What sounds like a simple task – delivering goods to consumers – has become one of the most complex facing retailers.  Thanks to rising online sales igniting the field of automated warehousing, large-scale facilities filled with the latest gizmos are cropping up along the eastern seaboards and bringing with them a whole new set of challenges. From choosing the best warehousing tech (which robot is better?) to international players grappling with local legal and finance law, the automated logistics solution scene is brimming with questions.

The major contributing factor is the soaring trajectory of online sales. In the 12 months to June the sector soared 32 per cent – or $24.9 billion – compared to 13.6 per cent in January 2020*. *(Colliers Q2 Industrial and Logistics Update August 2020). This resilience has led to some significant deals for automated logistics facilities forging ahead. These deals include:

• Woolworths pre-committing to a total of 75,300 sqm across two distribution centres (DCs) located in Moorebank Logistics Park, immediately adjacent to the Moorebank Intermodal Terminal, in Sydney’s south-west. Both centres are on an initial 20-year term with 6 x 5-year options. Woolworths is also putting $560 million into its first automated DC in Victoria.

• Coles pre-committing to 60,000 sqm across two DCs in Sydney (Horsley Drive, Wetherill Park) and Melbourne (Midwest Logistics Hub, Truganina), due for completion in about four years’ time. Thanks to Coles’ strategic partnership with Ocado, a British online food retailer morphing into global digital tech, Coles will acquire smart platform technology to streamline online grocery shopping, doubling home-delivery capacity and boosting online sales by around $1 billion. The new DCs will have up to 1000 robots moving orders.

• Drakes supermarkets is outlaying $125 million for an automated DC in Queensland in which it will have the capacity to handle 23,000 product lines.

• eStore Logistics which caters to such retailers as Kogan.com will almost double its order-handling capability from 105,000 to 200,000 per day when its two automated DCs in Victoria are completed. The company has further expansion plans.

• Amazon pre-committing to a $500 million 20-year lease to create an automated DC in Oakdale West Estate at Kemps Creek in Western Sydney. On completion in late 2021, the facility will operate across 200,000 sqm over four levels. Amazon Australia also recently leased about 16,300 sqm within Goodman’s Port Industry Park in Lytton, Brisbane.

• Electronic’s retailer Jaycar will spend around $80 million building a 21,600 sqm automated DC in NSW.

Among the challenges for retailers pursuing the automated DC path is choosing the best gizmos to allow for the most profits. The key question when choosing automated technologies for your DC, points out McKinsey & Company in its 2019 report Automation in logistics: Big opportunity, bigger uncertainty is simple: “Which ones will take off to yield the greatest return on investment?”. No one wants to buy tech for their warehouse that will soon be rendered obsolete. Such a move would spell trouble for investors and occupiers alike.

Gizmos galore

But with McKinsey unearthing at least 50 new technologies to automate parts of the supply chain at the time of its report, and dozens more having emerged since then, making those choices is not straight forward. In existence nowadays is everything from automated guided vehicles (AGVs) which move cases and pallets, to drones for aiding inventory management and ‘exoskeletons’ that augment human motion with mechanical power through gloves or ‘legs’ (!). One solution, suggests McKinsey & Company, would be for contract logistics companies to meet the needs of their customers by becoming true partners “offering expertise, better rates of procurement and deep operating knowledge”. With well over 20 logistics activities at least able to be aided by mechanisation, and innovations constantly upping the ante, it only makes sense for suppliers to offer such guidance, McKinsey suggests.

Other issues exist on the legal and financial fronts. As automated logistics solutions are relatively new in Australia, many of the providers are international. Among the challenges this poses notes Corrs Chambers Westgarth partner Jane Hider are a supplier possibly not being familiar with Australian or common law legal concepts, or wanting to use its own trading bank as opposed to an Australian institution in regards to performance security and bonds. Then there are jurisdictional issues facing the law applying to contractual arrangements.

What is certain however is that such issues will eventually be ironed out, as automated warehousing is here to stay. “If you squint hard enough an entirely new logistics paradigm is coming into view,” states McKinsey & Company report. “Many operations could be automated by 2030 as artificial intelligence takes over the many repetitive activities that logistics companies perform. We expect to see fully automated high-rack warehouses with autonomous vehicles navigating the aisles. Managers with augmented-reality goggles will be able to ‘see’ the entire operation, helping them coordinate both people and robots….3D printers will crank out spare parts made to order.”

A brave new world indeed.