Robots, AR and Algorithms: Solving the Delivery Challenge 

Online demand pushes logistics firms to innovate

Author: Andria Cheng

December 1, 2017

As online sales rise to yet another record this holiday season, shipping and logistics companies are being put to the test once again. To meet the demand for fast, cheap and consumer-centric deliveries, the companies are investing in tech and in people.  

Take DHL, which calls itself the world’s largest logistics company. On Thursday it forecast its holiday volume growth will rise between 15% and 40% across its four logistics units in the US. It expects to employ about 6,000 additional seasonal workers at those North America units to help support the increased demand.

UPS has said it expects to ship more than 750 million packages globally in the 25 days between Thanksgiving and New Year’s Eve, up about 5% from last year’s holiday peak shipping season volume. UPS also said it plans to employ 95,000 temporary seasonal workers, including drivers, delivery helpers who ride with drivers and package sorters. FedEx said it plans to employ 50,000 seasonal hires on top of a regular workforce of more than 400,000.

However, the increased hiring is only part of the picture. Behind the scenes, these companies are trying to figure out how to use technology to speed deliveries and update the way they ship products to meet the demands of consumers who want delivery on their terms.

A robot demonstration by DHL. Photo by Andria Cheng.

DHL, for instance, has been testing robots that roam warehouses to pick up orders.  In part to help train employees and increase order picking accuracy, the company is also using augmented-reality vision-picking goggle technologies. The goggles, which allow employees to keep their hands free, guide them to pick the right orders and drop them in the right baskets.

This year DHL also designed in-house tools using machine learning and algorithms that can tell warehouse employees the shortest distance and best routes they can travel to pick up customer orders. Another tool involves figuring out the best shipping box size that’s needed to cluster orders so there won’t be waste.

“We used to take 48 hours to fill an order and now we take hours,” said Jim Gehr, DHL Supply Chain President, Retail, in an interview. “Automation has been around for a long time, but the problem is traditional automation is fixed. These robots we are looking at are very fluid, dynamic and changing….The complexity of filling millions of individual unit orders—one to three units per order, is a completely different experience than shipping full pallets and cases.”

UPS, meanwhile, is using “advanced package scanning and sortation technology that increases processing speed, accuracy and efficiency” and “enables package routing flexibility.” FedEx is using sensor technologies that will help guarantee “maximum use of trailer space” during the loading process.

While major online retailers led by Amazon and Walmart also rank among logistics and delivery leaders and are upping their own game on those fronts, for most other retailers, the logistics and package-shipping companies play a crucial role in helping them navigate  ecommerce. According to an internal DHL study and survey of its customers, while 45% of its customers expect an increase in online sales of at least 10% this holiday and 47% identify fulfilling shipment orders timely as their biggest challenge, 84% don’t plan to hire temporary staff for the holidays.

Back end technology isn’t the only area the logistics companies are changing. As consumers increasingly demand same-day and other fast delivery, and want their orders to be shipped at the time and location of their choice and convenience, UPS this year added its own lockers in more than 300 UPS “access points” in cities including New York, Chicago and Dallas so consumers can pick up orders in alternative locations such as delis, grocery stores, dry cleaners and florists. UPS also introduced Saturday Ground services this year, which has been expanded to more than 4,600 cities and towns.

FedEx and drugstore chain Walgreen Co. said in November FedEx package pick up and drop-off services have been expanded to more than 7,500 Walgreen locations in all 50 US states.

“As online shopping grows, our customers are searching for flexible options,” said Raj Subramaniam, FedEx’s executive vice president, chief marketing and communications officer, in a statement at the time.

FedEx also has other pickup and drop-off locations in some Albertson’s and Kroger grocery stores.

DHL is testing same-day delivery services in New York, Chicago and Los Angeles and is also adding flexible pick up locations for customers and using technology to update shipment status the minute consumers click for purchases.

As the labor market tightens, the companies also have to up their game competing for talent. DHL’s Gehr, for instance, said it’s given employees more say in the hours they work, on top of also increasing their hourly wages.

“We are more flexible in the hours they work,” Gehr said in the interview. “We ask them ‘When do you want to work?’” In contrast, the message employees would have gotten in the past probably would have been this: “This is what we have available.”