We have multidisciplinary risks associated with robots in logistics industry. This section of the report tries to briefly describes the risk.
Economic risks [1″,2″,3″,4″,5″,6]
Any company faces risk of stability when large capital expenditure (CAPEX) is required for a project. Operational expenditure (OPEX) may not be that higher, but given the nature of automation in logistics, small to medium sized companies may think twice to hire specialized skilled workers (section w). The large capital is associated with purchase of state-of-the-art hardware and software to run the hardware – robots to transport in this case. Hence, the amortization duration is unknown – there will be a time-lag where the return on investment (ROI) will start getting positive; coupled with uncertain achievement makes it even more risky to invest such large capital sums. Large conglomerates retain more buffer capacity in terms of financial loss, though small-to-medium sized companies may find themselves driven out of market.
Furthermore, need for in-house highly skilled professionals to operate & maintain these robots will further burden the limited resources, though acquiring these services from third-party companies maybe an option, but still not feasible. Added necessities like prevention against data theft and other cyber risks (section x) will further increase the OPEX. Supporting robotics to automate the logistics side of the value chain will also need investment in digitalization & networking side.
Time & method of investment
Another looming economic risk by logistics companies seeking to automate their last mile delivery system is the uncertainty of the right time to invest. Questions like when is the right time to invest in a technology (having the right blend of hardware and software)? Is it too late to adopt or are we too early? These questions are of grave interest to SMEs (small and medium-sized enterprises) in logistics sector. Companies may find themselves too late to invest as their competitors are already in process of transition to better serve their customers. SMEs in particular face this risk due to lack of expertise for these decisions. For those too early, will be either a fatal decision or a carefully planned internal revolution to better serve their customers.
Changing business model
A sudden change in business model as a result of rapid automation is highly likely to drop their revenue. Enterprises based on traditional models may fail to bring the required agility needed. Business that offer customized products (or solutions) may need to reiterate their product line; some assets maybe unattractive to customers or completely redundant. As a result, to avoid these potential losses, logistics industry is showing a slow pace to industry 4.0 and introducing fully autonomous robots in their business model –logistics companies find themselves unwilling to pay for such uncertain outcomes. In a nutshell”,
Logistics companies are highly likely to find themselves in an unescapable risk of replying on outsourced software or hardware providers. Some logistics companies may find impossible to escape as the knowledge and know-how remains with the external company. Oft-times it may be a viable solution but in a long run, over dependency is highly likely to eat logistics profit margins.
Ecological risks [8″,9″,10″,11]
Consumption emissions & pollution
Production of increased robots need large amount of rare earth metals. Increased energy consumption despite the fact of highly efficient robots, the overall energy utilization by the logistics companies will certainly bring about environmental concerns. Even clean energy at user’s end has a dirt start by fossil fuels at upstream energy sector.
Logistics by drones or autonomous vehicles will be prone to halt in case of energy outage. Hence, at macro most people fail to realize is that, with increased in robotics in transportation and logistics will significantly increase the overall global power consumption, putting excess burden on natural resources and emissions at upstream side of energy sector. Furthermore, irreplaceable spare parts in robotics will produce additional waste. Old redundant machinery even after recycling useable components pose a serious environmental concern. Replacing old with new will bring excess burden on natural habitat and environment at macro-level, since robots are non-biodegradable. Last yet most important, is use of highly customizable machinery by individual companies (“Lot size one”) in contrast to mass produced will make it impossible to be used again by another firm.
Social risks [12″,13″,14″,15, 16″,17]
• Job losses
Some lower jobs are unquestionably prone to vanish, especially those which involves least technical skills. Employees may find themselves unsuitable or perhaps mass layoffs. Job losses are highly likely to fall for the skilled workforce too. For example, automated land and air traffic control for autonomous delivery vehicles. Robotic quality assurance has already replaced manual quality checks. Employees who will not be able to adopt to these changes (in addition to learning new knowledge and acquiring new skill) will find themselves unwanted. Hence, job losses have serious social impact on society overall. Social impact of these job losses will be of greater impact than recent oil burst due to excess oil production in Canada or Middle East. Not only will it cause burden on governments, but can also lead to serious political crisis, if not attended to now.
• Organizational structure and leadership
Automation of will most certainly demand several changes from top to bottom of an organization, regardless of which industry. Logistics industry in particular is deemed to require a Chief Digital Officer (CDO). Generating a new position is not a major risk, however, transfer of power to the new head by exiting, re-allocation of resources to new department and R&D may put excess burden on net profit. For SMEs this might be a bug hurdle in implementation of automation in their value chain, as most are privately held, and senior executives like to retain their decision power. These types of changes are rather uncommon and might be a reason for the demise of many SMEs, since owners always have resistance. However, the logistics companies based on agile model have better chance of change management. Lack of communication between the IT department and traditional management is highly likely to cause delays in operational decisions. Rise of internal resistance is another risk companies should keep in mind when taking decision to go this path.
• Lack of qualified personnel
Companies that do not have access to training for their employees to operate the robots, either due to geography or internal rigidity by management or perhaps due to lack of resources can find themselves in difficult position. Outsourcing software engineers or even maintening a fleet of drones by third-party is expensive for both short & long term. SMEs are more endangered to brain drain because of lack of employees benefit relative to other gigantic companies like Amazon, Google, FedEx and etc. Furthermore, existing employees are highly likely to face stress due to pressure to learn and adopt at later stages of their lives.
• AI concerns
AI is in development stages, however the concerns associated with automation of logistics sector is already becoming a controversial topic. It might be hard to overcome the feeling of a machine making ‘moral’ decisions on road in circumstances like whether to hit a pedestrian or another car or the other side of the road. Naturally, these decisions are more suitable for a human to make, there might be chances of dissidence between public and companies who operate autonomous vehicles. Presently, there is huge potential to balance the regulation in robotics in logistics and liability issue due to legal and ethical challenges. People maybe slow to accept machines taking their place on driver’s seat. A U.K based law firm Bristows LLP confirms that if long-term plans for fully automated delivery systems like Amazon are not drafted now, a sudden transition may bring public sentiments as they fail to adopt the new norm of robots in everyday life.
A study by Hendrik, Johannes, Julian, Evi and Kai-Ingo (2019) asked several industrial experts their opinion about how can manufacturing be affected by robots in their value chain. Most agreed-on relocation of company itself. Relocating can occur due to either in pursuit to find better place to serve the customer or due to lack of qualified personnel as a result of introduction of robots. In many circumstances, the plant itself is prone to permanently close as machines have better efficiency than humans, thus can produce more quantity without distractions, feeling or break without compromising quality.
• Technical risks [7″,8″,17″,20″,50″,51″,68″,73]
The real complication lies in change management in context of integrating IT with mechanical process. Although benefits are numerous, however the complexity of materializing is immense. Upgrading the existing fleet of trucks with autonomous control system is a challenging task, let alone selling old fleet and buying new driverless logistics vehicles.
Bringing old sensors on mechanical machinery brings whole lot challenges like compatibility issue, purchasing new IT system and expert engineers to operate them.
o Navigational Problem: Robots in warehouses may seem an ideal replacement to humans, however in urban jungles like New York, Beijing and Tokyo have gigantic network of on ground wirings, helicopters and airplanes. Accidents are deemed, hence a delivery drone collision in cities may cause lawsuits, if hit to a car or pedestrian.
o Limited operation time: For robots that not stationary suffer limited battery capacity. They are bulky; need maintenance and several charge intervals. To avoid such problems companies prefer keeping buffer capacities of drones, which later adds to the capital cost.
o Interference problems: Robots like drones and self-guided domestic and commercial vehicles may end up in hazardous disaster due to loss of signals by man-made or natural obstacles. Noisy signals due to other signals in surrounding. Strong magnetic fields may damage the internal components or distort the internal compass for navigation.
• Cyber attack
IoT and automation can make logistical companies vulnerable to foreign attacks remotely. Perhaps one of the most eminent risk that pertains due to prevalence of robotics and automation in any industry is risk of cyberattack, hence cyber security (in continuous development) is a paramount element for robotics to be successful in logistics. Cyber risks can be either hazardous or non-hazardous by nature, however in both cases financial loss is deemed. Cyber criminals may use one of the following methods as an entry point are; staff computers, networks, emails, unsecure Wi-Fi, mobile devices or even cloud based.
Unauthorized access remotely by hacker may cause machines to be redundant and production or logistics (if performed by robots) may come to a halt. Over-writing of embedded or temporary codes may cause the robot to perform abnormally, which may cause the delivery destination to change – stealing can be a norm if cyber risks are not tackled.
Furthermore, introduction of a simple bug in an automated port (e.g. Singapore) has the potential to reduce the efficiency in handling cargo to massive traffic jam of shipping lines. Handling such challenges can be rather cumbersome depending on the complexity of the port.
• Data risks
Servers may be prone to crash due to overload by immense data generation by the robots. At present there is lack of standards in terms of quality of data generated by these machines. Furthermore, data must also be kept in secure place to avoid data theft. SMEs can find themselves in challenge, in terms of data interpretation as they do not have the capability to use it in a meaningful way.
Legal & Political risks
There is lack of infrastructure to handle such energy demands. Governments are still on the path of bringing more energy in various mixes (renewable and non-renewable) to the grid, to support high energy demands by industries continuously upgrading themselves into automation.
• Liability issues
Its already established that accidents due to technical problems are deemed – it can be software crash or hardware malfunction. In many scenarios it is still unclear who will be legally responsible for the financial or loss of life. However, existing laws are capable enough to tackle these issues, but need further amendments. There are grey areas in which it is unclear whether it is supplier’s, manufacturer’s or operating company’s fault. Automation will further bring insurance companies to develop new rules and regulation in case of damage, as of now not many insurance companies provide such offers.