E-commerce is booming, exposing its logistic backbone to an ever increasing bill. The industry is therefore trying to find cheaper solutions with the help of innovative tools, such as robots that are learning to see and pick stuff, artificial intelligence, drones and many other devices that are brought to us by Industry 4.0.
E-commerce amounts to 10% of global retail sales. DHL, the world’s largest logistics company, expects e-commerce to grow around 19% per year, to become 15.5% of overall commerce in 2021. We think there is room to go even higher; for example in China, e-commerce penetration is already at 22% today. Trust in online shopping has increased, both in terms of payment security and quality of product.
The massive growth in e-commerce has quite an impact on the underlying logistics. Figure 1 shows a simplified visualization of a logistic set-up for e-commerce: goods are transported from a manufacturing facility to a centralized distribution center (DC) in what is called line haul. This mode of transportation is generally still pretty efficient. From the DC, goods continue further to fulfillment centers (FC), which are closer to demand centers and therefore generally smaller and less efficient. This set-up is known as a ‘hub and spoke’ model. From the fulfillment center, goods are finally transported to consumers’ front doors, pick-up points or stores. This is generally done by small delivery vans and is often much less efficient.
As goods travel further to the right in the chart, efficiency decreases – which is also reflected in the costs. AT Kearney estimates the last mile to account for nearly half of total logistics costs. The industry is therefore trying to find cheaper solutions.
The right industrial real estate at the right location can reduce last-mile cost, improve service and enable fast delivery. As warehouse rental costs are only a small portion of the overall logistics bill, warehouse owners are often able to enjoy substantial rent increases. We therefore see owners of prime industrial real estate assets as major beneficiaries of e-commerce growth.
One of our favorite ways to benefit from growing e-commerce is through warehouse automation. This is crucial for success. One specific automation technology will bring about the inflection point: as robots learn to see through vision technology, they get ready to enter the warehouse.
To be able to work in a warehouse, robots have to learn something new: the perception and recognition of objects. In other words, they have to learn to see. This ‘vision technology’ includes cameras, laser sensors, Radio-frequency (RF) ID devices and barcode readers. They are found along a warehouse’s whole process chain and make sure that hardware can effectively signal to software, or the Warehouse Control System. The producers of these vision systems are among the most interesting investment opportunities related to e-commerce growth.
The holy grail of warehouse automation is picking. Currently, half of all labor time is spent on picking and packing, as 90% of the picks in a warehouse are still done by a human hand. This has been termed Moravec’s paradox: it is very easy to teach robots adult skills but incredibly difficult to let them perform tasks a two-year old already masters – such as picking from a cluttered bin with overlapping items. Nevertheless, we think solving this challenge is possible and will be done through a combination of machine 3D vision and deep learning.
As the last mile is the biggest cost item, it is the main battleground for incumbents and start-ups alike. There won’t be a ‘one-size-fits-all-solution’, and we think the last mile will become an ever more fragmented mix of many solutions. Start-up companies will bring technologies such as cloud platforms or crowd sharing to the logistics industry to make clever use of free capacity elsewhere. Incumbents will experiment with automatically guided vehicles (AGVs), drones, self-driving robots or even delivery tunnels. While many sound and probably are far out in the future, others - or at least pre-forms of them - will be with us quite soon.
Barcodes, RFID tags and lasers alike are generating and collecting vast amounts of data - which are worth nothing unless turned into insights for better decision-making. This is the domain of software companies offering (inter)-enterprise software for supply chain management. With the help of cloud solutions and artificial intelligence, logistics can become just-in-time and efficient.
While e-commerce introduces a lot of challenges to logistics, ‘Industry 4.0’ brings a lot of tools to offset costs in what has historically been a low-tech and often very inefficient industry. Connecting the supply chain from one end to the other will significantly benefit suppliers of Automatic Data Capture devices, including sensors, lasers, connectors, cameras and tags. Asset owners will enjoy better utilization rates and, last but not least, the environment will benefit from lower emissions.
The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong.
This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing
This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions.
The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.
Please read this information carefully.
This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.
2. Important risk disclosures
Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:
3. Local legal and sales restrictions
The information contained in the Website is being provided for information purposes.
Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.
4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.
5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.
Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.
6. Third party websites
Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage.
7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.
Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.
Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.
8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.
10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong.