Supply Chain Effect and KNAPP Nordics recently held a roundtable discussion on the rapid development and growth in warehouse automation, with a particular focus on retail/e-commerce, trends, challenges, and visions for the coming years. Here is a summary of that highly interesting discussion.
Participants in the discussion were Anders Bartholin, Langebæk; Anders Björklund, SAP; Christian Heimer, FTZ; Joakim Kembro of Lund University, Norbert Stepnowski of the Ingka Group and IKEA, Mikael Holmqvist of KNAPP Nordics, and Stefan Karlöf of SCE, who moderated the discussions.
– Warehouses are increasingly beginning to resemble production facilities in terms of how they are planned, equipped, and operated. “In our research, we see that warehouse processes are becoming more like production lines, where people with that type of experience and expertise are also being recruited,” says Joakim Kembro, an associate professor and logistics researcher at the School of Engineering at Lund University. Joakim conducts research on warehouse automation and has just completed the research project; The Impact of Automation on Retail Profitability, Competitiveness, and Sustainability, funded by the Trade Council.
Norbert Stepnowski of the Ingka Group, IKEA, sees a similar trend and emphasizes that there are opportunities today to carry less inventory and operate more leanly by using AI and machine learning in the supply chain.
– With the help of AI and machine learning, end-to-end production and planning can be optimized, thereby reducing the need for inventory. There is a shift away from the traditional way of manufacturing, building inventory, distributing, and selling toward becoming as lean as possible, based on an end-to-end perspective on the supply chain, explains Norbert, who is Deputy Customer Fulfillment Manager at Ingka Group, IKEA.
Norbert, who began his career as a warehouse worker at IKEA, explains that the company has had automation on its agenda for quite some time, but primarily for the very large distribution centers. In recent years, however, extensive automation has also begun in IKEA stores, with the goal of building a dense and flexible omnichannel network. In practice, this means that the stores are becoming a combination of a retail location and an automated warehouse hub for the growing e-commerce flows.
“With e-commerce having grown from 7 to 25 percent over the past four years, our automation needs have changed. “We need to get closer to our customers to deliver cost-effectively and become more sustainable,” says Norbert, emphasizing that the automation efforts are now focused on piece-picking, which is a major challenge in a company with an extremely wide variety of products.
More Focus on Smart Software
Just as important as physical automation equipment—such as robots, drones, and autonomous vehicles, among others—is, of course, various software. Software is therefore a major area of development for all automation companies, as is the integration of their own software solutions with other systems and solutions.
“We’ve been developing warehouse solutions for more than 30 years, and automation has always been part of our strategy. These days, we’re also incorporating AI and ML into our solutions, in part to automate an increasing number of decisions,” says Anders Björklund, Head of Digital Supply Chain at SAP. He emphasizes that SAP’s own WMS, Extended Warehouse Management, is one of the market-leading solutions, which also integrates well with automation partners such as Knapp, Swisslog, and other leading players.
Customer-Driven Automation
A large part of today’s logistics automation is driven precisely by increased customer demands and the need for speed. Here, the participants see a risk that the focus on shortening lead times and speed is too strong and may have negative consequences for sustainability efforts. Furthermore, the actual importance of fast delivery varies greatly across different industries and customer segments.
– Much of the automation boom is customer-driven, but in many cases, customers’ need for speed is exaggerated. Having something delivered within an hour is rarely what the customer actually wants; the risk is that companies go too far in their efforts to provide customer service that isn’t actually in demand,” says Anders Bartholin, a partner at the consulting firm Langebæk. Christian Heimer, Director of Logistics and Purchasing at the Danish company FTZ Autodele & Værktøj, agrees.
“There is definitely a risk that the need for speed is being driven without a genuine customer need. At FTZ, we’re still doing most things manually for now, but we’re building up our knowledge of automation, developing the business case, and planning—together with our sister companies in the Meko Group,” says Christian, continuing:
– We are now introducing some automation at our central distribution center, and the next natural step is to explore how we could automate local distribution centers and micro-fulfillment centers to better manage the last-mile flow. The challenge isn’t automation itself, but rather automating in a profitable and sustainable way—which is what we’re currently exploring.
Proximity to customers
The discussion revolves in part around the centralization versus decentralization of warehouses and distribution centers, and the participants note that the pendulum swings in different directions over time. Right now, all of the major Swedish grocery chains have built massive, highly automated central warehouses near Stockholm and the Mälardalen region.
“They want to take advantage of economies of scale, optimize their operations, and recognize that costs will spiral out of control if they decentralize,” says Anders Bartholin.
Mikael Holmqvist, CEO of KNAPP Nordic, partially questions that strategy and explains that the KNAPP Group has delivered about 50 so-called micro-fulfillment centers (MFCs) worldwide —that is, small, local, automated warehouses located close to customers—and he asks rhetorically why none have been built in Sweden yet.
– Instead, giant, centralized warehouses are being built near Stockholm. I see great potential here in using existing facilities to get closer to customers, especially in e-commerce for groceries, where there’s a need for same-day delivery, and where it’s crucial to make a seamless combination of in-store shopping, home delivery, and curbside pickup work.
At the national, regional, and local levels
Anders Bartholin believes that micro-fulfillment centers could be too inflexible and costly. But Norbert interjects that one must think long-term and expect a fairly long payback period for that type of investment, and he notes that multiple different warehousing and picking solutions are often needed.
– For us, it’s not a matter of one or the other, but rather of both centralization and decentralization. The key here is to find the best possible solution. It’s about striking the right balance and not overinvesting. We are therefore using our existing infrastructure and developing it into a combination of traditional brick-and-mortar retail and modern, sustainable warehousing and delivery solutions. The goal is to offer our customers affordable, accessible, and sustainable delivery.
Joakim believes that the pendulum is swinging back toward greater decentralization, not least because of the growing focus on sustainability.
– I think the circular economy will drive this forward. It will become too expensive to ship goods back and forth from central warehouses located far away. I envision more micro-fulfillment warehouses and similar solutions that take advantage of existing store structures and make smart use of available physical assets.
”The ”Follow John’ mentality”
Joakim explains that companies that invested early in warehouse automation often became locked into certain solutions, and his research shows that this has led to a general sense of caution in today’s market.
– The companies we’ve interviewed want to be innovative, but not necessarily when it comes to warehouse automation. They want solutions that offer maximum flexibility so they don’t get locked into a particular approach. That’s why there’s a tendency toward a “follow-the-leader” mentality, where companies copy a flexible, proven solution out of fear of betting on the wrong horse.
Increased Skills Needs
A large part of the discussion focused on the need for additional expertise. This includes, on the one hand, the need for more expertise in warehouse automation, the technology itself, and how to use it most effectively; and, on the other hand, a general increase in expertise regarding the opportunities that automation creates for greater efficiency, customer value, and enhanced competitiveness. Everyone agrees that there is a lack of a common language between those who work in logistics and the supply chain and those who make decisions at the management and board levels.
“When we started our business in Langebæk, we talked to warehouse managers and logistics managers. Now the solutions are much larger and more expensive, so we need to get the CEO and the board on board. This requires a completely different kind of dialogue, one that takes a broader, network-based perspective on investments. This has clearly changed over the past twenty years,” says Anders Bartholin.
Norbert emphasizes the importance of implementing warehouse automation in a responsible manner, with a focus on people and the human aspect of automation.
– In a rapidly changing job market, it is important to ensure that manual jobs in increasingly automated warehouse environments remain meaningful and that employees are given ample opportunities for skill development and professional growth.
“The Zero-Touch Warehouse”
The discussion concluded with a look into the future. The participants shared a vision of a future in which we will see more automated warehouses and a greater variety of warehouse types, in order to achieve better customer service, efficiency, and sustainability.
– Our vision for the future is summed up in the phrase “The zero-touch warehouse,” where most tasks are performed by robots and where the flow of goods in the warehouse is more or less fully automated. “We’re also focusing heavily on using data to optimize warehouse operations and get an entire network of different technologies and other assets to work together as efficiently as possible as an integrated system,” says Mikael, adding that this essentially fully automated workflow needs to leverage relevant data, optimize operations, and ensure that the network of various technologies and warehouses works together as effectively as possible.
“Yes, regardless of whether you automate or not, sooner or later you’ll need to add warehouse capacity, and you’ll need to do so within interconnected delivery networks comprising multiple decentralized units that are optimized using software.” “To a large extent, I believe this will be driven by demands for sustainability and circularity,” says Joakim.
End-to-End Visibility and Control
Anders Björklund of SAP observes that the market and his customers are increasingly focusing on digital end-to-end supply chain solutions, in which the warehouse is one component of an optimized, data-driven supply flow.
– Warehouse automation is increasingly becoming a component of an overall workflow, where we’re seeing more advanced technologies being used to achieve end-to-end visibility and control. Companies want control over their products at multiple levels and throughout their entire lifecycle—including through the use of digital twins and digital threads—all the way until the product reaches the end of its useful life and re-enters a circular flow.
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The automation company KNAPP is a major global player headquartered in Graz, Austria. The company was founded in 1952 by Günter Knapp and is still owned by the Knapp family. In recent years, the group has grown rapidly and currently employs approximately 7,000 people, of whom about 2,000 are development engineers. The company invests 800 million kronor annually in product development.
