At the outset of the pandemic I was in Atlanta attending the Modex 2020 trade show, a showcase for innovation in the supply chain industry. As I made the rounds of the enormous convention center gallery, two themes emerged: the robot invasion was nigh, and few of the companies actually understood how warehouses work. The combination of these phenomena bodes ill for the industry in addressing its biggest problem: unproductive labor.

What do I mean by “unproductive labor”?

For some years now, warehouse recruiting has been a race to the bottom in terms of the quality of candidate. Low wages combined with historically low unemployment rates and a large number of companies requiring warehouse personnel drove a high turnover, ineffective workforce where negative background check results were ignored (“Well, it wasn’t a VIOLENT felony….” This in turn led to an increase in “shrinkage”, the industry euphemism for “theft”. Dealing with employees who couldn’t be trusted to show up on time, not call in sick because they didn’t feel like coming in, or required to be driven to and from work because their latest DUI claimed their license negatively impacted the efficiency of the solid workers and supervisors. Warehouse managers who had previously spent most of their time chasing stockouts or wayward carriers now spent it working phone trees begging folks to come in on their day off to cover the shift—-when they weren’t picking themselves to plug the gaps. This reduces the productivity of the entire operation as we get fewer orders out during a typical shift.

So frustrated have we become by getting a team trained up and working well together only to have Amazon open a facility next door and pay a dollar an hour more for the holiday rush, thereby triggering an exodus of our warehouse workers that we dream of getting rid of labor altogether in favor of beeping trashcans rolling about or lights-out facilities where the only people on site are there to grease conveyors. Manufacturers responded to these yearnings with an array of products from tiny robots for each picking all the way up to full pallet handling systems. Just push a button and crank orders out. What could be simpler?

Automation comes with its own challenges, however. First, warehouse operations are typically starved for investment as companies routinely find better returns investing in production or transportation rather than in storing and reconfiguring inventory, making it difficult to raise the money to put into expensive equipment. Second, automation is poorly-suited for high mix, low volume situations where exceptions abound. Why do we have jackpot lanes and expediting in supply chain operations today if not for this? When I confronted mobile robotics vendors with this challenge, the response was invariably, “You can TRAIN our robots.” Of course, if I have to retrain your robots every time something changes, I need people to do that—-which rather makes the robots really expensive shadows. Third, automation requires more highly skilled personnel to maintain and program it. These companies are more than happy to provide such people, to be sure—-at a price. Automation makes the operation more complex and harder for supervisors to manage. If we send someone out to bulk storage and they disappear, we go find them and swiftly restore flow. If the equipment breaks, we stop and call somebody to fix it, limping through the rest of the night. Finally, automation creates what we Lean practitioners call “monuments”—-impediments to optimal flow because we cannot easily and completely reconfigure the layout of the facility. We bleed efficiency over time as a result.

If we can’t hire and retain enough solid warehouse workers, and we can’t automate the warehouse, how do we survive?

The answer is to improve information flow, shrink travel times, and improve material flow through the warehouse. The good news is that a couple of companies I saw at Modex realized this and are offering solutions which will help. More on that in my next blog post.