In the spring of 2018, MIT launched the Work of the Future Task Force to understand the impact of our increasingly intelligent machines on the future of work, and how to best harness these technological innovations for social benefit. The MIT-wide task force released its findings and recommendations in a November, 2020 report, - Building Better Jobs in an Age of Intelligent Machines.
In addition to the task force report, the Work of the Future initiative has published a number of working papers and research briefs on related topics. I’d like to now discuss one of those briefs, The Future of Work in Logistics by Arshia Mehta and Frank Levy, which explored the transformation of the retail industry since the advent of e-commerce in the 1990s. The brief is a very interesting case study of the evolution of the retail industry over the past few decades.
“Twenty years ago, U.S. distribution networks were built to deliver products in bulk to retail stores,” wrote the authors. “Today, large parts of distribution networks are built to deliver individual items to home residences. The shift has been driven by technology, working through e-commerce, and recently reinforced by the COVID-19 pandemic.”
e-commerce was one of the earliest applications on the Internet. Amazon and eBay started handling e-commerce transactions in the mid-1990s. Online sales grew slowly at first. In 2001 online shopping comprised 1% of all US retails sales, partly because the vast majority of users accessed the Internet over dial-up phones, and only 4% did so using the much more convenient broadband access. In those early days, online shopping was considered a novel application for leading edge Internet users.
Over the next two decades, Internet access and e-commerce advanced in parallel. By 2010, smartphones made it possible for over half the population to have broadband access. e-commerce sales were now 6.4% of all US retail sales, climbing to 10.7% in 2015 and 15.8% in pre-pandemic 2019. In 2020, the pandemic caused online sales to reach 21.3% of all retails sales, - a year over year growth of 44%.
The research brief examined the changes to distribution networks that were needed to deliver the rising volume of items ordered online to individual homes. In particular, the authors analyzed the necessary changes to two major components of logistics services, warehousing and trucking. Both were originally built to deliver bulk packages and large shipments to distribution centers and retails stores, but they now had to handle the delivery of huge numbers of individual items to individual homes.
In addition, the greater reliance on logistics has increased the demand for related services, including more efficient scheduling, updates on shipment status, and the handling of shipping paperwork. “The high demand for warehousing and trucking has also stimulated research on cost-reducing innovations, including including varieties of warehouse automation and the development of autonomous trucks that can run on interstate highways. In practice, however, these innovations have either not yet come to market or are only slowly being adopted.”
Let me summarize the author’s findings in each of these two areas.
Warehousing
The labor force in the warehousing and storage industry grew from 438,000 in 2000 to 1.1 million in 2019. This labor growth is due to a number of factors: the rapid expansion of e-commerce; the change from bulk order to single-item fulfillment; the limits of current robotic technology; the rapid expansion of e-commerce; and now the uncertain post-pandemic environment.
The output per hour of warehouse workers is no higher in 2019 than in 2000. The output per hour increased by about 20% between 2000 and 2014 but then declined after 2014, leaving the productivity measure slightly lower in 2019 than it had been in 2000. Warehouse operations involve a combination of physical and information processing tasks. Physical tasks include unloading and storing incoming items, picking the items requested in customer orders, assembling and packing the order, and loading the packed items on the truck that will handle delivery. Information processing tasks include keeping track of all incoming items and the locations where they were stored, receiving and accurately fulfilling individual customer orders, and keeping accurate records of all warehouse activities.
Most of the early productivity improvements were due to information processing improvements using warehouse management systems, scanners, barcodes and RFID tags to track product arrivals storage locations, and shipments to customers.
The automated movement of goods has evolved more slowly than the automated movement of information. Many physical tasks that are easy for humans remain difficult for computers. Warehouses have been slow to embrace the necessary, - and expensive, - advanced automation equipment because it requires the transformation of the warehouse from a drab storage building on the other side of town into a state-of-the-art fulfillment and distribution center, - similar to the transformation manufacturing plants went through a few decades ago. This raises the possibility that only the biggest firms can afford to develop and deploy advanced automation technologies, - “a process that may be adding to current trends toward greater market concentration among a few firms.”
From 2014 to 2019, rapid increases in e-commerce caused warehouse hiring to grow faster than 10% per year, much of it in older, un-automated warehouses. Many of these jobs are for low skill workers who move and pack material by hand. “In 2018, they averaged $12.64 per hour (including those persons who worked at Amazon warehouses at $15.00 per hour).” As warehouse automation evolves, these jobs will be at risk.
Trucking
Between 2000 and 2019, the output of the general freight trucking industry increased by roughly 20%. “One-quarter of the increase came from more drivers: 1.62 million in 2000 compared with 1.75 million in 2019. Three-quarters of the increase represented a more efficient use of trucks.”
Between 2000 and 2019, output per hour in freight trucking grew by 14.8%. Most of this increased productivity comes from the use of digital tools and methods to improve the scheduling of long-distance deliveries. These include improved scheduling so a truck doesn’t make the return trip empty; better matching the demand and supply for trucking space; change to routes in emergencies; automatically processing paperwork; and so on.
A commercially viable autonomous truck that travels on interstate highways is at least a decade away. However, a number of digital technologies have been improving the productivity and safety of trucks, including GPS devices, route scheduling applications, smartphones and smartphone apps, improved collision protection, lane departure warnings, and so on.
“If we think of logistics employment as a tug of war between job gains from e-commerce and job losses from automation, thus far job gains are winning decisively,” note the authors. “In eight to ten years, however, automation will likely be significantly stronger, both reducing the total number of jobs and shifting the mix of remaining jobs toward technicians, analysts, and other skilled occupations.”
“The challenge is to design labor market policies that handle automation-induced transitions better than current policies have handled the collapse that comes when manufacturing jobs suddenly leave a local labor market. In designing policy, the automation case begins with two advantages. Where manufacturing plant shutdowns are often sudden, the automation described in this brief is proceeding relatively slowly; and where manufacturing plant shutdowns are highly concentrated in particular communities, warehousing and trucking jobs are dispersed throughout the country.”
The outburst of coronavirus made us think about the various gaps in our supply chains and retail industry. Fighting counterfeit items became the biggest challenge. Bringing automation and transparency with technologies like Blockchain and AI can be a good move.
Posted by: Akeo Blockchain Development Consultancy | July 23, 2021 at 01:59 AM