With sales surging, online retailer Zappos.com needed an order picking technology that could be up and running quickly. The answer? A system that uses robots to bring goods to order pickers.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
Ask its customers what type of company Zappos.com is, and they'll likely tell you it's an online retailer of shoes—and maybe accessories and apparel. But Zappos itself would tell you something different. As it explains on its Web site, Zappos considers itself to be "a service company that happens to sell shoes, handbags, and anything and everything."
What Zappos means by "service" is what supply chain professionals would call order fulfillment. In its online profile, the retailer attributes its spectacular success over the past nine years to a commitment to speedy order delivery and a guarantee of product availability (the company says it will not offer a product for sale unless it's physically present in its warehouse). It's hard to argue with the results. Since its founding in 1999, Zappos.com has recorded double-digit—sometimes even triple digit—sales increases every year, and it's looking forward to more of the same. The privately held company expects sales to surpass $1 billion this year, which would mean growth of about 20 percent over 2007 figures.
As gratifying as that sales growth may be to, say, management and accounting, it presents enormous challenges for the distribution centers that must fill all those orders. The company stocks more than 3 million items across 1,400 brands, and runs what could only be described as a high-volume shipping operation. Craig Adkins, vice president of fulfillment operations for Zappos.com, says the retailer moves about 35,000 units daily through its two distribution centers in Shepherdsville, Ky., which include its original 280,000-square-foot building and a new 832,000-square-foot facility. Peak season volumes can hit 60,000 units daily, all shipped directly to consumers. Nearly all items require split-case picks.
In order to keep up with demand, Zappos continues to expand its fulfillment capabilities. But when it comes to installing new equipment, it has to proceed with caution— its very public commitment to prompt order turnaround means there's little margin for error. So it's no surprise that, when it went to choose a fulfillment technology earlier this year, Zappos was attracted to a system that promised rapid deployment.
The company found what it wanted in a technology developed by Woburn, Mass.-based Kiva Systems that relies on robots to move products stored on portable shelves to order pickers. Because there are no racks or conveyors to install (all of its hardware components are mobile), the Kiva system offered the prospect of a quick installation. "One of the challenges of growing fast is that we need a kind of just-in-time installation, which Kiva offers," says Adkins.
In June, the company announced that it had completed installation of a Kiva Mobile Fulfillment System in one quadrant of its new 832,000-square-foot DC. True to its billing, the system proved simple to deploy. The complete installation took about four months from the time the two companies signed a contract until the system was up and running.
A good fit
When it came to purchasing the new technology, Zappos.com started small: Its initial order with Kiva was for 70 robots. Zappos could have used more, says Adkins, but the company wanted to test the system first to validate its assumptions about how it would perform and ensure that its economic analysis was correct.
The actual installation began shortly after the contract was signed—something Kiva was able to accomplish because it already had the groundwork in place. Early in the negotiation process, Kiva asks potential customers for detailed shipping information. "We create an exact simulation of the warehouse environment, including orders and volume," says J.D. Harris, vice president of professional services for Kiva and the on-site manager for Zappos.com's installation.
While Kiva assembled the robots at its Woburn plant, the company sent a team to the Zappos.com site to prepare the floor, installing two-dimensional barcode stickers that the robots use for navigation. Once the configuration work was completed, Kiva delivered the robots, which it terms the "drive units," and the shelving units, or "pods," and the software was configured and tested.
Adkins reports the installation progressed rapidly once the robots, which can handle loads of up to 3,000 pounds, were delivered. "When you take them off the truck and turn them on, they start to communicate," he says. "You can tell them to go out in the grid and start driving around.
"Soon after the bots arrived, we started testing those and bringing in the shelving and deploying that," he continues. "Then the stations were built and assembled; then we tested communications between the software [applications]."
The Kiva system currently handles about 15 percent of the overall volume shipped from the DC, and Adkins expects to buy additional units. "In subsequent years, as we grow," he says, "we will order more." Adding on will be easy, he says, because the Kiva system is highly scaleable."You don't have to buy entire systems," he explains. "You can buy one robot and one shelf. Then it scales with the business. That's a lot of capital cost avoidance."
Fast and flexible
Speedy installation and scaleability are just two of the Kiva system's advantages, says Adkins. Zappos has also found it to be extremely energy efficient. Because the system uses robots, not humans, to retrieve inventory and bring it to the picking stations, there's no need to keep the lights on in the areas where goods are stored. And unlike powered conveyors, it does not use motors that must operate constantly. "The energy savings are pretty huge," he says.
Adkins expects to see other savings opportunities as well. He reports that Zappos' analysis indicates that using the Kiva system should result in about a 40percent reduction in labor costs. He explains that the savings will come from the system's ability to receive and put away simultaneously on the inbound side and to handle picking, sorting, and packing simultaneously on the outbound side. Another labor benefit, according to Adkins: Training is simple. "The learning curve to use the picking stations is very short," he reports. "We can take anybody and train them in 15 to 30 minutes."
Adkins adds that another key advantage of the Kiva system is its ease of reconfiguration. Changing the robots' paths—and thus, the product flow— requires little more than moving the barcode stickers on the DC floor that the robots use for navigation.
Similarly, it will be a simple matter for Zappos to adjust its operation as its product mix changes. Right now, 90 percent of Zappos' business is shoes, Adkins says, but the company expects the balance to shift more to apparel in the coming years. As that happens, it can simply change the items stored on the shelving pods without affecting the way the system works.
And finally, there's the portability advantage. In Adkins' eyes, one of the biggest benefits of all is the ability to move the entire system if need be. "If we have to move," he says, "it is easy to pick up and go."
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."