Much has been written about artificial intelligence (AI) software and robotics in the warehouse from a technology and functionality perspective. Far less has been written about the broad question of who “owns” this type of “smart fulfillment” in an organization.
In the context of AI software and the robotics it manages in the warehouse, everyone involved in the fulfillment operation — regardless of job title — claims ownership in one capacity or another. It resides at three levels: senior management, operations and labor.
What are the characteristics of these three levels of ownership? And how do they fit into the larger picture of scaling up e-commerce business and improving its performance and profitability?
The answer is complex, and has its basis in, among other things, the rapid growth of e-commerce in the past three years. This growth is fueled, in large part, by the permanent changes in consumer buying behavior wrought by COVID-19. The pandemic’s ripple effects are a key driver for the upsurge in interest in smart fulfillment platforms, which leverage AI software and robotic-enabled automation for the e-commerce fulfillment center.
Technology and Digital Commerce
Pre-pandemic, e-commerce volumes were rising rapidly — growing at a rate of 25%. COVID-19 doubled that to 50%. This number is an average; some retailers are experiencing much higher volume increases. Walmart, for example, saw its e-commerce business skyrocket 170% in the last year.
Clearly, consumers now make a substantially larger percentage of their purchases online, a trend that industry believes is a permanent change in buying behavior. Thus, the 50%-plus e-commerce growth rate is likely not to abate. According to Gartner Inc.'s State of Digital Commerce: 2022 Outlook, 86% of surveyed companies — leaders in their respective industries with an e-commerce business — believe digital commerce will be the most important route to market for their companies over the next two years.
As part of this growth trend, consumers have become much more demanding in their customer service expectations. Companies are scrambling to meet these demands and do so at a profit.
That’s good news for e-commerce companies. However, there’s a catch. Fulfillment operations are experiencing significant warehouse labor shortages, a fact that’s been widely publicized. They stem from the effects of the pandemic, but also from worker disenchantment with the often grueling, monotonous, sometimes dangerous and frequently low-paying nature of traditional warehouse work.
Labor statistics bear out this reality. According to the Bureau of Labor Statistics (BLS), in mid-2021 the warehouse and transportation industry had a record 490,000 job openings (BLS doesn’t split out job openings for warehouse workers versus truck drivers). BLS expects this number to climb in 2022.
It’s certain that all levels of the organization involved in fulfillment — management, operations and warehouse labor — will feel the pressure not just to sustain performance and meet customer expectations, but also deliver steadily improving results. This puts extraordinary pressure on every level of the organization, but particularly on warehouse worker labor.
“A smart fulfillment platform can ease pressure at all levels,” says Jim Brownell, partner at warehouse automation company GreyOrange. “Using a platform that continuously prioritizes decisions and workflows to orchestrate tasks, people and robots and optimize performance across a distribution center creates a modern fulfillment operation that best utilizes the resources you have.”
Current adoption rates in warehousing hover around 10%. Experts expect this number to skyrocket significantly as senior executives come to grip with a hard truth: Their business is losing customers in droves, demanding speed they can’t deliver.
Three Levels of Ownership
There are three constituencies that have an ownership stake in the warehouse smart fulfillment platform: senior management, operations management and fulfillment center labor. Some of those roles overlap, because serving the customer at a profit requires a coordinated strategy that spans all three groups.
Pinning down a CCO job description can be tricky. Tasks and responsibilities can vary based on the organization. Overall, the CCO oversees an organization's entire relationship with its customers, and drives efforts to assess and elevate experiences at each touchpoint across the customer journey.
Gartner describes the position as “a C-suite member who focuses on building, growing and nurturing relationships with customers as soon as they convert and become customers. The CCO is tasked with generating a complete view of the customer, including their needs, expectations and perceptions of their experiences with the company, and communicating these insights to other C-suite members. They lead the organization’s customer-centric initiatives and support front-line employees to provide exceptional customer experience.”
The CCO, together with the CTO, CSCO and other senior executives, are the technology stewards for warehouse operations, retail store fulfillment and other fulfillment sites. Their concerns include right cost, speed to market, order accuracy and customer service, all supported by real-time order information.
The owners of fulfillment center operations include a cross-section of titles, from the CSCO to all facets of supply chain operations management. Within this group, a new job title has begun to emerge: the chief robotics officer (CRO). “Supply chain-dependent industries need a CRO to manage the blending of human and robotic workers,” says Gartner vice president analyst Dwight Klappich in a recent report. He argues that this position should be elevated to the C-level management ranks because of its strategic impact on the bottom line.
“While robots are rapidly growing in use, development of effective principles, processes and disciplines for managing automated workers [is] still in the very early stages,” Klappich says. Appointing a CRO would accelerate this evolution.
The CRO position would blend engineering, IT and human capital management skills in order to develop the management structure to oversee all facets of the robotic life cycle, Klappich says. This includes evolving the role of robots as they assume more warehouse functions.
This is particularly important given the changing complexion of the warehouse workforce. Millennial workers now make up an increasingly large proportion of the warehouse workforce. For this generation, raised on technology, paper-based processes and outdated legacy warehouse management systems aren’t acceptable. Millennials quickly embrace mobile and wearable technologies and robotics. They see these technologies as an indication of a progressive company that values its employees by providing the latest technology that improves their day-to-day work experience and performance.
The relationship between workers and robots is a symbiotic one ⎯ not a replacement relationship. Getting robotics right in the warehouse is a matter of creating the appropriate division of labor. Repetitive, low-value, error-prone or injury-prone tasks are best suited to robots.
Jim Brownell says, “Robots augment the human worker, performing repetitive, time-consuming and low value tasks. In doing so, they free up the worker for higher-value work. This improves worker job satisfaction while boosting productivity and, ultimately profitability.”
Yet another benefit of a smart fulfillment platform that leverages robotic automation is its ability to scale e-commerce operations up and down in accordance with volume surges and troughs.
By equipping the workforce with innovative technologies such as smart software as well as robotic teammates, companies signal that they value the fulfillment center’s employees and the jobs they perform. Thus, these technologies help warehouses recruit and retain skilled workers by making them a more attractive employer.
The Bottom Line on Ownership
E-commerce companies that adopt this three-tiered approach to integrating a smart fulfillment platform into their operations reap savings in several areas. In the warehouse, they come from improved productivity for the tasks being automated, along with greater worker satisfaction for employees working with software and robotics.
Other ROI benefits come from better utilization of facility space, improved accuracy, increased throughput and the ability to accommodate surges. Taken together, these tangible and intangible benefits fuel greater profitability and higher customer satisfaction.
Realizing these benefits requires commitment from all three tiers of owners. Each tier plays an essential role in ensuring the success of smart fulfillment.
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