechanical way, is because I truly believe that we have to make use of automation in terms of letting the robots do the redundant, repetitive work that we do not enjoy doing. I truly believe that this kind of work can be automated. Of course, some jobs will not exist in the future, but on the other hand, there will be other jobs. I don’t consider this a danger, I consider this a transformation process for society, so that humanity can have other systems in place to do different, better things that more enjoyable and meaningful. I know there are people that will not like this answer. There are a lot of potential concepts for the future that can be implemented or that we can discuss. I can see the danger, politicians have to address those worries. We will see other jobs coming up, as mentioned before, artificial intelligence, machine learning. The software side on these expert aspects will grow. Labor that you see in the logistic environment will go down. What I've experienced in the warehouses where I have been: People won't get fired because of a robot, it will be a gradual shift of jobs.

Benzoni: At this moment in time, robots are not in a place where they can completely replace humans. There are some human characteristics like cognition, flexibility, availability or reliability, which cannot be replaced by a machine. Technology still needs to develop. But science is moving so fast, the difference between robotic and human ability will gradually narrow. Workers that switch to working with robots and automated systems usually have a high acceptance rate, meaning their perception is that automation is really improving their way of working. The ergonomics is improved and work is more sustainable. Customers are providing us with this kind of feedback. The use interface is also becoming simpler and easy to use.

Drees & Sommer: Unlike humans, you cannot deduct taxes from robots. Some economists are calling for taxes on robots. What are your thoughts on this?

Landener: Currently the situation is quite unfair and that is also why a lot of people are building up these negative scenarios when it comes to robots. At the moment, labor is taxed. But if you replace a normal worker with a robot and the robot is not taxed, that's not fair. This makes people feel uneasy: robots can work all day, they don't need rest breaks, and they aren't taxed. So if a company replaces workers with robots they do not need to pay taxes or social insurances for those robots.They only need to maintain it. This is an issue politics has to cover. There are a lot of economists suggesting that robots should be taxed as well. Imagine a world around 30 to 40 years from now, where more and more things are automated and digitalized. There will be new jobs, but less jobs in total. Our economy is built on consumption. As a society we will not earn money as we do now. Who will consume goods if we are not able to work as we do now? So you have to think about where money will come from, so that we as human beings can still consume. There are options like an unconditional basic income. This is one of the biggest questions we have to answer as a society. When our economy is built on consumption, how will we deal with that in the future? One solution, besides the unconditional basic income could be a tax on robots. Another answer might be also be to think about robots as a service model (RaaS). The current situation that we have with economics and tax will definitely change. It has to change.

Drees & Sommer: There may be a good mix between robotics, automation, and humans in so-called exoskeletons. Is this also a task for you? And what role does artificial intelligence play in automated logistic settings?

Benzoni: The concept of exoskeletons seems very futuristic. The idea behind this kind of robotized armor is to help people work and increase their productivity. We are not completely sure yet if this will catch on. It does have a cost. And if the productivity of people is not improving, how do you pay those costs? In my opinion, robotics is more than just a way to assist people in doing their jobs. In a constantly changing world automation cannot remain static. We need an automation which is capable to learn and adapt. This is where artificial intelligence comes in. Instead of having just a machine which is taught what to do, the machine is able to understand at least part of the variables representing the environment. And based on that, the machine is capable to adapt itself to perform the job it needs to perform. In a matter of five years or ten years, we will have a significant jump in artificial intelligence, this will open up additional opportunities for automation to step into our processes or our daily lives in general, not only into internal logistics.

Landener: To me exoskeletons are a transitional technology in the intralogistics. The big dream we are working on is what we call ‘lights out logistics’. The warehouse or distribution center of the future will be a place where no human interaction is needed, therefore no light is needed as well. But we are not there yet. It is good to have technologies like exoskeletons in place to make work a bit easier, but in future we will not see that anymore. It will be really robotic, full stop automation.

Drees & Sommer: Let's take a brief look at another trend in the transformation of the logistics industry. What role does the topic of micro fulfillment play for Swisslog? And what do you bring into the economy of micro fulfillment?

Landener: It is part of our strategy. We are thinking in two different directions, one direction being the grocery area. Swisslog actually is one of the main drivers for micro fulfillment, in the U.S we already executed several projects. We can see the same developments in Europe, micro fulfillment is definitely very important. The second direction is the same technology but with a different purpose, so-called multi hubs, which are promoted and needed by towns or cities. The intention is to have a kind of cross dock, multi hub system at the border of a town. From a functionality point of view, it is the same as a micro fulfillment. The only difference is that there can different customers in one multi hub, not only one grocery chain, also retailers in general. The intention is to use these multi hubs as a cross dock gate where all these incoming items can be consolidated so you can reduce the amount of needed vehicles for the last mile. We are touching upon this approach th topic of open innovation, a lot of people and different companies have to come together.

Benzoni: It is the last but not least challenge. Micro hubs also require an appropriate way to refill. The logistics world is used to refill stores with cases or boxes. But being hubs gettins smaller and smaller, the need to refill in Items is becoming real. This is a big challenge for automation and is going to be something which will push into the direction of the so called “break pack” applications, that will be based on artificial intelligence, robotics and automatic grasping systems. This development is going to be very interesting to see.

Landener: One topic I would like to add is nano fulfillment, which takes it one level deeper. Imagine that there would be micro fulfillment in the outskirts of a city and the even smaller nano fulfillment warehouses in the city center from where you can distribute ordered items via bicyclists. The new concepts we see can change the last mile to make it more profitable. We are not involved in the topic yet, but we are thinking about it. It is a very interesting trend.

Drees & Sommer: Is automation suitable for existing buildings?

Landener: Yes, in theory, we can implement each and every technology into an existing building. Nevertheless, it takes time and is not easy. It is simpler to implement on greenfields, but we already gathered some experiences to bring automation into a brownfield environment as well. Micro fulfillment concepts are also a part of this. But you definitely need a very modular, scalable and flexible solution. Not each and every solution that we have in place, such as perfectly fitting cranes, make sense economically to be implemented in an existing building. But there are technologies, such as AGV based solutions, you can easily implement into an existing building. There definitely are possibilities to bring automation to existing buildings.

Benzoni: If you want a fast delivery, which is what society expects nowadays, you need to get closer to the customer. With people crowding big cities centers, there is no way other than going into those centers with automation as well. We do have systems installed in Paris or London that can serve customers in a matter of 2 hours and may serve just a particular district. These kind of concerns are going to be more and more common. Of course brownfield installations are difficult, you need to deal with the existing limits and you need to cope with existing infrastructure. So in the past, automation was quite heavy, meaning also in terms of building requirements when it came to seismic or foundations. New generations of automation are really taking into account the fact that they need to be building friendly in terms of interfaces. So for example they will not force the customer to refurbish a floor completely, but adapt much easier into buildings. We are really at the starting point. So from a norms and regulations point of view, there are still a lot of conflicts on many levels and regulations, for example, when it comes to fire protection. You are introducing a very high fire load into a very condensed, small space, so how do we cope with that? Traditional norms have not yet evolved in a way that they can host automation into buildings with very high density. Ultimately, however, governance, standards and regulations will evolve.

Drees & Sommer: What are the current limits you are facing with existing buildings?

Benzoni: The biggest limit we have right now is the available height. When it comes to space consumption, automation becomes way more convenient if you can go in height. So 20 to 25 meters would be ideal. The problem is that in cities, if you are lucky there are eight to twelve meters available. If you are not lucky, there are three meters. This is changing the shape of automation in a very significant way, because the more you reduce height, the more you consume surface, which is very costly in an urban center. So finding the right spot, finding the right buildings that are balanced in terms of geometry to offset the actual available technologies is going to be a big challenge.

Drees & Sommer: Do you have a wish for the real estate industry, especially for this movement? Do you have wishes in relation to future joint developments?

Benzoni: One of my wishes when it comes to norms and regulations is that municipalities or towns would become more flexible about converting brownfields into new fields with a different kind of scope of use. If there was the ability to remove the roof and work upwards, we have technologies that allow us to do that, this would open up impressive opportunities for automation to penetrate urban centers in a very efficient way. Overall, in Europe, you need to face this issue bureaucracy. It's all about what kind of visual impact this kind of new installation will have. These are going to be challenges that we need to be addressed and solved. But if these issues could really be addressed, it would open the door to using automation in power centers in a more convenient way. We need to cope with what we have. We cannot change the world in a matter of a day, destroy a town and rebuild it. That's not possible. So the incremental transformation is going to be the challenge we will have to face.

Landener: I would have the same wish. I'm not sure whether someone can really change bureaucracy in Germany or in other parts of the world. But that is definitely our limitation, something we always experience. From time to time we have to say, sorry, this will not fit. In already existing buildings in rural areas it is not as dramatic, but there is definitely more pressure when it comes to cities.