A handful of warehouse robots helped American Eagle Outfitters Inc. cope with a flood of online orders during coronavirus lockdowns as consumers loaded digital shopping carts with hoodies, leggings and loungewear.
Now the company is stepping up its use of automation. The company is installing 26 more piece-picking robots at its main U.S. distribution centers, making it the latest company to deepen its logistics technology investments as the coronavirus pandemic upends sales channels and supply chains.
The kiosk-size units from robotics provider Kindred Systems Inc. use mechanical arms, computer vision and artificial intelligence to sort through piles of apparel. They provide steady labor to help workers organize orders and reduce crowding on the warehouse floor, where the company said one human can manage multiple robots instead of standing next to other associates.
“During non-Covid times, if demand grew by 50% I would go hire 300 more people,” said Shekar Natarajan, senior vice president of global inventory and supply chain logistics for American Eagle Outfitters, which said e-commerce sales for its American Eagle and Aerie brands shot up after stores closed in March.
Upheaval from the coronavirus pandemic is pushing more companies to consider automating distribution and fulfillment, as the consumer rush to online shopping and social distancing practices within warehouse operations add to the challenges in strained logistics networks. Although fulfillment operations still rely largely on human labor, companies have been incorporating more technology in recent years as they seek to boost output and handle swings in demand more efficiently.
Covid-19 is accelerating that shift.
More than half of warehouse operators responding to a recent survey by Honeywell Intelligrated, Honeywell International Inc.’s warehouse automation business, said they were more willing to invest in automation as a result of the pandemic. E-commerce companies showed the biggest shift, with 66% saying they were more willing to do so, followed by food and beverage companies and logistics providers, at 59% and 55%, respectively.
About half of the respondents who had invested in automation said it was helpful for the business during the pandemic, with many citing their ability to continue operating with fewer staff on-site as a benefit, according to the survey, which polled 434 U.S.-based professionals in April and May.
The pandemic has highlighted the importance of operating flexibility that some newer types of automation can provide, said Thomas Boykin, a leader of Deloitte’s supply-chain practice.
“The ability to scale up quickly or scale down without laying off workers or reconfiguring workers has become more important,” Mr. Boykin said.
About 39% of manufacturing and supply chain professionals said their organizations use robotics and automation, according to a survey by MHI, an industry group representing makers of material handling and logistics equipment and technology. Adoption is expected to reach 58% in the next one to two years, and 73% in the next three to five years, the survey found.
Technology providers say smaller companies previously on the sidelines are now making serious inquiries about automation, especially for lower-cost options such as collaborative robots that work alongside humans. Other businesses are looking into automated micro-fulfillment systems that fit in the back of stores or in small urban distribution centers to help grocers and retailers fill online orders more quickly.
The number of inbound sales calls to IAM Robotics Inc., a company in the Pittsburgh area that makes autonomous mobile robots, has more than doubled this year, said Chief Executive Tom Galluzzo.
“Our clients are saying, ‘We’ve underbuilt for buy online, pick up in store.’ It’s expanded the range of folks looking for automation,” Mr. Galluzzo said. “It’s not just Fortune 500 companies.”
Companies that already had logistics automation in place when the coronavirus pandemic hit are also ramping up technology investments.
A few years ago FreshDirect LLC, a New York-based online grocer serving regional markets in the Northeast, spent millions on a sprawling, highly automated distribution center in the Bronx with more than 640,000 square feet of usable space. Demand for FreshDirect’s home-delivery slots skyrocketed during the pandemic, particularly in suburban markets outside the company’s usual core base of urban customers.
Now the company plans to install micro-fulfillment technology from U.S.-Israeli robotics startup Fabric at a smaller facility outside Washington, D.C., so it can speed groceries to customers in that region in as little as two hours, augmenting its next-day delivery there.
“As we grow over time, particularly in the suburbs, we’re going to want to be as close to the customer as we can,” Chief Executive David McInerney said. “The velocity going through these micro-fulfillment centers will be a lot higher.”
Still, economic uncertainty has some businesses hitting the pause button on spending, including investment in automation.
The pandemic is expected to depress global industrial robot shipments this year, market-research firm Interact Analysis said in a recent report. Companies that delayed automation projects this year will likely advance those plans in 2021, the report said, although revenue and shipments for providers of collaborative robots is still expected to grow by double digits this year.
North Reading, Mass.-based equipment-maker Teradyne Inc. said the pandemic depressed second-quarter revenue in its industrial automation segment because of global manufacturing weakness. But subsidiaries specializing in mobile robots notched sales gains compared with the same period in 2019.
The company expects sales to pick up in the third quarter and grow by 20% to 35% over time, Chief Financial Officer Sanjay Mehta said in a July 22 earnings call.
“We’re seeing a lot of activity in this—plant managers and decision makers looking to harden their production lines and social distance,” he said.