by Andrew White | August 31, 2017 | Comments Off on March of the Robots Changes Who Wins and Who Loses
I noted an interesting article in last weekend’s FT US print edition – titled. “March of the Robots Shakes Up Logistics Sector“. This was an in depth look at the impact on Amazon’s business and specifically its logistics capability with the impact of robots and increased automation. The source of the robot innovation stems from Amazon’s acquisition of Kiva in 2012. It seems Amazon now operates over 80,000 robots globally as a result. The narrative is quite interesting – in that warehouses increasingly have fewer and fewer human “pickers” running around the floor, and instead have robots moving inventory around towards the pickers. Its an impressive story (and graphic). But the really interesting part of the story concerns the charts in the article that explore the impacts on employment both at Amazon, warehouses in general, and the economy as a whole. The data suggests that innovation changes who wins and who loses.
Clearly Amazon seems to be winning more. The report suggests that their business is growing. They have more revenue, and more market share. The efficiency offered by the robots and automation have permitted Amazon to grow warehouse space (i.e. capacity) that has helped them grow their business. At the same time the overall warehouse employment for Amazon has also increased – and this is perhaps counter intuitive. This flies in the face of most discussions about automation. The point tends to rest safely on the idea that automation tends to lead to short-term disruption (e.g. losses of work) but over the medium to long-term, it leads to more work and jobs. The question over if the net is larger or smaller then tends to be the focus.
There are loses here. Amazon’s competitors may or may not lose out. If Amazon is growing, and the market is the same size, then competitors are losing. Competitors will only avoid losing if the overall market grows faster than Amazon grows. Along the same lines, local workers may also lose out. Those competitors that are losing market share to Amazon may close down their warehouses and logistics services thus letting workers go. So clearly there are potential for losers in a wider context as a result of automation. Of course, creative destruction if freed of regulation should drive the allocation of inefficient resources and the birth of new competitors to Amazon.
Who Win’s in the End?
The last part of the cycle is to look at the end customer who places an order and is now serviced by an automating industry, and also to look at the overall economy. The article doesn’t rally look at the consumer impact so we shall leave that for another day. The article does report that retail space continues to decline so there are more losers there that need to be counted. It is not clear that the net-net at the economy level is a positive. It certainly appears overall positive on the supply chain side, but there is no reporting on the level of declining retail employment as a result of Amazon’s and its automation efforts.
It certainly is an interesting article that touches on several complex issues being explored today due to the heightened focus on automation, robots and artificial intelligence. This topic will keep us engaged for quite some time.
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