Insights: Is the Automation Revolution Falling Short?
October 2024 warehousing report
This month, we cover McKinsey’s recent report on the automation revolution and its effectiveness for manufacturing and warehousing. We also delve into 2025 warehousing trends, an analysis of the Texas industrial real estate market, and the reasons your warehousing operation should consider WERC membership.
McKinsey Takes on Warehouse Automation: is the Automation Revolution Delivering?Â
According to the McKinsey report cited in this Supply Chain Digest article, many sources believe robotic shipments will jump 5o% a year, every year through 203o as manufacturing and distribution struggles to plug gaps left in the labor market. Warehouse automation as a while will grow more than 10% annually through that period.
The question McKinsey is asking boards or directors: is that effort actually working? Is automation living up to its promise?Â
Companies that delve into automation projects should have these pieces in place first, at the leadership or board of directors’ level according to McKinsey:
- Have a cohesive vision: understand what your issues and needs are at the highest levels
- Understand automation technologies: do your senior leaders have a grasp of what’s available, and how those technologies function?
- Align your beliefs and principles from top to bottom before you invest: what are you seeking? Do you have buy-in throughout the organization?
Since solutions can range from pinpoint improvements down to the facility level to a fully automated greenfield project strategy, these principles are critical for success. A robust strategy prevents the kinds of organizational silos and misalignments that plague unsuccessful automation implementations.
What steps should executives take?
- Formulate your vision – and think big
- Educate the board of directors and senior leaders on the “art of the possible”. Developing realistic expectations is critical, and that requires more than a passing analysis of the things automation can do – and cannot.
- Achieve alignment on a set of core beliefs and design principles.
Warehouse automation and robotics are no longer just operational concerns within distribution centers; they have become strategic priorities for executives and board members, encompassing areas like strategic planning, risk management, and beyond.
Unex: 2025 Supply Chain Trends and Predictions: How Warehouses Can Stay Ahead
Unex, a manufacturer of carton flow, conveyors and other warehouse equipment, predicts the supply chain and warehousing trends we’ll see in 2025. The company describes warehouse and fulfillment as “in a steady state of flux” the last few years. What does 2025 potentially look like?
- Ecommerce and omnichannel fulfillment aren’t done growing yet. It probably gets faster and more complex in 2025 as competitive pressures mount.
- Labor shortages are going nowhere but up. This has been the trend since at least 2018, and it’s getting worse, not better. Automation and what Unex calls “semi-automation” can help companies adapt as costs rise while labor supply decreases.
- Consumer demand will increase the drive for sustainable operations. They cite research that claims consumers will pay 9.4% more for sustainable goods.
- Space optimization and dense storage become critical. Demand for industrial space exploded during the post-pandemic era, causing rates to climb. At the same time, warehouses are experiencing continued SKU proliferation – adding more stock – into their space. Using the space you have better is more important than ever in this environment.
- Your data is pure gold. Use it. Data and the analysis you can derive from it are critical. Look at fulfillment costs per order, order volumes, peak times, warehouse capacity, average shipping times, and operational bottlenecks.
Finding ways to adapt to the changing environment and its coming changes is important for warehouse operators. Read more from Unex.Â
Unlocking the Potential of the Texas Industrial Market
Gordon Highlander, a Dallas-based general contractor focusing on design-build and partially and fully-engineered construction solutions, lays out the current scenario in Texas industrial markets. Supply chains are constricting and that’s resulted in logistical challenges for American companies. This has been happening for reasons both geographical and ideological.
Central Texas
One key beneficiary of this shift is Central Texas with its strategic geographic placement, developed workforce and infrastructure. Manufacturing has been growing steadily in the region. Other key reasons for the shift to Central Texas include its research and educational institutions, which help drive skilled labor and advanced manufacturing in the region. Austin and San Antonio are both desirable locations for manufacturing and relocations in part because both are appealing destinations for young workers.
Tilt wall construction is prevalent in the region for manufacturing operations due to the ease, speed and durability of these types of buildings. Many of the new manufacturing projects focus on small to midsized manufacturing companies, often as support companies for larger operations.
Hurdles for Central Texas are focused on capital, which is currently expensive. Increased infrastructure needs is also a challenge for the region.
Gordon Highlander: “Central Texas isn’t just growing in size and scope and maturing into a more interconnected and collaborative industrial ecosystem.”
North Texas & Dallas
Dallas has been one of the hottest industrial markets in the United States the last half decade due to its location, dynamic workforce, educational systems and desirable regulatory structures. Dallas has boomed in the e-commerce sector during the post-pandemic era. That sector grew quickly before slowing in 2022. This period allowed these companies to assess their infrastructure and operational needs as demand for space eased.
While large facilities were the rage during the pandemic and post-pandemic era, today’s dynamic has shifted toward compact, smaller facilities designed for efficient operations. These types of facilities offer a network of flexible options for manufacturers.
The future of Texas industrial facilities
Texas’s industrial sector will face infrastructure and capital constraints, but the future promises growth in the sector.
WERC Offers Team Memberships for Warehouse Operations
WERC has long been a trusted partner for warehousing and distribution professionals. The group is committed to enhancing operational performance, measurement and safety. The organization now offers Team Membership Plans to support the success of your entire team. These plans offer a range of benefits, including expanded access to educational tools and benchmarking resources.
The membership includes these online classes:
- Distribution Logistics Fundamentals
- Distribution Logistics Equipment
- Safety & Compliance
- Distribution Logistics Operations
- Performance & Metrics
- Labor Management & Leadership
Cisco-Eagle has supported WERC for many years and we recommend the organization for companies who want to improve warehouse performance. Catch us and our expert panel at the WERCouncil North Texas conference with a session on: Facility Expansion: Renovate, Relocate or Build?
Quick hits
- In The Transformative Impact of AI in Manufacturing, Industry Today discusses ways AI systems will affect manufacturers. The article cites worker upskilling, simulation, and other ways this technology is changing manufacturing.
- Check Cushman & Wakefield’s 2024 Q3 industrial market analysis report, particularly if you are near the end of your lease. This quarter saw industrial square footage slow to 2018 levels and vacancy continue to normalize. America is on pace to exceed 100 million square feet of industrial space this year. Both vacancy rates and rents continue to rise in most markets. The company advises that slowing construction points to declining vacancy and rental rate growth in the coming years. It may be time to lock in rates if you’re leasing your space.
- Power & Motion covers Mexico’s Boom: The New Hub for U.S. Manufacturers. American manufacturers are turning away from overseas sources and towards Mexico in recent years due to vulnerabilities and geopolitical conflicts that threaten those sources (China, to name names). Other advantages include easier and less expensive transit infrastructure, cultural factors, differentiated/skilled workforce, and shared time zones. The United States-Mexico-Canada Agreement (USMCA) weighs heavily on this trend.
Scott Stone is Cisco-Eagle's Vice President of Marketing with more than thirty years of experience in material handling, warehousing and industrial operations. His work is published in multiple industry journals an websites on a variety of warehousing topics. He writes about automation, warehousing, safety, manufacturing and other areas of concern for industrial operations and those who operate them.