How Robotics Are Widening the Consumer Packaged Goods Retail Gap

Amazon publicly claimed that robotics technology reduced its operating costs by 20 percent.

Gary Hawkins
Gary Hawkins

While many in the retail industry view robotics as a vision for tomorrow, the technology is already impacting supply chain economics today. Leading companies are deploying robotics throughout their distribution centers and are realizing significant gains in productivity, along with increases in order picking accuracy. Companies like Amazon and C&S Wholesale Grocers are using robotics technology to drive a growing performance gap compared to their less tech-savvy competitors, but the robotics revolution is only in its infancy.

Amazon acquired robotics manufacturer Kiva several years ago, paying an estimated three-quarters of a billion dollars. Since then, Amazon deployed approximately 30,000 Kiva robots in the company’s distribution centers around the world and publicly claimed that the technology reduced operating costs by 20 percent. And Amazon is not done yet; the company is projected to realize an additional $2.5 billion in savings as it rolls the technology out to another 100 distribution centers that were not yet roboticized.

What’s driving those lower operating costs? Amazon is using robotics technology to reduce the click-to-ship cycle—previously an estimated 60 to 75 minutes per order when done entirely by humans—to 15 minutes.

But Amazon is not the only major distributor seeking the advantages of leading-edge technology. C&S Wholesale Grocery, the largest grocery wholesaler in the U.S., acts as supplier to Tier 1 retailers, regional chains and a vast network of independent retailers across the country. Several years ago, its owner, Rick Cohen, acquired Symbotic, seeing the potential efficiencies robotics could provide in massive distribution centers.

What else do Jeff Bezos of Amazon and Rick Cohen of C&S have in common? They each see robotics as a strategic asset and are aggressively protecting the technology they acquired from becoming part of rival arsenals by shutting down the sale of robotics to other firms.

But the use of robotics is quickly growing outside distribution centers. Uber, the ubiquitous ride-sharing company, recently acquired Otto. Otto was started by former Google technologists and is focused on the application of artificial intelligence to create self-driving trucks, another form of robotics. Many company backers are betting that self-driving trucks will be commercially viable before autos. The economics are compelling: Self-driving trucks don’t need mandatory rest breaks, don’t speed and can operate 24/7. Consider that shipping a full truckload of goods cross-country costs an estimated $4,500, with labor representing three-fourths of that cost, and it’s easy to see how this technology can transform shipping.

And the robots are not stopping there. Retailers like Lowe’s, the do-it-yourself chain, are aggressively piloting and deploying robots from OshBot within their stores to provide enhanced customer service. Other retailers are focused on employing the technology for operational gains. BossaNova provides autonomous robots designed to cruise up and down the aisles of supermarkets, watching for out-of-stocks, misplaced items and excess inventory.

Completing the impact of robotics on the retail supply chain, the use of drones and ground-based robots to deliver products to the consumer are growing quickly. Not a week goes by that we don’t read about another company that is piloting drone technology to deliver products. The technology is real and it’s here.

Companies that are willing to place bets on robotics technology are already reaping the benefits—look no further than Amazon and C&S Wholesale—and others are gaining fast. These companies are taking advantage of the innovation-implementation gap that helps separate the haves from the have-nots. Technology is advancing at a hastening pace and the retail industry is having an increasingly difficult time keeping up. As innovation outpaces implementation, it enables leaders to leverage technologies like robotics to outperform their competitors, changing the industry landscape.

While many technology trends, such as delivering sophisticated capabilities via the cloud, are helping independent and regional retailers stay in the game, robotics may be a different story. Unlike software, robots are physical equipment that require significant investment, and the ability to make capital expenditures swings the needle back to the largest retailers and distributors. What happens next may be fascinating to watch, but one thing is certain, the robot race is already underway.

As the founder and CEO of the Center for Advancing Retail & Technology LLC (CART), Gary Hawkins has an unparalleled view to current and future innovation in fast-moving consumer goods retail. Reviewing thousands of new solutions each year, combined with over 30 years of industry experience leading shopper-focused innovation across the supply chain, uniquely position Hawkins to guide the future of retail.

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