Are capital and labor costs mutually exclusive when automating?

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Dive Brief:

  • Mobile bulk shopping startup Boxed automated its Union, NJ fulfillment center, replacing the jobs of roughly 100 staff, Fortune reported recently.
  • However, rather than lay off workers the company retrained them in operations and hired temporary staff. Fortune reports the company’s CEO chose to retain staff out of respect to his parents’ immigrant experience where minimum wage was all they earned. 
  • Experts predict that approximately 38% of U.S. jobs could be automated by 2030, not just in blue collar work but also in white collar workplaces. The cost-advantage of automation is often seen as directly tied to the labor costs saved, an additional cost Boxed had to accept when it chose to keep staff.

Dive Insight:

Automation within the supply chain is usually considered an industry boon, but a variety of areas exist in which a machine — no matter its intelligence — cannot fill the human void.

A recent Quartz report reveals Adidas robots can build the “perfect” athletic shoe but cannot perform a vital function: tying the laces, which is ironic, given the fine motor skills required for the function. In addition, the production capacity of automation remains below the German shoemaker’s need, supporting the idea automation will not fully replace labor needs just yet. 

However, there is little doubt the lack of capabilities are merely an engineering problem rather than a fundamental problem with automation. Businesses worldwide have long relied on automation, from assembly line sorting machines to the computer and now predictive analytics, but by and large skills have adapted. That’s why retraining initiatives like the one adopted by Boxed are important.

Another common concern over automation is the high capital investment required for automation, a problem that at least in the logistics and distribution space is holding back the adoption of new technology. A recent Supply Chain Digest survey suggests shippers and 3PLs often pass the buck to each other in terms of commitment to innovation, with shippers saying if they were to share any costs the contract length would have to be significantly extended, but few believing 3PLs would follow through with the promise.

Add to that the concern over labor costs and effectiveness of an automated facility, several factors appear to be holding the industry back despite the hype.

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