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VERTICAL CITIES AND VERTICAL LOGISTICS
the Rise of the Personal, Automated and Local Supply Chain
the E-Commerce Flywheel
INNOVATIONS AT FM LOGISTIC
How will people and robots work together?
BIG DATA AND VIRTUAL REALITY: WHAT WILL THE FUTURE BRING?

VERTICAL CITIES AND VERTICAL LOGISTICS

"This might be the last time you’ll see a human on the stage here and not a robot," joked Amaury Gariel, Managing Director EMEA at CBRE, surprising the audience at the start of his presentation at the P3 Future Trends Conference in Prague. The pressing challenges of today, however, include not only robotisation and automation, but also the phenomenon of vertical cities. At present, seven out of 10 Europeans and eight out of 10 Americans live in urban areas. And, the only acceptable alternative to the continued sprawl of cities outwards is building higher structures. Vertical cities are becoming the new standard of modern urban architecture, not only in Asia, but in Europe, as well.

The vertical-city concept is not based on faraway visions of the future; it is rooted in economic pragmatism. Transport accounts for as much as 50% of all costs in the supply chain for most types of goods, while statistics show that real estate expenses make up no more than 5% of expenditure. At the same time, proximity to customers is one of the most important factors considered by companies in the process of allocating investment. The questions are, therefore, quite simple – how can transport costs be reduced effectively and, at the same time, how can goods be delivered to customers when more than a half of the world's population live in cities? Gariel believes that the answer is vertical logistics. The viability of such projects is demonstrated by several examples in Asia where financial synergies are created by the combination of a suitable location and the advantage of warehouses that are several-storeys high. Facilities of this kind function as urban retail supply hubs that allow deliveries to be made within short timescales on a 24/7 basis.

"Imagine that the equivalent of the entire population of France or Thailand, that is more than 60 million people, move from the countryside to cities every year. For that is precisely the speed at which cities around the world are growing," said Gariel, explaining why the vertical city concept is the only possible option. The concentration of people in mega-metropolises might be conducive to GDP growth, but the unavailability of real estate causes prices to rise exponentially, hand in hand with the development of commerce and the supply of goods to city dwellers. This is because the higher the number of inhabitants, the more complex the logistical solutions needed to keep the mega-metropolises functioning. As well as cost savings, however, vertical logistics help offset various other social challenges in 21st-century cities, such as traffic jams and, with carbon emissions a fundamental problem, air pollution. According to estimates presented by Gariel at the Conference, investment into vertical logistics infrastructure solutions has the potential to reduce global emissions by 450 megatons of CO2 between now and the year 2020.

According to Gariel, vertical warehouses will be a key feature in last-mile logistics, the last link in the supply chain before goods are delivered to the customer. Every city has its own approach to vertical logistics. For example, warehouses in Hong Kong use elevators to transport goods whereas in Paris, goods are delivered by trucks that use ramps to travel to higher floors.

In fact, multi-storey warehouses already exist throughout the world, including the Czech Republic. One of the most-advanced facilities of this kind was built by P3 for the VF Corporation as part of the company’s VANS brand distribution hub at P3 Prague D8 park to the north of Prague.

All things considered, Gariel believes that going higher is synonymous with moving forward.

the Rise of the Personal, Automated and Local Supply Chain

There aren’t many people that can describe the essence of the changes that humankind is facing as a result of the transition from the industrial age to the age of intelligent automation in a captivating but detailed manner. Watching the presentation delivered by Sean Culey, the author of the forthcoming book "Transition Point: Revolution, Evolution or Endgame?" was, therefore, a real treat for guests at the P3 Future Trends Conference in Prague.

Something of a visionary, Culey points to the invention of the steam engine as the start of an exponential curve of development and dramatic innovation that is leading to a point where machines will increasingly replace humans in the supply chain and beyond. According to Culey, although the supply chain remains "human" for the time being, people have been doing everything in their power to automate it since the 1760s.

Intelligent machines are not a thing of the far future said Culey. On the contrary, "robots are already capable of replacing a vast number of human tasks in the supply chain,” he said during the Conference. ”Machines have never been as intelligent or as able to perform certain tasks as they are today. Moving forwards, they will be able to do nearly every task we currently assume only humans can do." According to this widely recognised business transformation expert, autonomous vehicles are an example of the current level of machine intelligence. Six years ago, nobody imagined that self-driving cars would be possible, as the quantity of data that needs to be processed within a split second was an insurmountable obstacle for engineers of the time. Today, however, in some places driverless vehicles can already be seen out on the roads. And that's not all the current state of the evolution of the robotic age has to offer. So, as well as driverless passenger cars in Pittsburgh, robots drive trucks in underground mines in Australia, autonomous planes are being discussed and Rolls-Royce plans to launch fully autonomous cargo ships by 2035.

Efforts to improve the independence and intelligence of machines raise social issues. "Let's face it; only robots are ‘willing’ to work for the cost of electricity," joked Culey, explaining why he is not surprised that corporations are keen to invest in automation. Culey claims that the retail giant Amazon is projected to save no less than $2.5 billion by using robots in their warehouses. The evolution of robots is documented by figures from their manufacturers and the companies that test their capabilities. While in 2013, Rethink Robotics’ ‘Baxter’ robot took three minutes and 20 seconds to complete a product packing task, but after just one software update the same task took just one minute and 12 seconds a year later. According to Culey, it would take mankind as long as 50,000 years to achieve comparable progress. In some instances, machines have completely taken over work formerly done by humans. A case in point is Rotterdam harbour terminal which is fully automated. This is leading to an automation race across all ports, such as the Webb port in Melbourne which is currently spending $77m on automation. The same autonomous fate awaits other Australian ports such as Sydney and Brisbane, as well as in other countries such as harbours in America, China, India and elsewhere.

According to Culey, 3D printing represents a chapter in itself in terms of logistics, the supply of goods, and commerce as a whole, as the possibilities and opportunities offered by this concept have yet to be fully exploited. Apart from resulting in dramatic changes for manufacturers and distributors, 3D printing will change things for consumers too.

There is no doubt that 3D printing will cause a revolution in production. Consumers will become the manufacturers of their own goods. All customers will need is to choose the item they want, pay online for the template and print out the product in their homes. Specialists designate this phenomenon with the term "prosumer", which is a combination of the words consumer and producer.

As the quality of 3D printers improves, it will be possible to print out essentially anything you might need, ranging from replacement parts to printed circuit boards and jet engines," said Culey outlining the future to guests at the Conference. Indeed, 3D printing technology already extends to biological material in addition to plastic or titanium. "In the future, we will be able to print ourselves," joked Culey. Culey also highlighted that 3D printing itself is also being updated; 4D printing technologies now exist that have the potential to "print out" intelligent materials – for example new alloys with shape memory – where different temperatures will bring about specific changes in shape. Another impatiently awaited milestone is the use of special polymers, liquids and gases that respond to the intensity of light and change shape or characteristics accordingly.

Exciting as this brave new world is, suggestions that the rise of 3D printing may mark the death knoll for logistics as we know it are quickly scotched by P3 CEO Ian Worboys who pointed out that the printers, printer parts and all the increasingly diverse materials that will be needed in order make things will still need to be stored somewhere and delivered to the consumer. “3D printing will change what’s stored in a warehouse, but not the need for warehouses or efficient distribution networks” he said.

the E-Commerce Flywheel

Don't know what to do about e-commerce? Having problems making money from e-commerce? Worried that you can’t compete with Amazon? If any of these describe your concerns about your e-commerce business, Neil Ackerman, Global e-Commerce Director at Mondelez International, has some simple advice.

“Amazon is not the master of the universe, you can beat it,” he said speaking at the P3 Future Trends Conference in Prague. “Calm down. You can be successful in e-commerce there’s nothing complicated about it." Ackerman believes that all a company needs to succeed in e-commerce is to follow a strategy similar to that employed by Mondelez – an approach known as the e-commerce flywheel. Getting it right might well be the decisive factor as to who will succeed and who will fail in the future.

The first of the five pillars of the strategy unveiled by Ackerman during his presentation to the Conference is selection. Nobody wakes up in the morning and says,,"I wish I didn't have so many choices." Every consumer wants to have as many choices as possible. That's why a successful company must not limit the scope of its e-commerce portfolio. However, he also highlighted the need for quality over quantity, offering relevant products and making sure that you are able to ensure that are in stock and available to purchase.

Price is another key factor customers consider important. The lower the better of course, but Ackerman also recommends removing purchase barriers such as excessive shipping fees and minimum order requirements. Ackerman's portfolio at Mondelez includes such brands as Oreo, Cadbury and Milka – products for the end purchaser only pays a few dollars. That’s good news for consumers. At the same time, however, buyers are very sensitive to any changes in these products, especially changes in price or packaging. Sales margins keep falling – is it even possible to make profit?

Like others, Ackerman has faced this dilemma. ""It was clear that from a profit point of view our online sales of cookies had to be by the box, the way they arrive at the warehouse. At the beginning, however, our eyes were bigger than our stomach so to speak, because only a monster would buy a 12-pack of Oreo cookies at a time. Over time, we found that the optimal size is four units. That allows vendors like Amazon or Walmart to earn their margins and but is also good business for us." Nonetheless, this has meant that Mondelez has had to change the packaging system across its portfolio of 147 production plants.

The third pillar of a profit-making e-commerce strategy is content. This might come as a surprise to many, but it is very logical. In e-commerce, merchants are not limited by shelf space; they can offer essentially an endless selection of goods. But in order to sell, they need accurate, complete and current details of what’s on offer across all communication channels in order to allow consumers to make informed buying decisions.

Ackerman used the Mondelez example to highlight the fact that it pays to invest in e-commerce content. Using integrated content, his team has been able to increase the conversion of Oreo cookie sales by 12%. In a business worth billions of dollars, such a figure translates into a huge surge in sales.

Search is the fourth pillar of the e-commerce flywheel, particularly optimised key word searches. According to Ackerman, it’s important to keep in mind that 88% of the world's population seems to be unable to spell correctly or do not know the correct brand names of products. "You wouldn't believe how poorly Americans spell. They spell the word "cookie" in hundreds of different ways and forms, in fact – and this is really shocking – only 11% spell the word correctly in searches," he said.

Companies should regularly review, enlarge and modify keyword lists for their products according to customers' knowledge and lifestyle. So for Mondelez to succeed it needs far more than just the word "cookie" in its key search lists, it needs to ensure the customers find the desired product even if the word cookie is spelt with two ks or the product described as “double chocolate wafers”.

Traffic is the final pillar of a winning e-commerce strategy. In this respect, Ackerman places emphasis on using merchandising promotions to generate higher product conversion that both allows companies to move surplus stock and creates a “halo” effect which impacts on regular sales. Ackerman also points to the importance of convenience, making things as easy as possible for the customer, including online shopping lists, wish lists, regular items lists, pick up and delivery options, and, of course, payment options.

Ackerman's inspiring presentation ended with a simple tip for success, "Buy cheap and sell where a given product is unavailable. And don't let anyone scare you with drone deliveries because they are still far from being a cost-effective transport method."

INNOVATIONS AT FM LOGISTIC

"We need to develop some form of cobotics management, rules that determine how humans and robots work together," said Pablo Gomez, Head of Innovation & Managing Director Iberia at FM Logistic, as he began his talk at the P3 Future Trends conference in Prague.

The relentless march of progress means that robots with a level of dexterity to match humans will be with us sooner than we think. Only recently, robots were still learning how to walk or to perform such basic tasks as lifting a box. Now, Boston Dynamics’ walking robot not only handles the level floors of a warehouse but also rugged terrain in the great outdoors. Even so, we will have to wait for another couple of years before the kind of "robo-partner" seen in the Robocop movies becomes a reality. "We have the basic technology, but we still need to invest a lot more into development before we see anything like that level of robotics," suggests Gomez

In order to avoid possible snags and roadblocks in the future, Pablo Gomez suggested that the market, and society at large, should consider the future of robotics and put in place a clear set of rules that govern the way in which AI development should continue, a "cobotics management" system if you like. "Humans want machines to do their work, so more and more often we will find a human and a robot working side by side. And yet, there are no rules for this. As a starter, we could at least make sure that robots won't harm their human work colleagues. From there we should agree other rules for how humans and machines work together. Right now, we’re finding out everything by trial and error," Gomez noted.

Pablo Gomez is also thinking about new tech-driven business models for 3PLs like FM Logistic.

"We are increasingly looking at the ‘sharing economy’, sponsoring start-ups that we believe have potential, such as Stockbooking, the first European platform for temporary storage that matches available warehouse space and companies’ warehouse needs, and Click&Truck, a B2B marketplace that links manufacturers with delivery requirements with transporters with available capacities in real time. We want to exploit the value of these capacities and incorporate them in our supply chains,“ explains Gomez.

"So far, we're still trying to work out how to ride the crest of the wave of change. There are so many opportunities. We want to be a part of the future – in fact, we want to play a role in creating it," Gomez said in closing.

How will people and robots work together?

What do we mean when we talk of evolution? Today, evolution isn't about technological advance as such. The evolution we are currently witnessing involves a dramatic social transformation, one that marks the beginning of a dialogue between robots and human beings. This topic was examined by Gustav Mistrík during his presentation at the P3 Future Trends Conference, where he spoke about interaction between artificial intelligence, robots and people.

Conference delegates were relieved by Mistrík's assurances that robots would only assist humans. He likened fears about hostile robots to concerns about mechanisation at the beginning of the Industrial Revolution. "No matter what, robots will improve and expand our options. They are and will continue to be an immense opportunity for undertaking complex tasks as well as monotonous work and dirty jobs, all of which could be eliminated through the work of robots," said Mistrík painting an optimistic future.

A widely respected robotics expert, Mistrik believes that artificial intelligence can never replace humans; and neither is it intended to do so. "Artificial intelligence cannot replace the human brain. On the other hand, the capabilities of robots will continue to improve and their productivity will grow. The development stems from the complexity of the robotic brain and neuron networks that are able to learn fast, to communicate with people, to interact and so on," Mistrík told delegates, adding "the robotic brain will extend people's abilities and underline the positive traits of their personalities, which is an opportunity for every human."

Mistrík is also a tech investor and, as part of his presentation, he explained the Metila Project to develop the way in which robotic artificial intelligence communicates with people over the Internet. In fact, the online world is where Metila continues to gain new knowledge and experience as regards social and cultural interactions. Metila already understands human values, cultures and social patterns. The robot is capable of supporting human education and facilitating personality development in the social context. And this is the main purpose of artificial intelligence – helping people. Mistrík believes that artificial intelligence will eventually become so advanced that robots will be able to think independently, draw conclusions and understand metaphors.,

Mistrik can see a future, for example, where robots will take over the work of human resources officers or the average lecturer. Metila is already able to use a dialogue to choose the right personnel for specific positions, so this future may be closer than we think.

BIG DATA AND VIRTUAL REALITY: WHAT WILL THE FUTURE BRING?

John Thornhill, Innovation Editor at the Financial Times, spoke at the P3 Future Trends conference about the ways in which innovation will change our lives in the next few years. The world may be abuzz with talk of Brexit, the refugee crisis or the US presidential elections, but Thornhill believes that it will be technology, rather than politics, that will shake the foundations of society as we know it and turn our world upside down.

"Let's face it, innovation is not what it used to be. Electricity, aircraft, nuclear weapons, computers – these inventions all shook the world at the time. But which would you rather give up first today? The latest model of the iPhone or the flush toilet?" Thornhill asked the audience. According to him, we live in a stagnating world whose governments no longer give priority to investments into new technologies.

However, innovation in the 21st century requires a more nuanced discussion. "The agenda will revolve around three things – godlike powers, immortality and bliss. Humans will create new life in the form of robots, they will almost double their own lifespan, and a large number of them will pop happiness pills to feel good."

Technically up to 10% of the population is already part-cyborg (thanks to pacemakers and artificial limbs) and artificial intelligence will clearly play a key role in determining the future direction of humankind. Thornhill confirmed: "During recent discussions, I asked the CEOs of four large corporations two straightforward questions – 'what technology do you believe will change the world?', and 'what technology are you most afraid of?'. They all gave the same answer to both questions – artificial intelligence."

Thornhill and the other speakers at the Conference agree that we are still some way away from a scenario in which robots walk among us. AI has become excellent in solving problems over which we've been wracking our brains forever, but is still hopeless when it comes to other tasks that we humans master without even really thinking about them.

"To this day, the Roomba vacuum cleaner – one of the most widespread manifestations of artificial intelligence on the market – is incapable of recognizing certain things which it should ideally avoid at all costs, such as dog poo. This leads to some very unpleasant results," Thornhill told an amused audience, though he hastened to add that many industries, from transportation to healthcare and education, to energy generation and distribution, will be profoundly transformed by artificial intelligence. "There'll be only two types jobs in the future: one group of people will tell robots what to do, and the other group do what robots' tell them to do," he said.

One intriguing chapter in the book of current innovations is virtual and enhanced reality. "You put on the VR goggles, stretch out your arms, and hey presto, off you fly, like Superman. But VR headgear also has its place outside entertainment, in the business world and particularly logistics. For instance, you can take a look around a warehouse or collaborate with people on another continent," he concluded.