The Link: LINK

The Story: Logistics Management ran a very interesting article on the online retailer Zappos.Com and how they overcame their order fulfillment issues by using robots.  As the company grew beyond being just an online shoe retailer, it struggled with how to be efficient in fulfilling orders when the items were not the consistent size of a shoe box.  The solution they came up with was a robotic system made by Kiva Systems Inc.  In this system, the robots roam the DC and bring bins of items back to the pickers.  A laser then highlights which specific item is to be picked and a monitor shows the quantity.  The robots do not use wires, rails, or laser for guidance.  Instead, Zappos put bar coded stickers on the floor and the robots read those.  Also, the system stores the larger bins throughout the DC based upon the order characteristics of the items in the bin.  A particular bin does not have a “home” in the DC.  If it’s items are hot this week, the robots don’t take it very far from the picking stations.  If it’s items are frequently ordered with another item, those two bins are stored next to each other.  In all, it seems like a very efficient system and if Zappos decides to leave the building, it can easily be taken with them.

The Analysis: The story brings up a number of interesting issues as it relates to the future of warehouse design.  According to Zappos, one issue with the Kiva system is that it does not go vertical.  All of the bins reside on the warehouse slab.  For years, clear height has been a driving force in the warehouse industry.  Anything under 24′ is considered class “B”, less functional space.  32′ clear is the de facto norm for new construction and 40′ and 50′ are not unheard of.  However, with one of these systems, even an 18′ clear building can be brought into the 21st century.  It would be interesting to run the analysis to see if the cost savings of leasing an older facility and the increase in worker productivity would offset the cost of the Kiva system.  Zappos claims the system is so efficient that it can have an order ready for shipping 12 minutes after the user hits the “submit order” button.

This army of robotic workers can also operate in total darkness.  Zappos only has to light the picking area.  This has the obvious effect of reducing the electrical usage, but also works to reduce the buildings heat load.  Do I smell a LEED point in there somewhere?

If you knew you were constructing a building for an automated user, what other design specs would you change?  It’s only a matter of time before more and more DC’s become completely automated.

Link to story on Reuters – LINK.

Um, that’s great but why do I care?  It in itself is not that interesting unless you are an active business traveler and need a small, lightweight laptop.  However, it does point to a significant trend in our supply chains – stuff is getting smaller.  Just take a second and think about the size of the computers you have owned over the past 20 years.  My first computer was an Apple IIe that was absolutely huge and heavy.  Over the years, my computers have progressed to tower desktops, to mid sized desktops to the computer I now use.  I can now use my laptop to do everything my old clunky desktop used to do, and more.

That laptop now takes up only 157 cubic inches (yes, I measured) vs the old tower desktop that takes up 5,102 cubic inches (again, I measured).  That is a reduction in size of over 96% and represents an increase in utility.  Computers are just one example of the products that have been steadily shrinking in size.  Flat screen TVs take up much less space than their CRT counterparts.  Cell phones continue to shrink.  MP3 players are vastly smaller than their Walkman predecessors.  And the list goes on.

Even non-electronic items are shrinking, or at least their packaging is.  We can all thank Wal-Mart for the form fitting plastic packaging that is impossible to open.  In addition to security improvements, that packaging allows Wal-Mart to put more product in the same amount of space – on the shelves, in the warehouse, and in the container.

This has very real implications for how much container and warehouse space companies need to sell the same amount of goods.  I was speaking with a port official recently and we were talking about the volume of product that a major retailer brought in through his port.  He said that they have significantly increased the amount and value of product they bring in, but decreased the number of containers.  This decrease was brought about from packaging improvements and an overall reduction in product size.  Unfortunately, this meant that the port was making less money (per TEU handling fees) from a client that was bringing more product in through the port.

How will ports cope with this decrease in TEU, but increase in value?  Will we see dock handling fees be calculated on the value handled rather than the number of TEUs handled?  Will the million SF distribution center become a relic in favor of smaller, more flexible facilities?  Stayed tuned to find out…