In the Age of Automation... Why Is 'Robotization' Slow in Logistics Centers? [Im Juhyung's Tech Talk]

Symbol of Automation Innovation: Robot Logistics Center
Market Expansion Unhindered Despite Pandemic Impact
Robot Systems Lag Behind Humans in Scalability
Achieving Human-Level Flexibility Remains a Challenge

Stretch, a logistics warehouse organizing robot developed by the American robotics company Boston Dynamics. / Photo by Boston Dynamics

[Asia Economy Reporter Lim Juhyung] We are truly in the era of automation. From robotic arms in car factories to drone delivery services, life without robots has become unimaginable. However, in logistics centers, except for some specific tasks, human labor is still heavily relied upon. Why is it that advanced cutting-edge technology is not widely seen in the logistics industry?

◆Tech Companies Betting Their Lives on Logistics Center Automation Technology

In fact, many companies have taken on the challenge of automating logistics centers. The most representative companies in this field include the UK-based Ocado, known for developing the so-called 'robot logistics center,' and Norway's AutoStore. Boston Dynamics, a robotics company under Hyundai Motor Group's affiliate in the U.S., recently attracted public attention by unveiling its warehouse organizing robot called 'Stretch.'

These companies are developing technology with the goal of replacing human labor with automated robots. Among pure 'robot logistics center' companies, Ocado is the largest by revenue. In the most recent year, 2020, it recorded sales of ?2.3 billion (approximately 3.7 trillion KRW) and is already widely known to consumers in the UK, where its headquarters are located.

The 'Central Fulfillment Center,' Okado's robotic logistics center. Robots move along cubic grid rails, automatically organizing items. / Photo by Okado YouTube capture

Ocado's robot logistics center is called the 'Central Fulfillment Center (CFC).' Inside the logistics center, a dense grid-shaped rail system in the form of cubes is installed, and dozens of small box-shaped robots move along it, automatically collecting ordered items and placing them in front of human delivery workers. The delivery workers then pack these items into boxes, load them into vehicles, and deliver them to customers' homes.

Of course, the CFC still requires human labor at times. For example, items that robots cannot pick up must be handled directly by humans, and tasks such as scanning products with barcodes are performed by human workers. According to Ocado, currently about 50-80% of logistics center tasks have been replaced by robots.

However, despite the remarkable efficiency of Ocado's CFC, it struggles with full-scale industrial expansion. According to market research firm Kantar, as of October last year, Ocado's share of the UK online grocery market was only 1.7%. In contrast, Tesco, the UK's largest department store chain and e-commerce company, holds a market share of 27.6%.

◆Robots with Slow 'Scalability' Face Market Expansion Challenges

Ironically, the reason robot logistics companies cannot easily expand their scale lies in the robots themselves. This can be understood by looking at the e-commerce market situation in 2020, when many countries in the U.S. and Europe implemented full lockdown policies due to the COVID-19 pandemic.

At that time, with most supermarkets and department stores closed, consumers had no choice but to rely on e-commerce. It seemed natural that Ocado, operating only online stores powered by robot logistics centers, would benefit. Indeed, Ocado experienced high growth of 20-30% in both 2020 and 2021. However, it did not grow enough to threaten other major logistics companies.

General logistics centers employing human workers have the advantage of being able to expand at a much faster rate than automated logistics centers. The photo is not related to any specific expression in the article / Photo by Yonhap News

The problem was with 'scalability.' Ocado's logistics centers require laying grid-shaped rails inside warehouses for robots to move on, installing the robots, and integrating various IT systems. After all systems are in place, testing is conducted. This process takes about 1 to 2 years. In contrast, traditional logistics companies like Tesco can immediately start operations by hiring tens of thousands of temporary workers and deploying them to logistics centers.

In fact, in 2020, when Tesco's department stores and supermarkets faced operational restrictions, it quickly focused its capabilities on the logistics center industry, resulting in an increase of nearly 69% in e-commerce order processing volume in just three months. Moira Clark, a professor of business administration at the University of Reading in the UK, pointed out, "Tesco hired 16,000 new employees within weeks after the pandemic began and was able to process about 1.5 million orders weekly, becoming twice the size of Ocado as soon as it started its online business."

The challenges robot logistics centers face are not limited to expansion speed. Picking operations in logistics centers require flexibility. Robots must recognize and 'pick up' dozens of different items varying in size, shape, color, and hardness. While this is easy for humans, it is a highly advanced technology for robots that perform actions based on programmed instructions.

◆Continued Technology Development and Investment... Will the Era of 'Robot Logistics Centers' Come?

Despite these limitations, robot logistics center companies continue their challenges. Ocado, for example, unveiled new technology on the 26th of last month (local time) that improves the scalability issue, a known weakness of the CFC. Examples include the Series 600 robots rapidly manufactured by 3D printing and picking robot arms equipped with the latest artificial intelligence (AI) computer vision capable of accurately recognizing and picking hundreds of different items.

3D printer mass production robot (left) and picking robot unveiled by Ocado / Photo by Ocado

Additionally, since the COVID-19 pandemic, many countries have faced labor supply disruptions, leading more companies to seek robotic solutions. Nine major retailers from eight countries, including Kroger in the U.S., Sobeys in Canada, and Aeon in Japan, have recently adopted and are using Ocado's robot logistics centers.

There are also cases of introducing smart robots for warehouse organization. According to the U.S. IT media 'The Verge' on the 28th of last month, Boston Dynamics' 'Stretch' robot recently received an investment of $15 million (approximately 18 billion KRW) from DHL, Germany's largest logistics and courier company.

DHL plans to deploy Stretch in its North American logistics warehouses and conduct operational tests over three years. Stretch will be used for the so-called 'loading and unloading' tasks involving heavy delivery boxes. DHL expects that by replacing this physically demanding and injury-prone work with robots, it can improve working conditions.