Five technologies shaping supply chain operations today

1. AI and big data. AI is not new to supply chain. For more than a decade, AI has been used to manage supply chains for workforce planning, dynamic inventory routing, network design, demand planning and simulation and warehouse design. Taken together, these tools are primarily focused on growing revenues and managing transportation and labor spend.
2. Basic IT and data analytics. The integration of warehouse management systems (WMS), order management systems (OMS), transportation management systems (TMS), data visualization, integration platform as a service (iPaaS), and advanced analytics profoundly improved visibility and operational efficiency through dynamic inventory control, streamlined fulfillment processes and agile space management. While leading companies have employed these capabilities for years, adoption is now expanding to small- and medium-sized enterprises.
3. Legacy automation. Warehouse operations employ several types of equipment—such as high-rise racking systems (over 40 feet), forklifts and wire-guided vehicles, and hand-held devices (e.g., scanners)—to enhance efficiency, increase throughput, and control costs. While these have been widely adopted, the pace of change is slowing.
4. Autonomous mobile robots (AMRs) transport goods in logistics facilities and require modest infrastructure. AMRs are modular and can be introduced in any number, allowing for small installations and an ability to scale needed. They increase pick rates, safety, and employee morale and job satisfaction. Payback periods range from two to five years; ROIs of 30% and more are possible.   
   
   Our analysis finds that half of logistics facilities are likely to have AMRs over time. Adoption is facilitated partly by AMRs’ ability to integrate with existing operations. Consequently, there are few implications for warehouse design or construction requirements beyond basic power and floor-flatness. Space requirements are unchanged in most applications, with ROIs justified through increased labor productivity. Some AMR installations require more space for charging and integration points, and add to the operational power load.
5. Automated sortation/retrieval (AS/RS) can result in bigger efficiency gains, concentrated in the storage component of customer operations, but with bigger trade-offs: adoption rates for AS/RS are depressed by the long financial planning horizon and limited short-term operational flexibility. AS/RS increase pick rates and allow for greater storage density of sortable inventory. AS/RS are best applied to high velocity SKUs and complemented by other storage and retrieval equipment for lower velocity SKUs. Installations can cost $25- 50M or more. Payback periods can be 5-10 years with ROIs in the mid-teens. AS/RS tends to be installed in new facilities with ample access to power.

We expect 10-20% AS/RS adoption and a 3-5% industry-wide demand reduction from AS/RS over a 10-15-year horizon, based on the following:

• Only 35-50% of customers have inventories suitable for AS/RS (e.g., sortable versus non-sortable goods).
• Only 25-50% of these customers are within suitable industries (e.g., CPG versus hardware).
• AS/RS efficiency gains are highly concentrated with 33- 50% savings for just storage.
• As a result, AS/RS adoption leads to 10-20% logistics real estate space savings across a retailer’s distribution network.

However, changing business requirements, such as SKU mix and service times, could counter these gains.

Conclusion

Logistics real estate use in supply chains will continue to rise. Retailers will need to increase their use of logistics facility space to compete and win in the future of retail, supporting increased levels of e-commerce, omni-channel fulfillment, product variety and resilience.

• Advances in AI continue the evolutionary path of data analytics within supply chains and will support increased levels of service and resilience within supply chains.
• Automation adoption, led by AMRs, will see a meaningful expansion, increasing role quality, employee productivity, and compensation. Up to 50% of logistics operations could include AMRs over the next decade.
• AS/RS can reduce logistics real estate space needs, however we expect adoption will have a low ceiling of 10-20% reached gradually over the next 10-15 years.

Forward-Looking Statements

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About Prologis Research

Prologis’ Research department studies fundamental and investment trends and Prologis’ customers’ needs to assist in identifying opportunities and avoiding risk across four continents. The team contributes to investment decisions and long-term strategic initiatives, in addition to publishing white papers and other research reports. Prologis publishes research on the market dynamics impacting Prologis’ customers’ businesses, including global supply chain issues and developments in the logistics and real estate industries. Prologis’ dedicated research team works collaboratively with all company departments to help guide Prologis’ market entry, expansion, acquisition and development strategies.

About Prologis

Prologis, Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. As of June 30, 2023, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 1.2 billion square feet (111 million square meters) in 19 countries. Prologis leases modern logistics facilities to a diverse base of approximately 6,700 customers principally across two major categories: business-to-business and retail/online fulfillment.