Facing an evolving supply chain landscape in 2025, companies are being forced to rethink their distribution strategies to cope with challenges like rising cost pressures, persistent labor shortages, and the complexities of managing SKU proliferation.
1. Optimize labor productivity and costs. Forward-thinking businesses are leveraging technology to get more done with fewer resources through approaches like slotting optimization, automation and robotics, and inventory visibility.
2. Maximize capacity with smart solutions. With e-commerce volumes rising, facilities need to handle more SKUs and orders without expanding their physical footprint. That can be achieved through high-density storage and dynamic throughput.
3. Streamline returns management. Returns are a growing challenge, thanks to the continued growth of e-commerce and the consumer practice of bracketing. Businesses can handle that with smarter reverse logistics processes like automated returns processing and reverse logistics visibility.
4. Accelerate order fulfillment with robotics. Robotic solutions are transforming the way orders are fulfilled, helping businesses meet customer expectations faster and more accurately than ever before by using autonomous mobile robots (AMRs and robotic picking.
5. Enhance end-of-line packaging. The final step in the supply chain is often the most visible to customers. So optimizing packaging processes can reduce costs, improve efficiency, and support sustainability goals through automated packaging systems and sustainability initiatives.
We are in the golden age of warehouse automation. Supply chain leaders today have a dizzying array of new automated solutions to choose from. These include autonomous mobile robots (AMRs), automated storage and retrieval systems (AS/RS), automated case-handling mobile robots, robotic pickers, and advanced software. While predominantly manual facilities remain, advancements in automation are improving existing facilities and use cases demonstrate in very real ways how robotics will forever alter supply chains.
But while the potential gains from automation can be significant, it’s also important to realize that no two organizations’ needs are the same. There is no cookie cutter approach to warehouse automation and robotics. A successful implementation requires not only strategic planning and investment but also a full understanding of the organization’s own unique needs. Before it installs any automation, a company must have a clear picture of its specific processes and requirements and ensure solutions are tailored to its operations. This involves identifying the needs of the specific sector or market segment that the company is trying to serve, what its growth potential is, and where it currently is in its automation journey.
To show how this can be done, let’s take a closer look at the retail industry. Today’s retail distribution centers are some of the most advanced materials handling facilities ever built, simultaneously supporting fulfillment for online purchases and enabling the efficient stocking of brick-and-mortar stores. These facilities demonstrate the impact automation and robotics advancements can have on distribution operations, including enabling unprecedented performance and throughput levels that were unimaginable a few short years ago. For this reason, reviewing the strategic considerations a retailer may face on the way to making a business case for automation will provide a model not just for other retailers but for companies in other industries as well.
Tackling long-standing challenges
Warehouse robotics and automation can help retailers respond to a variety of longstanding challenges. First, there is the growth of e-commerce. The volume of online purchases continues to increase, even as the rate of growth slows to pre-pandemic norms. According to the U.S. Department of Commerce, despite ongoing inflationary forces, American consumers spent more than $300 billion online in the third quarter of 2024, which represented 16.2% of total retail sales and a 7.4% percent increase over the same period in 2023.
Each online purchase is essentially an ad hoc event, making the resulting fulfillment more complex and demanding than the regular, scheduled replenishment of in-store inventories. Automation plays a vital role in helping retailers overcome these challenges. By automating key processes, retailers can achieve faster throughput, can more efficiently handle a larger variety of stock-keeping units (SKUs), and can maintain exceptional order accuracy. Automated systems streamline order picking, packing, and shipping, reducing errors and speeding up operations. This allows retailers to keep up with the growing demands of e-commerce while ensuring customer satisfaction with precise and timely deliveries.
Then there is the issue of labor. Retail supply chain leaders face an ongoing and problematic shortage of workers. While the “2024 State of Warehouse Labor Report” from the online labor marketplace Instawork found some improvement in the labor market, more than 40% of surveyed businesses still reported that warehouse staffing levels remain a cause of revenue loss.
The implementation of automation and robotics in both existing brownfield and new greenfield warehouses is a direct response to these labor market concerns. All forms of warehouse automation, including robotics, are fundamentally efforts to address the shortage of labor or to increase its efficiency. For example, many automated solutions, such as AMRs, are designed to specifically address the most time-consuming activity in warehouses: the 78% of time employees spend walking.
There are other important benefits. Machines don’t require rest, and they are particularly effective at highly repetitive tasks, which are a leading cause of workplace injuries. Automation also creates new career paths for employees, transitioning them away from physically taxing activities that center on moving items through the warehouse to maintaining and overseeing the systems that assume those tasks. Finally, as the cost of labor rises, the cost of technology continues to decrease.
Implementation: Where to begin?
Automated storage and retrieval systems (AS/RS) provides advanced storage capabilities and fast throughput. But they are typically more costly and take longer to implement than less automated systems.
Courtesy of Vanderlande
While the benefits of automation are clear, selecting the right solution for a specific operation can be daunting. To choose among the variety of automated solutions available, retail supply chain leaders must first consider the needs of their specific sector.
The grocery and food sector is a telling example. Few sectors have experienced as rapid a transformation in recent years as the grocery industry. Before the pandemic, online grocery sales were mostly limited to select metropolitan areas. Last year, online grocery sales in the U.S. reached $95.8 billion, according to the data and technology company Mercatus. Consumer grocery purchases are now split between three very distinct fulfillment models: ship-to-home, delivery, and pick-at-store. Those models and the retailer’s unique needs determine the type of warehouses required. As a result, the grocery sector sees everything from full standalone distribution centers to warehouse operations at the “back of the store” and even so–called dark stores—stores that are solely used as warehouses for online orders and are not open to the public.
Due to razor-thin margins and price-sensitive shoppers, the grocery sector is embracing advanced automation, such as AS/RS and palletizing robots. For example, they are utilizing software and automation to build pallets and pallet cages in a stable and space-efficient fashion with products arranged by store layout. By doing so, leading grocers and food retailers ensure that they can quickly move and stock items while keeping labor costs in check—all savings that enable them to maintain margins while competing on price.
Different considerations, however, are the main focus for automation projects in the apparel and general merchandising industries. In apparel, items need to be moved—typically in bags—without being damaged. Additionally, warehouses often have to manage the processing of returns. In both applications, pocket sorters are often used. In contrast, the general merchandise sector deals with highly variable SKUs and the rapid processing of online orders, making throughput levels and order accuracy critically important. Here, a high-performance AS/RS is often a natural choice.
Build new or sweat your existing warehouse assets?
Automated case-handling mobile robots are a good solution for companies looking for more "incremental" automation. Because they can use existing warehouse racks, they can be implemented faster than a more complex system.
Courtesy of Vanderlande
Where retailers are in their growth cycle and in their warehouse automation journey should also be carefully considered when determining what kinds of automation and robots are needed. These two factors will play a particularly strong role in determining whether a retailer implements new automation or sticks with what it already has. This is particularly true today when the cost of capital is a key consideration. As an example, let’s look at how this decision might play out in different retail sectors.
Fast-growing, mid-market retailers: Most of these organizations currently have largely manual distribution centers. They are predominantly moving to build more advanced, fully automated facilities that include AMRs, AS/RS, and robotic pickers. Primed for growth, they are foregoing the improvement of existing warehouses, as even modernization projects can't keep up with growing sales and risk becoming quickly obsolete.
Slower growing mid-market retailers: These companies are embracing more incremental automation. For example, many are deploying a system that includes automated case-handling mobile robots (ACRs). These robotic units are designed to move and retrieve goods stored in traditional, often pre-existing, warehouse racks. As a result, these systems can often be implemented in just a couple of months, offering a faster implementation timeline.
Other mid-market retailers are choosing to implement an AS/RS, which—while automating many of the same tasks—provides more advanced storage capabilities and faster throughput. These systems are, however, more costly and require a more comprehensive planning and installation process, as they can take a year or two to design and make operational.
The largest retail brands: These companies already rely on largely automated warehouses that utilize AS/RS, robotic pickers, and other solutions. They are increasingly choosing to “sweat their assets” by making incremental improvements—such as adding additional shuttles and more storage capacity to an already existing AS/RS or deploying additional robotic pickers to speed throughput. Such improvements can result in significant efficiency gains, without requiring any large capital investments.
No matter what type of automation is selected, however, successful implementation hinges on a crucially important step: creating an effective business case.
The crucially important business case
Before implementing any automation or robotic solution, a company must perform due diligence. It is critical that no project should proceed without first completing a detailed business case. There are several factors to consider, starting with the decision between modernizing an existing brownfield facility or building a new greenfield site. This choice requires evaluating the costs, growth potential, and the return on investment (ROI) associated with a more advanced warehouse system.
Importantly, the business case should not be created in a vacuum. Operational, financial, and legal leaders should all be involved. The process should be sure to incorporate the following steps:
Determine growth projections: No one has a crystal ball, but growth projections and plans should be carefully considered to determine if a new greenfield facility with advanced automation and robotics is viable and necessary. These cutting-edge solutions often deliver the highest ROI but come with significant upfront investment.
Determine the lifecycle of existing warehouses: Are they able to process the number of SKUs, achieve the throughput, and provide the storage capacity needed today? What about for the future? If not, can they be modernized to cost-effectively buy more time?
Calculate the timeframe needed to realize an ROI: How long will it take to achieve the ROI for your automation project over the cost of capital and labor that would be required in its absence? How does this compare to the lifespan of the facility or project in question? Are you looking to see your ROI in three years, five years, or ten? The time required to achieve the desired ROI is key.
Consider the costs and gains associated with incremental advancements: Even if it seems like a new, fully automated facility makes the most sense, consider the alternative approach of making incremental improvements. If you choose to move forward with a greenfield project, it is good to know you carefully considered existing assets.
Run the numbers on your dream warehouse: Even if a new facility that delivers the capabilities of high-performance robots and automation is likely out of reach, run the numbers anyway. It can feel safer to upgrade a warehouse than to build a new automated one, but no one wants to invest significant capital in a facility that hinders growth in the future.
Remember that no automation is automatic: Advanced solutions and robots are never a one-and-done purchase. They must be maintained and managed—tasks that require significant expertise, either from partners or through an investment in employees and training.
By carefully considering the needs and nuances that define success in their sector and creating a detailed business case, supply chain leaders can embrace emerging, powerful robotics and automation with confidence. Regardless of whether they choose to obtain the most advanced capabilities or take a more measured approach, they will do so with the confidence that their investments are based on proven strategies that position them for growth and success in the future.
About the authors: Jake Heldenberg is the director of North American Warehouse Sales Engineering, at Vanderlande. He oversees the design of warehouse systems that combine intelligent software, robotics, and advanced automation. Andy Lockhart is the director of strategic engagement, warehouse solutions, North America, at Vanderlande, where he provides retail customers with innovative, scalable systems; intelligent software; and reliable services to optimize distribution and fulfillment operations.
It’s getting a little easier to find warehouse space in the U.S., as the frantic construction pace of recent years declined to pre-pandemic levels in the fourth quarter of 2024, in line with rising vacancies, according to a report from real estate firm Colliers.
Those trends played out as the gap between new building supply and tenants’ demand narrowed during 2024, the firm said in its “U.S. Industrial Market Outlook Report / Q4 2024.” By the numbers, developers delivered 400 million square feet for the year, 34% below the record 607 million square feet completed in 2023. And net absorption, a key measure of demand, declined by 27%, to 168 million square feet.
Consequently, the U.S. industrial vacancy rate rose by 126 basis points, to 6.8%, as construction activity normalized at year-end to pre-pandemic levels of below 300 million square feet. With supply and demand nearing equilibrium in 2025, the vacancy rate is expected to peak at around 7% before starting to fall again.
Thanks to those market conditions, renters of warehouse space should begin to see some relief from the steep rent hikes they’re seen in recent years. According to Colliers, rent growth decelerated in 2024 after nine consecutive quarters of year-over-year increases surpassing 10%. Average warehouse and distribution rents rose by 5% to $10.12/SF triple net, and rents in some markets actually declined following a period of unprecedented growth when increases often exceeded 25% year-over-year. As the market adjusts, rents are projected to stabilize in 2025, rising between 2% and 5%, in line with historical averages.
In 2024, there were 125 new occupancies of 500,000 square feet or more, led by third-party logistics (3PL) providers, followed by manufacturing companies. Demand peaked in the fourth quarter at 53 million square feet, while the first quarter had the lowest activity at 28 million square feet — the lowest quarterly tally since 2012.
In its economic outlook for the future, Colliers said the U.S. economy remains strong by most measures; with low unemployment, consumer spending surpassing expectations, positive GDP growth, and signs of improvement in manufacturing. However businesses still face challenges including persistent inflation, the lowest hiring rate since 2010, and uncertainties surrounding tariffs, migration, and policies introduced by the new Trump Administration.
Atlanta, GA, Feb 6, 2025 - Today Exotec®︎, a global warehouse robotics provider, announced the commercial launch of the Next Generation of Skypod®︎ system with higher performance, improved storage density, and advanced software features.
The Next Generation of Skypod comes with a number of design improvements including a new and more compact Skypod robot, a workstation for robot-to-robot picking, high-throughput Exchanger, and denser storage. These redesigns combined with new software features improve the throughput at a single workstation by 50% while also enhancing storage density up to 30% compared to the previous generation.
The key differentiator for the Next Generation of Skypod is the ability to handle both each and case picking, positioning Exotec to better address multichannel needs with a single solution. The system also natively supports a number of value-added logistics features that traditionally require external equipment and complex subsystems. This not only enables customers to simplify the flow of goods through the warehouse, but also significantly shrinks the system footprint by cutting down the need for conveyors, sorters, external storage, and packing stations.
Specifically, the Next Generation of Skypod supports:
Integrated Buffer: Next-Gen Skypod handles buffering within the system. Following order preparation at the Workstation, completed or semi-completed orders get automatically stored inside the racks until they are ready for outbound, or further consolidation. This helps reduce the need for staging areas or any other external buffer systems.
Perfect Sequencing: Next-Gen Skypod handles strict outbound sequencing prior to ejecting orders by using robots and the Exchanger. The robots group orders and deliver them in a specific arrangement to the Exchanger, which then routes the orders to outbound. This enables precise loading of pallets, containers, or trucks based on delivery routes, store planograms, or other unloading requirements, all without the need for external sorting equipment.
Pick-and-Pack: Next-Gen Skypod handles packing as an integrated part of the picking process. Operators pick directly into fulfillment containers, removing the need for manual packing operations downstream. This functionality pairs extremely well with right-size packaging solutions. These solutions can be integrated with Next-Gen Skypod to enable picking into right-size containers, significantly cutting last-mile costs.
“When designing the Next Generation Skypod, our goal was to create a solution that would set the industry standard of operational excellence and elegance for the next decade and beyond," said Romain Moulin, CEO and co-founder of Exotec. “We’re already seeing our customers reimagine their entire supply chain around the transformative capabilities of this innovation, from combining case and each picking operations to leveraging outbound sequencing to improve transportation costs. Witnessing this level of impact has been incredibly rewarding.”
Exotec developed the Next Generation of Skypod in response to evolving market needs and feedback from the existing customer base, which increasingly demands warehouse robotics to address a wider range of processes within the warehouse walls. Over the past two years, Exotec has sold and deployed the Next Generation Skypod system globally in stealth mode. The company has successfully secured over 20 projects worldwide, totaling $400M to customers including Oxford Industries (Tommy Bahama, Lilly Pulitzer, Southern Tide, etc.), Grainger, and E.Leclerc to strengthen their supply chain operations.
“We chose Exotec for its storage density and its operational flexibility. Robotic advancements have enabled us to set up a larger buffer area for prepared orders within the system,” said Maxence Maurice, CEO E. Leclerc Seclin. “Previously, I estimated that the customer journey, from arriving at the drive to leaving with their groceries, took between 10 and 15 minutes. Today, with the Exotec solution, it takes less than 5 minutes.”
For more information on the Next Generation of Skypod system, please visit www.exotec.com.
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About Exotec Exotec is a global warehouse robotics company powering the world's largest brands. The company combines the best of hardware and software to offer elegant warehouse robotic systems that drive operational efficiency, add resiliency, and improve working conditions for warehouse operators. 50+ industry-leading brands including Gap Inc., Carrefour, Decathlon, and UNIQLO trust Exotec to improve their operations across 100+ sites worldwide.
Walk into any high-velocity distribution facility and you'll immediately grasp the complexity: dozens of forklifts move in orchestrated patterns while automated systems hum along conveyor lines, all working to meet demanding throughput targets. Yet what remains invisible to the casual observer is how maintenance challenges can bring this carefully choreographed dance to a halt.
For facilities moving millions of pieces weekly, maintenance demands fundamentally different solutions. The traditional approach to material handling maintenance that works for smaller operations isn't just constraining productivity—it's holding back your entire operation.
Warning signs that you need an upgrade
For facility leaders managing 40+ forklifts and complex material handling systems, the warning signs often hide in plain sight. The first clear indicator that your current maintenance strategy isn't keeping pace with your high-velocity facility appears when equipment downtime increasingly affects your ability to meet throughput targets. This challenge is compounded by climbing rental equipment costs as you struggle to compensate for unavailable machinery. The human impact becomes evident when floor supervisors and staff begin expressing mounting frustration about not having the machinery they need available to do their job.
More concerning still, safety incidents related to equipment issues may become more frequent, creating both operational and liability risks. The financial strain finally manifests in mounting overtime costs because you simply don't have enough functioning equipment to run operations efficiently. These interconnected issues signal a maintenance strategy that needs urgent reevaluation and restructuring.
If these symptoms sound familiar, you're not alone. Many high-velocity facilities have outgrown the same maintenance principles they applied as a smaller operation, only to find them inadequate at scale.
The scale challenge
The complexity of a large facility creates unique challenges that make traditional maintenance approaches insufficient. Equipment diversity presents a significant hurdle, as larger facilities must manage multiple types of forklifts, automated systems, and specialized equipment, each requiring different maintenance expertise and parts inventories. Communication complexity also poses a major challenge—while information flows easily in smaller facilities where everyone knows the status of every piece of equipment, this informal communication breaks down in large operations with multiple shifts.
The scale of impact becomes exponentially more significant in high-velocity facilities, where a single forklift breakdown in a critical area can impact dozens of downstream processes. Maintenance timing presents another crucial challenge, as continuous operations and high utilization rates make it increasingly difficult to find maintenance windows, and waiting for equipment to fail is simply not an option.
Building a maintenance strategy that matches your scale
High-velocity facilities require a transformed maintenance approach, not just scaled-up traditional processes. This starts with dedicated on-site teams who develop deep facility knowledge and conduct preventive maintenance strategically during optimal windows. Smart inventory management of parts ensures critical components are always available without overstocking, while data-driven systems help track equipment performance patterns and guide future investment decisions.
Before investing millions in facility expansion or automation, consider this: Implementing proper maintenance strategies can boost productivity 10%-20% at a fraction of the cost of facility expansion or automation. This comprehensive approach leads to reduced equipment downtime, improved safety outcomes, and enhanced staff satisfaction by transforming maintenance from a reactive necessity into a proactive tool for operational excellence.
Ready to transform your maintenance strategy? Here are the key steps to implementation:
Start with a thorough assessment phase, reviewing safety incidents, analyzing current maintenance costs, and evaluating how maintenance affects facility key performance indicators (KPIs).
Develop tailored processes by establishing proper preventive maintenance procedures and implementing robust data collection protocols.
Structure your maintenance team effectively, with clear roles, communication protocols across shifts, and comprehensive training programs.
By taking this methodical approach to maintenance strategy, facilities can achieve operational excellence without the massive capital expenditure typically associated with major operational improvements. The key lies not in maintaining more, but in maintaining smarter.
In today's fast-paced distribution environment, your maintenance strategy can't be an afterthought—it needs to be as sophisticated as your operations. In high-velocity facilities. Maintenance isn't just about fixing equipment, it's about maintaining productivity, safety, and competitive advantage. The time to evolve your maintenance strategy is now, before considering more costly alternatives. Your facility's full potential depends on it.
About the Author: Cory Monroe is Regional Sales Director at Concentric, a national distributed power services organization specializing in maintenance and power solutions that deliver resilient and sustainable facility systems for critical power and forklift mobility.
By the numbers, global logistics real estate rents declined by 5% last year as market conditions “normalized” after historic growth during the pandemic. After more than a decade overall of consistent growth, the change was driven by rising real estate vacancy rates up in most markets, Prologis said. The three causes for that condition included an influx of new building supply, coupled with positive but subdued demand, and uncertainty about conditions in the economic, financial market, and supply chain sectors.
Together, those factors triggered negative annual rent growth in the U.S. and Europe for the first time since the global financial crisis of 2007-2009, the “Prologis Rent Index Report” said. Still, that dip was smaller than pandemic-driven outperformance, so year-end 2024 market rents were 59% higher in the U.S. and 33% higher in Europe than year-end 2019.
Looking into coming months, Prologis expects moderate recovery in market rents in 2025 and stronger gains in 2026. That eventual recovery in market rents will require constrained supply, high replacement cost rents, and demand for Class A properties, Prologis said. In addition, a stronger demand resurgence—whether prompted by the need to navigate supply chain disruptions or meet the needs of end consumers—should put upward pressure on a broad range of locations and building types.