Supermarkets begin switch to automated workforces

Coles and Woolworths have announced new “electronic workforces”.

Powerful new automation technologies, such as machine learning, artificial intelligence and advanced robotics, are beginning to transform the Australian economy and have now spread to the $3 billion online grocery market.

This week, Coles have announced they will be launching a new “electronic workforce” by 2023, while Woolworths have begun first tests of their new automated warehouse, leaving experts concerned that a trend in advancing technology may cost Australians over five million jobs.

COLES MOVES TO AUTOMATION

In Australia, online grocery sales are expected to hit $3.3 billion this year, and is continuing to grow.

Looking to capitalise on this growth, Coles has announced plans this week to build new automated warehouses (valued at close to $1 billion), overseen by an electronic robot workforce.

The company has struck a deal with British online supermarket group Ocado to run its website and distribution warehouses by 2023, which will double home-delivery capacity.

Ocado was founded in 2000 by three former Goldman Sachs bankers and now has a 20 per cent share of the multi-billion dollar online grocery market.

The organisation, a food retailer which is transforming into a global digital technology company, will install and maintain equipment and provide Coles with its smart platform technology, including a new grocery system, automated single-pick fulfillment technology and home-delivery solutions.

Under the agreement, after more than 18 months of negotiations, Coles have plans to launch a new website and build two highly automated “fulfillment centers” in Melbourne and Sydney, replacing five existing distribution outlets.

The facilities will each have approximately 1000 robots moving orders around and each will be able to handle products worth between $500 million and $750 million a year:

Both warehouses will come at a cost of as much as $150 million, with another $140 million set aside for ‘operational costs’, which may include redundancy packages.

The move is line with other similar announcements made this year by the supermarket giant, including partnering with Uber to allow customers to order “ready-to-eat”, “ready-to-heat” and “grab and go” options from Coles outlets.

Coles are expected to start operating in four years, with the move set to begin a long-term trend of automation transformation, according to Coles Managing Director, Steven Cain:

“We’re confident this will be a long-term relationship that’s rewarding for both companies.”

Steven expects the partnership with Ocado to boost Coles’ online sales by about $1 billion.

Despite the moves being met with praise for innovation this week, Coles’ largest competitor, Woolworths, is already leading the charge when it comes to the great automation shift.

WOOLWORTHS READY TO LAUNCH

Woolworths has tested the beginning stages of their new automated distribution warehouse this week, after completion of the facility in September 2018.

Woolworths was first to announce their transition to automation in April 2018, revealing a new $215 million fully automated facility that will be “the biggest and most advanced automated distribution centre in the southern hemisphere.”

The facility, tested or the first time this week on a 15.9-hectare site 35 kilometres south-east of the Melbourne CBD, promises to deliver in cost, savings and productivity for customers and distributors across the country:

The warehouse is owned by Charter Hall and leased to Woolworths for 20 years.

The organisation released a promotional video to demonstrate the extent of processes achievable in an automated setting, including multi-storey racking systems, robotic high-speed conveyor and sorting systems, and more.

The facility, will stock more products than Brisbane and Sydney distribution centres combined, and will supply most Woolworths stores in Victoria.

Woolworths Distribution Design Centre Manager, Michael Lucas, spoke on the changes:

“It is the largest single investment in infrastructure in Woolworths’ history and it is expected to deliver significant safety, efficiency and productivity.”

In a recent report, Woolworths said that due to the scale and complexity of the new systems, the company might need to test the facility for 18 months before it goes live.

Woolworths Chairman Gordon Cairns has issued a veiled warning to food and grocery retailers such as Amazon, who are
also expanding their markets in the automation field with robots replacing staff members at unprecedented rates.

AUTOMATED WORKFORCES

The new moves by Australian supermarket giants signify an increasing trend in a shift to automated workforces, which many experts warn will have significant implications for the current job market.

An analysis from the Committee of Economic Development of Australia warns more than five million jobs could disappear in the next 10 to 15 years because of technological advancements.

Intelligent automation, the combination of artificial intelligence and automation, is already helping companies transcend conventional performance tradeoffs to achieve unprecedented levels of efficiency and quality.

Applications range from from collecting, analyzing and making decisions about textual information, to guiding autonomous vehicles and advanced robots.

The new robots, backed by new JDA Software “replenishment and warehouse management systems”, take into account not only how to build the pallets in the safest and most stable way – based on carton dimensions, weight and crushability – but the characteristics of each supermarket.

It was predicted in 2015 that supermarket distribution centres will become far more dynamic with the introduction of automation in the coming years, making them far more equipped to handle processes and manage stock.

It was also forecasted that industrial warehouses across main cities will be as much as 200,000 square metres in size, due to increasing populations across the country.

As a result, supermarket chains have been incrementally researching, trialling and now transitioning to intelligent systems that have the efficiency to handle increased demand, while also cutting associated costs for labour and staffing.

The first step towards this shift was the introduction of ‘self-service’ at checkouts across the country, with both  Coles and Woolworths announcing the change almost a decade ago.

Now, both companies are doubling-down on the increased shift to digital technologies.

Automation and AI will be disruptive, just as other technology adoptions have been disruptive in the past, and while some jobs will be lost and others created, all jobs will certainly change.

The extent of the anticipated change is neither unprecedented nor unmanageable, and the benefits will be lasting.

As automation technologies integrate into the workforce, the mix of skills required in all jobs will slowly change, leaving those who are unable to adapt left to perish as we enter the digital era.

Policy makers, business leaders and educational institutions will need to respond to a range of implications of automation and AI, including rising unemployment and income inequality, growing disparities between cities and rural communities, shifts in the competitiveness of export-oriented sectors, and redeploying a large number of displaced workers.

Supermarkets are just the beginning of this new phase.