Warehouse Automation to Support Circular Economy

What are some challenges prevailing in the logistics industry, and how are you mitigating them?

Challenges across the logistics industry change every year. Last year, for instance, inventories were reaching customers’ warehouses later than expected. That required a particularly rapid turnaround for products to reach end-customers on time during peak season. As a result, we focused on warehouse velocity and agility to satisfy consumer demand— which took place increasingly in the D2C channel. To dramatically improve velocity, we increased automation and robotics in our warehouses and put in more advanced technology to solve for the ecommerce channel share shift. Automation brings other benefits, for example in some solutions, automation has helped reduce our variable cost-per-unit by 60 percent and is helping to reduce wastage.

Given today’s inflationary environment, logistics leaders and their customers are more focused on driving down costs and creating more storage and inventory space. To pursue these goals, we are adding more efficient and effective technologies to our operations and using our customers’ resources smarter—notably their valuable inventory.

What are some technologies and tools that are aiding you in increasing revenue?

We use automation to drive the one thing customers crave: predictability. We drive cost out strategically, make costs less variable, which is attractive to customers given the current environment of high inflation and economic uncertainty. The technologies that we have available to us continue to improve and drive a higher ROIC. For example, this year we are deploying over 2,000 new collaborative robots across our sites, these robots are now being deployed across numerous verticals helping to create a more efficient and safer solution. Given the flexibility necessary to meet the widely varying needs of customers, we see the adoption of automation being led by modular technologies such as these collaborative robots. They are small and mobile—warehouses can easily add them when volumes increase during peak seasons and then redeploy some of them elsewhere as volumes return to normal—giving them significant advantages over heavier, fixed installations.

Reverse Logistics is a Great Way to reduce our Customers’ Environmental Footprint.

Controlling the hardware with software is perhaps more important. Our technologies have driven a precision rate of 99.9999 percent in one solution, ensuring that the right customers get the right products. This has been significantly helped by machine learning. Machine learning is going to further finetune automated processes and drive further benefits to GXO and our customers as it is deployed across more activities within the warehouse.

What practices do you follow to conserve the environment and sustainably deliver products?

Reverse logistics is a great way to reduce our customers’ environmental footprint. In ecommerce, an average of about 30 percent of goods is returned to sellers, and 25 percent of those returned goods go to landfills, which has a negative environmental impact. However, thanks to our expertise in reverse logistics, last year we helped our customers to resell 96 percent of returns—a tremendous improvement on their environmental impact. This great reduction in returns being sent to landfills also drove incremental revenue growth for our customers and positively impacted their gross profits and margins.

Our performance in the second quarter of 2022 was notable: Almost 40 percent of our new contracts opted for reverse logistics processes that include testing, repair, repackaging, storage and outbound shipments. For instance, a large reverse logistics site in North America has driven up revenues for our customer by making more products available to their consumers.

That’s at the heart of what we do; we drive efficiency and precision for the benefit of our customers, positively impacting their financials and reducing their impact on the environment. For our customers’ benefit and our own, we have also installed solar panels in many of our warehouses and deployed LED lighting, which has reduced electricity consumption by 70 percent at some sites.

Would you like to share some advice with your peers reading this article?

The logistics industry is going through significant change, driving new business use cases and creating good returns on investment by ensuring that technological innovation solves actual problems for our customers. It’s a very exciting time in logistics, with GXO continuing to lead the industry in innovative and productive solutions. And we would like to see even more innovative technologies to solve customer problems and improve sustainability.