The pandemic pushed automated processes but altered risks

While the pandemic and its supply chain disruption highlighted the value of robotic process automation and other digitized services, it also exposed fresh risks.

Insureds looking to increase their investment in automated processes in light of increasingly distanced business transactions may want to take a page from businesses that have long operated in the AI space.

“One of the things that we know from automation over decades of experience with it is that, in general, automation likes steady, predictable volumes,” says Joe Dunlap, head of Supply Chain Advisory at CBRE. “Dramatic variances or swings, whether it’s weekly, daily or hourly, creates challenges for automation.”

A manual solution, by contrast, can scale up or down.

“A lot of the automation was accelerated because of the concern over a national labor shortage,” says Adam Roth, an executive vice president with Oakbrook, Ill.-based NAI Hiffman. “As labor gets more challenging and difficult, the technology starts to make sense.”

Now that unemployment is possibly shooting toward 20%, what will it mean for such workforce investments? One school of thought is that rising unemployment could make automation investments less likely for the time being.

But there is another side to that theory.

“The flip side is, if unemployment goes up, you’re also going to have more of a workforce to choose from for those companies that process automation,” says NKF’s Vice Chairman Thad Mallory. “So they could also see labor costs go down. I mean, you can see a whole host of things happen, which could take away some of that immediate necessity for all these groups to go that route [of investing in labor].”

The rise in online grocery ordering during COVID-19 could also boost automation investment for grocery tasks. “There are certain environments, like cold storage, where automation can help humans,” says Rich Thompson, international director, supply chain and logistics at JLL. “One thing that the pandemic has had an influence on is online grocery.”

The rise in online grocery orders should make companies more confident in automation for those tasks. And there are other places where technology could benefit the supply chain. For instance, automation has a back-office implication for resources, Dunlap says.

Sometimes the move to robotics does more than replace labor. It decreases the need for real estate and therefore changes a company’s risk exposures. “We’ve seen a lot of people move to a robotic posture to avoid having to put in the capital costs of building another facility,” says Rob Kolar, EVP, West Region for JLL.

Les Shaver (lshaver@naahq.org) is editorial director for the National Apartment Association and a frequent contributor to Globe St.

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