FOR IMMEDIATE RELEASE: Nov. 1, 2023
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How the COVID-19 pandemic affected warehouse technology
A predicted boom in warehouse automation did not materialize, according to new report
Berkeley, CA–An anticipated across-the-board boom in warehouse automation did not materialize, according to a new report released today by the UC Berkeley Labor Center. Pandemic-Related Trends in Warehouse Technology Adoption found that while the pandemic led to an upsurge in online ordering and the use of third-party logistic firms (3PLs), those firms continued to face disincentives for investing in new technology. Specifically, short-term contracts, business churn, and low profit margins meant that many firms did not adopt automation.
The report, by Beth Gutelius and Nik Theodore of the Center for Urban Economic Development at the University of Illinois Chicago, finds that while the pandemic led to speculation about a widespread increase in automation, firms instead managed the operational challenges wrought by the pandemic with labor strategies, and the adoption of new technology in U.S. warehouses remains incremental and uneven. The researchers note that in-house warehouses operated by larger, more established firms are the most likely to invest in automation. Workers in these facilities are likely to experience work speed-ups and sharply increased quotas putting them at increased risk for injury and health complications.
Meanwhile, the report found that 3PL facilities that are devoted to a single customer and have longer-term contracts (“dedicated” facilities) are also likely to implement new technology, while multi-client contractors in low-volume facilities are the least likely to invest in new technologies. Workers at subcontracted facilities are less affected by technological changes and more likely to be hired through temp agencies.
“As the pandemic subsides, we may see some increase in new technology investments, but we expect that it will continue to be quite uneven, and slower for 3PLs, given the risk structure in the industry” said author Beth Gutelius. She added that difficulty hiring warehouse workers was also likely to continue.
Among the report’s other findings:
- E-commerce warehouses require more workers than traditional warehouses, which increases labor demand and puts upward pressure on wage rates across the industry. Warehouses now spend more on labor than ever.
- Many warehouses are operating at or near capacity, and vacancy rates are low.
- Supply chain and labor market disruptions caused by COVID-19 increased interest in the adoption of new technologies in warehouses; the pandemic accelerated preexisting dynamics driving technology adoption in warehousing.
- Despite interest in new technologies, warehouse operators focused on immediate operational challenges and largely relied on labor strategies to deal with pandemic-related uncertainty rather than making major investments in technology.
- Where they did focus on technology during the pandemic, warehouse operators examined and optimized technologies already in place–especially software systems–and made modest investments in scalable technologies.
Gutelius and Theodore believe that the impacts of the COVID-19 pandemic on the warehouse and logistics industry will evolve and continue to generate interest. The new report is a follow-up to a 2019 report, The Future of Warehouse Work: Technological Change in the U.S. Logistics Industry. The current report, Pandemic-Related Trends in Warehouse Technology Adoption, was funded by the Alfred P. Sloan Foundation.
The UC Berkeley Labor Center conducts research and education on issues related to labor and employment.