Logistics robots to make 40% of sector's low skilled workers obsolete

19 July 2016 Consultancy.uk

The logistics industry across Europe is set to lose up to 40% of its low skilled workers due to the increasing cost effectiveness of robotic workers, a new report finds. Up to 1.5 million jobs are on the line, while supervisors, executives and shareholders stand to benefit from improved revenues at lower costs. Opening a stakeholder discussion about the social consequences of the technology is recommended by the report.

Questions related to the rise of automation, and its effect on labour, remain open. Recent analysis from Deloitte cites that up to a third of UK jobs will be lost, with similar effects across Europe in the coming decades. The technology is likely to massively increase productivity as people are partly or wholly replaced by machines. The first industrial revolution resulted in a large increase in productivity, but also a considerable loss of employment for lower skilled, and artisan workers. Following decades of growing inequality, mechanisms were put in place that ultimately supported the effects of the revolution to benefit both workers and capital holders. 

Today, another industrial scale revolution might already be underway as computers and AI (artificial intelligence) systems and technologies become cheaper and more and more efficient, competing for human positions. In manufacturing for instance, 25% of jobs in four primary sectors are projected to be replaced by robotic workers, while Robotic Process Automation (RPA) has already started to replace human beings, and is projected to do away with a large number of manual back-office functions in the years ahead.

A new study by Roland Berger, titled ‘Of Robots and Men – in logistics’, considers the effect of the rapidly falling price of robotic logistics support on human workers within the industry and within Europe.

Logistics robot price

Rise of the robots

Robots differ from more general automation technologies, long used within the automotive industry, due in part to their flexibility, versatility and reprogramability. Continued research and development of robotic systems over the past decades has seen their costs decrease substantially, down from hundreds of thousands for a system in 2010 to around $100,000 today – considering not merely base unit costs but also the wider ecosystem in which they operate, from project management to ordering the environment.

The cost threshold at which robotic solutions become viable – in most of Western Europe – is now €100,000-110,000 per unit: this level of investment generates a positive ROI in three years, thanks to a productivity gain of 20-30% in mature markets.

Human vs robot inflection point

Cost effectiveness

The rapidly decreasing cost of robotic systems, able to fill functions related to the logistics supply chain, while human labour continues to increase as GDP increases, means that the tipping point, at which a robot is more cost effective than a human being – all else being equal – is almost upon us. By 2020, robots are set to be considerably more cost effective than human labour.

The additional benefits of robots, while not being able to fulfil all roles as of yet, are relatively considerable. Robots are able to operate for considerably longer hours, perform tasks that are repetitive (which may harm humans) as well as lift heavier objects and work faster. The robotic solutions are projected to provide cost reductions of between 20-40%.

Low level jobs in logistics

Job losses

A comparison between the robotisation of the logistics and automotive industries shows that a little over 1.5 million direct jobs (40%) would be destroyed in the Eurozone in less than 15 years. The speeding-up of technological cycles would, according to the firm, more than likely mean that the transformation timeframe is reduced to ten years.

Automation in automotive industry

Social consequences

The consultancy considers the historic changes in the automotive industry, as a potential comparison for what is likely to happen within the logistic sector. Productivity, from automation, doubled over a period of 15 years. While workforces were cut by 50%, supervisor numbers have remained stable and executives have even increased in number by 45%. All in all, the average total payroll rose by approximately 35%. This suggests that the profits derived from the automation technology, generated from increased revenues (even at lower costs to consumers), shifted away from numerous low level workers into the salaries of a few higher level workers and shareholders. This shift may be one of the factors contributing to the growing income inequality in developed countries.

According to the researchers, “Decisions as to the pace and method used in "managing" the impact of robotisation will shortly have to be made. If this pace is too fast, the transition will have a disastrous social impact. If it is too slow, it will limit access to technology for players that are sufficiently large to support medium-term investment, which would stifle the potential for value and job creation linked to the robotic ecosystem as a whole.”