The Automation Revolution - Logistics

Interview Transcript

Article | The Automation Revolution – Logistics
1st October 2021 Atheneum Team

Expert Profile






Tobias has had 15+ years of work experience in the logistics industry. Currently he’s the CEO & Co-Founder at Depot City, a logistics (fulfillment and parcel delivery) platform for SMEs. Prior to this, he worked for DHL as a Director (2015-2018) where he was responsible for last-mile operations such as instant / next day delivery, APIs, 3PV plug-ins for automated customer onboarding, booking platform for logistic products and e-fulfillment tests.

Section 1: Current Automation Strategy

1.1. What is your current automation strategy? What are the intended goals?

Talking about automation we should focus on two different domains of fulfillment: parcel sorting and logistics. We can focus on three parts, so fulfillment, parcel sorting and last mile delivery.

Within loading-unloading & storage packaging, we are seeing lots of momentum with regards to storage automation. Amazon acquired a key player called Kiva for $775 million. Shopify acquired 6 River; Zebra acquired Fetch Robotics. So, in the global market, there is movement and exploration into the fulfillment domain including storage.

However, we also see something that first traction & first signs with to automating last mile like Ola motors launching services. And if you look at the entire value chain, so for example, purchasing an iPhone case online, and then all the logistical process steps; 50% of cost occur in last mile delivery.

This has the greatest impact, that’s why I believe going forward, this would be an area of focus for a variety of different companies. The process is still relatively manual and very unautomated process. I very much believe in couple of years on the road, this will look very different. So, we will have drones flying, transit driving, transit would have kind of consolidated delivery methods, like a parcel locker on his self-driving vehicle that will have taken the driver out of the equation. So at the moment, current priorities are in fulfillment but looking 5 to 10 years into the future, I would definitely say last mile delivery.

1.2. What are the challenges to implementing automation in your industry?

Delivering orders is still a very manual process today. The weakness was in fossil fuel usage, now the process is electrified. However, you still have human components actually conducting the delivery and thus the fundamental process has not changed yet. Yes, you basically saw some improvement. From 2000 years ago, the horse turned into a which could turn into an electric vehicle.

The routing was first intuitive. Now it’s basically guided by AI. This is fine but the end to end process is still kind of comparable to two dozen years ago, this kind of process hasn’t really changed. And what would be a substantial change in industry would be to consolidate the drop-off points as such as in parcel lockers, which currently exists, but these parcel points are static.

If you have a kind of self-parcel locker that is for example a self-driving vehicle that contains, 50-100 parcels. You can sit in your home, you will receive a notification from the parcel locker, that the locker is outside your home. You can have the option to pick up your order now, or ask the locker to come back at a later time.

This kind of process is just substantially different. From a last mile delivery company perspective, it is completely different in terms of costs and second the kind of technology you might have. This is a kind of a drone too, but this drone it can also think about scenarios about delivering single items. So take a flying drone, you’re living in a nice skyscraper in London and the parcel is arriving with the drone and just go to your balcony and the iPhone cases lying in your balcony, which obviously looks completely different to how the last mile delivery was conducted post 2000 years ago.

1.3. What are the different types of automation you have invested in?

We’re going to have a full-fledged drone delivery use case with kind of consultative drones or individual drones, either flying or driving drones. It’s not yet on kind of a large scale. So, this is the vision, but it is difficult to measure an ROI. So obviously you have some substantive costs to the also basically need a self-driving operations, self-driving vehicles, you need smart T-Systems with regards to the routing, you need smart communication systems to basically contact you.

You can be channel agnostic. So customers could prefer WhatsApp or prefer text message or you mail, or any other kind of channel to receive notifications on your parcel delivery. So basically you need those kind of integrations for CRM Systems, as well as in sending out a notification to you.

Obviously, you need some AI tools to basically manage the dialogue, sending you information. It’s one way communication, or actually engaging in dialogue with you as an end consumer and notifying when your parcel is in-front of your house, and when you want the parcel to be delivered. That’s basically engaging you as the end consumer in kind of a dialogue and obviously being able to being able to automate the entire interaction.

We are already seeing development across the logistics value chain. AI, ADA also with regards to being able or chat bots, which you can see everywhere, those simple communication tool to be fully automated. We see some drone applications. And I would say the vision is basically to put everything combined, everything into one really modern day service offering.

1.4. How has the pandemic changed your approach to automation?

The pandemic obviously changed everything. From March to May 2020, volume dropped significantly. The level of uncertainty was increasing to insane amounts, basically end consumers of corporations did not spend anything. As a result, every kind of automation activity was cut. There was such a high level of uncertainty and nobody was willing to invest in these kind of highly uncertain times.

Then we saw stimulus packages and companies and consumers gaining confidence for the future and realizing that the world is not going to end and that’s why they continued to spend again, especially within e-commerce. The volume grew quite substantially and volume fluctuation is not unusual in e-commerce across different parts of the globe. You have higher volumes in India during Diwali; in China, you have Chinese New Year; then the Western world and the Christian world you have Christmas where volume can go up by 5-10x. However, eCommerce always knew when it’s Diwali; when it’s Chinese New Year and when it’s Christmas. So, basically the goal was to create a plan with COVID. Nobody knew that COVID was coming. Nobody knew that the volume was going to peak at such high levels.

To cope with those increased volumes companies basically were forced to automate in order to keep up with increased volume. And in the beginning, obviously there was also a great access to low skilled workers. If you want the company to continue to operate, you had to use higher degrees of automation in order to support your clients and your customers. And basically, it was a necessity and thus we currently see the automation market just exploding.

Section 2: Future Automation Strategy

2.1. What are your current unmet needs/pain-points?

I would say the key pain point is basically the concentration of power within e-commerce provider and logistics. The Amazons and Alibabas in the Asian world. So you have these providers that are basically too large, too powerful, too great access to technology, and deep pockets.

If you compare Amazon and DHL, for example, if the founder of Amazon goes to the capital market and says, “We want to build world domination automation, and we have cut EBIT margin for the next five years,” it would be celebrated as a visionary leader. If the CEO of DHL would do the same, he would be fired the next second because he will not pay out dividend and EBIT performance for the next couple of years.

The key issue here is too high concentration of power, and maybe this will smooth out going forward with the Chinese government now having kind of a tighter regulation on the Chinese tech players. We see in the U.S. is both parties. Republicans with Democratic party initiatives to break up those large providers.

I would say it would be healthy for everybody and would accelerate automation significantly if Amazon would be broken up into 4-6 different companies. So have a commerce based company, market-based company, a cloud company, last mile delivery company, so on and so forth. That would say this would relieve the concentration of power and the concentration of power resulting in less competition, especially preventing further exploration of automation.

2.2. What are your upcoming priorities in automation in the next 3-5 years? Why?

There is a philosophical difference between basically owning the hardware themselves, or basically leveraging hardware from third party providers. Basically, do you want to create an autonomous self-driving vehicle yourself or do you purchase sorts of product from an external vendor and only use excellent technology as a user?

I think that is an opportunity for these third-party technology vendors to create more open-source technological solutions, as opposed to being a very managed service solution. If they’re not acquired and or bullied out by those large providers like Amazon.

2.3. What are the key emerging technologies that appeal to you in the future?

If I look at the logistics landscape, there are some logistics companies already in who have just started implementing automation in their functioning while others are quite developed and have been using automation in their operations for a while now, such as big players like DHL, FedEx etc.However the industry in general still has not reached its peak in fully leveraging key technologies such as an entry API connection, AI powered routing or software solutions and in my opinion these solutions apart from other solutions like material handling robots are the emerging technologies in the logistics ecosystem which are yet to be properly implemented.

2.4. How important is integration across the automation ecosystem?

Very important since obviously the full potential of automation can only be realized if you connect different operating systems with each other and if you lower the cost to do so. As an illustrative example: If every integration costed thousands, it wouldn’t make any economic sense to connect varied systems together .and fully realize the potential and benefits of connecting and integrating systems. Obviously with API connections this integration and running cost is cut down significantly which enables companies to share data from different systems back and forth and this helps automate the processes and the logistic ecosystem.