Up to the challenge

From the June 2024 print edition

In today’s business environment, where agility and efficiency are essential, technology’s role in supply chains has never been more important.

Amongst the advancements reshaping supply chains, automated guided vehicles (AGVs) have become more popular as a new business tool. AGVs stand out as a transformative force that’s changing supply chains across many industries. These autonomous robotic vehicles are revolutionizing manufacturing and warehouse operations, offering unparalleled efficiency, precision, and scalability. As businesses seek to meet the ever-evolving demands of e-commerce and hyper-competition, understanding the trends, benefits, challenges, and future applications of AGVs is essential.

Mariete F. Pacheco, MBA, PMP, is managing director at FRW Services Ltd.

Several key trends are driving the adoption of AGVs in supply chains: talent shortages, technology advancements, requirements for customizable and scalable solutions, and safety and reliability.
Job market challenges continue post-pandemic across many industries and disciplines, whether in skilled trades, logistics or warehouse operations. Regardless of inconsistent staffing, businesses must meet customer demands if they want to grow and some companies are looking to AGVs to address their talent shortfalls, either as a replacement or enhancement. Adding AGVs enables sustainable operations through avoiding the limitations of traditional labour forces like breaks, vacations, illness, or employee turnover. By automating repetitive tasks such as material handling and transportation, AGVs free up valuable human workers for more value-added activities, driving operational excellence and competitive advantage. The shift in human workers to move value-added activities, can provide improved access to talent as these roles often pay better and offer more challenging and dynamic work. AGVs can reduce labour costs from manual material handling, employee training and turnover, leading to substantial cost savings. The addition of AGVs can help to stabilize staffing needs as well as, once deployed, an organization can flex their use into or out of the operations pending business volumes or staffing changes.

AGVs are benefitting from rapid technological advancements, including improvements in battery life, sensors, navigation systems and artificial intelligence. These innovations enable AGVs to navigate complex environments and diverse conditions autonomously, making them suitable for a wide range of applications while allowing them to run longer between charges. AGVs are central to Industry 4.0, the fourth industrial revolution characterized by automation, data exchange and Internet-of-Things (IoT) technologies. By connecting AGVs to cloud-based platforms and other smart devices, businesses can get real-time visibility and supply chain optimization from virtually anywhere with a Wi-Fi connection.

Personal touch
As businesses strive to become more agile and responsive to customer needs, they are demanding AGV solutions be customizable and scalable, with modular designs and flexible configurations that adapt to changing requirements such as inventory characteristics, power needs, warehouse layout formats and more. The adoption of AGVs offers many benefits for businesses operating in manufacturing and warehouse distribution. One significant advantage of AGVs is that they can increase efficiency dramatically. AGVs can operate 24/7 with little-to-no downtime, improving productivity and throughput in manufacturing and distribution facilities. According to FRED, an AGV manufacturer, AGV affordability has improved with initial investments of US35,000-US$45,000, annual maintenance and operating costs of US$4,000, compared to traditional forklifts of +US$25,000 with annual maintenance and operating costs of +US$3,500 while compared to traditional labour costs of US$72,000 (including benefits) plus training and certification of US$2,000 (source: FRED AGV, September 2023. How Much Does an AGV Cost? www.fredagv.com/blog/how-much-does-an-agv-cost).

In addition to increased efficiency and cost savings, AGVs enhance accuracy and quality in manufacturing and warehouse operations. Equipped with precision navigation systems and sensors, AGVs can navigate with accuracy and avoid obstacles such as equipment, racking, employees or other AGVs, resulting in fewer errors, reduced damage to inventory, and improved overall product quality throughout the supply chain. Lastly, AGVs can optimize space utilization in facilities by operating in tight spaces, low light level areas and narrow aisles, something a lot of traditional material handling equipment like forklifts may struggle with. This can maximize the use of floor space and reduce the need for costly building expansions or relocations. By leveraging the benefits of AGVs, businesses can achieve operational excellence, driving growth and profitability.

Despite the numerous benefits AGVs can offer, their adoption also presents challenges for businesses. One of the primary challenges is the high initial investment needed for AGV deployment and implementation. The upfront cost of purchasing AGVs such as hardware, software, and potential infrastructure upgrades (including installing sensors, magnetic pathways, or IT networks) can be significant. This initial investment can be particularly daunting for small and medium-sized businesses who have limited financial resources.

The initial costs can also vary depending on the application such as assembly line AGV which replaces a fixed conveyor or overhead crane (generally pricier) versus an automated guided cart (AGC) which is ground level based and runs on a coloured or magnetic tape to move small, compact loads, as opposed to a forklift AGV which is similar to a traditional forklift transporting full pallet loads.

Complex integration
Additionally, integrating AGVs into existing manufacturing and warehouse operations can be complex and time-consuming. The process can require very careful planning, coordination and collaboration, with internal stakeholders and external partners (such as structural engineers, IT consultants, local government planning departments for building modifications, and so on). Businesses should also consider post-deployment the long-term maintenance and support requirements when adopting AGVs. These vehicles need regular servicing such as charging or replacing batteries, calibrating sensors and servicing moving parts such as wheels or tracks. Depending on the AGV, they may lack the flexibility and adaptability of human workers in certain situations. As well, businesses must ensure compliance with local and federal regulatory requirements and safety standards when deploying an AGV solution.

Looking ahead, the future of AGVs is filled with promise and potential as another evolution in creating robust, agile, and efficient supply chains. AGVs can be used to revolutionize last-mile delivery operations, facilitate intermodal transportation, and enhance remote monitoring capabilities. The North American market alone for AGVs is estimated by the Mordor Intelligence Group to reach US$5.56 billion in 2024 and a record of nearly $8.27 billion by 2029.

Enhanced range, flexibility and AI-powered optimization techniques are expected to improve the capabilities and versatility of AGVs, driving efficiency, productivity, and competitiveness across many industries. By embracing the latest trends, harnessing the benefits, and addressing the challenges associated with AGVs adoption, many businesses can reach new levels of growth, efficiency, and competitiveness in a rapidly changing global market. As the technology and adoption continues to evolve and improve, the future of AGVs will help revolutionize the way products are manufactured, stored, and transported. AGVs will undoubtedly play a pivotal role in shaping the future of supply chains by driving operational excellence and delivering value to businesses across industries.