Why, Robot?

Is robotics taking over the warehouse? The use of robotics has been a long-rising trend in the distribution marketplace, but is it a worthwhile investment for every distributor? Not according to Joel Goldstein, president of Mercedes Distribution Center, a NY-based fulfillment center specializing in flash sales – i.e., eCommerce opportunities based around special discounts for limited quality merchandise. Goldstein says robotics are a great fit in very large distribution centers, but they don’t offer a return on investment in certain complex environments. He goes into greater detail about robotics, their applications, and useful alternatives in this exclusive interview with Industrial Distribution.

Joel Goldstein

ID: Can you discuss the rise of robotics in warehouse environments? How long has this trend been on the rise?

Goldstein: Robotics has been around for quite a while, but it has really taken off in the last couple of years. It works well in certain environments. If you look at robotics users, these are all going to be very large corporate distribution centers. They have a very high fixed cost, and they have to have certain types of requirements that need to be met. We have looked into them, and we didn’t feel like it would be proper for the flash sales industry. Some people in the flash sales industry are using them, but from what I’ve learned about them, no one has a total environment in a flash sales business where they are totally dependent on robotics. The ones that I know of are all larger distribution centers that are really, really focused. They require certain layouts to be working and a certain type of product mix, because robotics limits you on the types of products you can handle. We in the flash sales industry handle multiple product types, and some of them would not work with robotics. If we felt like we could have a good return on investment, we certainly would be investing in them.

We at Mercedes are strictly what you would call a pick-and-pack distribution center. In pick-and-pack, it is something fairly new.

I think robotics have limited use in the pick-and-pack distribution centers. A lot of the department store distributors have been using them, and it works well. But when you get into flash sales, where every day it is a different sale, and you have very small levels of inventory, it makes it that much more complex for robotics.

ID: What questions or concerns come up when you look into robotics as a potential option?

Goldstein: The cost is the first aspect that turns you off. You don’t even get deep into the methodologies and the approaches to it once you start to see what the costs are. They’re good to put away and maintain inventory and good to pick. But that’s just one portion of the total physical distribution cost. Once you start talking about investing a million-plus dollars for a client, it’s got to be a very substantial client with a very long-term commitment to make that kind of investment. The payback on investment, the ROI is very, very slow and long-term. We look for much quicker returns on investment. We’ve got some very sophisticated computer technology. Also, warehouse management systems have become very, very strong forces in running warehouses. They’ve been running our warehouse for quite awhile. This obviously reduces the gap between the cost of investment and on the robotics versus a good, solid technology that runs the warehouse.

I think the first factor is one has to understand the costs that they have, basic unlimited budgets, and then they can continue looking into it. Then you look at the application and the type of product that you handle, and then you can make determinations as to whether or not you should continue investing time into robotics.

ID: Everyone is looking for ways to improve and become more efficient in the warehouse. What are some worthwhile alternatives to robotics?

Goldstein: Our key to success in that area is the warehouse management system. We do not use third parties. We have written all of our own software over the years that we have been into technology, and we maintain it ourselves. It’s still an evolving concept. There are changes to it every day as to how they market and how they sell it. The warehouse has to adapt to this. We have found the only way you can turn on a dime, which you have to do at times, is by writing and maintaining your own software. At worst, if you buy a packaged system, you have to be able to maintain it in house. You can’t be dependent on a 3PL (third-party logistics) for this. The software companies have other clients, and you have to wait. Here we can experiment, we can make changes, and we can reverse it out if it doesn’t work. So that is our major key – using the warehouse management system to control our warehouse environment. We’ve been very, very successful at it. Many of the things that we do have little, if any application, in a robotic environment.

As your application becomes more complex, that’s when robotics becomes less useful. But the biggest factor you have to start off with is cost. The cost of robotics is very, very high and the return on investment is very low. Once you get locked in, you lose a lot of flexibility – should there be major changes in the methodologies of doing business, which there has been. Flash sales is about four years old, so it didn’t exist a few years ago. If you put in robotics to handle flash sales, to handle your normal e-commerce, I think you would be in trouble today.

ID: Is it one of those things where companies have to take a long, hard look at what they’re doing now, what they project they will be doing in the future, and then make an informed decision based on that?

Goldstein: It’s very hard to do in a flash sales industry, because in my opinion, the needs are changing. For example, from what I know, robotics doesn’t handle bulky items well. What could happen is the clients, or the user, could change their product line. All of a sudden, your investment doesn’t work nearly as well. Where the flash sales industry is really in its infancy as to how it is going to be handled and how it is going to evolve in a few more years. There are still major changes as far as what the warehouses are handling and what the product line is handling. I just don’t see making the investments.

Do you agree or disagree with Mr. Goldstein’s assessment on robotics and their applications in a warehouse setting? Send your thoughts to the editor at anna.wells@advantagemedia.com.

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