The high cost of labor, among other variables, will not go away, says Mark Richardson, chief executive officer of Ocado Intelligent Automation. Companies must invest in automation technology if they are to protect their operations.

Changes in the labor market are making the greatest impact in logistics, Richardson says, and automation is the key to greater productivity, especially as there are fewer people in a company’s workforce. “In recent years, labor rates have accelerated beyond what you might have expected,” he says. “Over the last three to six years, the workforce that you want to employ in your logistics facility has just become much, much more expensive. I don't see any end to that trend, and it results in a significant problem for those of us who need to run large logistics operations. And not only is the labor rate increasing, the number of people who want to do logistics work is decreasing.”

Unfortunately for logistics operators, labor issues are mounting, as customers expect faster and more accurate deliveries. It doesn’t help that online sales are accompanied by promises that have heightened customers’ expectations. So how can logistics operations derive better service outcomes? “Automation takes some of the variability out,” Richardson says. “It takes some of the guesswork out, and the outcomes are more predictable.”

Nevertheless, some operators remain reluctant to make necessary technology investments. Richardson attributes that to “sticker shock,” but there’s also a lack of confidence that cash outlays will deliver the desired benefits. That may be because previous investments didn’t pan out as hoped.

Operations need to be future-proofed, he says. Labor issues won’t improve, and competitors will invest in automation. “All of that is going to happen whether or not you invest in automation. That’s what I mean by future-proofing logistics through automation.”