Augmented Reality – a Game Changer in DHL’s Logistics?

From science fiction to real-life industry applications, Augmented Reality harnesses the potential to enrich our real environment by overlaying context specific computer-generated information to our line of sight. Although still in its infancy, could AR eventually empower logistics?

Logistics Market & the Arrival of AR

After DHL’s attempt to acquire Dutch parcel company TNT Express failed due to antitrust concern, EU approved its competitor FedEx’s acquisition of TNT in early 2016, which not only significantly increased FedEx’s penetration in Europe, but also it was put almost alongside UPS in terms of market share.

Logistics Providers Global Market Share [1]
In logistics value chain, warehousing operations are estimated to account for about 20% of all logistics costs, and the task of picking accounts for 55% to 65% of the total cost of warehousing operations[2]. DHL saw the potential to significantly reduce cost by improving the picking process with Augmented Reality, which can also help with the training of new and temporary warehouse staff who usually require cost-intensive training to ensure they pick efficiently and without making errors.

In the Vision Picking pilot test, pickers are equipped with advanced smart glasses which visually display digital picking list in their field of vision and the best route, reducing their travel time by efficient path planning. The automated barcode scanning capabilities can check whether the worker has arrived at the right location, and guide the worker to quickly locate the right item on the shelf. Over the three weeks of the test, 10 order pickers succeeded in fulfilling 9,000 separate orders by picking more than 20,000 items. The resulting productivity improvements and reduction in errors increased the overall picking efficiency by 25%[3] and cuts on-boarding and training times by 50%[4].

After completing a series of pilot programs across the U.S., Mainland Europe and the UK throughout different industries including technology, retail and consumer, DHL has now established Vision Picking as the solution for the long run, and they’re looking into additional applications for augmented and virtual reality such as training, maintenance, dimension calculations, transportation optimization, last-mile delivery and more.

A Game Changer?

Augmented Reality is a nascent business technology and it is not a game changer – yet.

Before AR devices (especially wearable ones) can be widely adopted in logistics, we need to overcome a number of technical and societal challenges including battery life, high investment cost, network performance issues, privacy, and public acceptance, etc.

DHL Supply Chain should deepen collaboration with partners Google, Vuzix and Ubimax to refine the vision picking solution and raise awareness for the potential applications in the logistics industry. According to Dr. Matthias Winkenbach, an MIT researcher with a Ph.D. in economics, augmented reality needs to gain more traction in the consumer sector before hardware and software that would allow supply chain managers to visualize data in 3-D gets advanced enough to be used inside corporations. Makers of hardware devices tend to improve the technology for commercial use when it catches on in the consumer sector. For example, the iPhone excelled as a consumer product, and is now a business tool that’s frequently used in the commercial sector[5] .

To further revolutionize the logistics business, DHL could implement a wide range of digital technologies — the cloud, big data, the Internet of Things, 3D printing, robotics, drones, and others. Together, they are enabling new business models, the digitization of products and services, and the digitization and integration of every link in a company’s value chain. For example, once the proper products are picked, they will be packaged for shipment by robots that can handle a broad range of product sizes while taking into consideration data on the product and the customer’s packaging requirements. Software will also control the internal warehouse environment, including setting the proper temperature, light, and humidity according to predefined requirements. By shutting off the lights and heat in areas where all the work is being done by robots and autonomous vehicles, for example, energy consumption can be reduced significantly[6].

More Challenges on the Horizon

Just as is often the case with new and emerging technologies, there are risks never seen before accompanying the tangible benefits. A recent KPMG study estimates that the risks stemming from AR and VR technologies could generate potential losses to the value of US$20 billion by 2020[7]. For example, what will happen if logistics workers suffer accidents whilst using AR smart glasses? Who will be responsible for securely storing ever more sensitive information such as location data? What shall we do with labor if warehouses such as FedEx reaches extreme automation?


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[1] Wall Street Journal. “EU Approves FedEx Acquisition of TNT Express” Jan.8th, 2016

[2] DHL Research Team. “Augmented Reality – changing the way we see logistics”

[3] PWC. “Industry 4.0: How Digitization Makes the Supply Chain More Efficient, Agile, and Customer Focused” Sep.7th, 2016

[4] PR Newswire. “Vuzix Smart Glasses Used in DHL’s Successful Trials, DHL Making Smart Glasses New Standard in its Supply Chain Logistics” Aug.2nd, 2017

[5] Wall Street Journal. “Augmented Reality to Revolutionize How Companies Manage Supply Chains, Says MIT Researcher” Apr.4th, 2017

[6] PWC. “Industry 4.0: How Digitization Makes the Supply Chain More Efficient, Agile, and Customer Focused” Sep.7th, 2016

[7] KPMG. “How augmented and virtual reality are changing the insurance landscape” Oct.19th, 2016


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Student comments on Augmented Reality – a Game Changer in DHL’s Logistics?

  1. Your article brings me a little hope that VR and AR may be a transition step between human relying systems and fully automated systems. Let me explain:
    Digitalization and automation are disrupting every industry, improving efficiencies, reducing costs and slowly pushing away humans from traditional jobs. The job landscape is changing and is doing so very quickly. One of my biggest worries is that the people that will be left out of job in their mid-40s, mid-50s don’t have the required formation to be able to rebound and find another job, as the only that will be left are those that require deep knowledge in areas such as computer science/ AI. I could not think of a solution until reading your article.
    I believe that AR and VR can be some “transition” steps in the road to automation, as companies would be able to increase their production efficiencies without dismissing their employees. AR and VR have also the benefit of not being as capital intensive as buying a wholly automated new warehouse, while still improving operations.

  2. Interesting read! I had never considered this use of AR prior to reading this article. The gains from the AR trial are significant, but I can’t help but wonder if AR is simply an intermediate step on the road towards full automation. If robotics technology renders the role of the picker obsolete, large scale investments into AR for the picking workforce may not be prudent. Full automation of the delivery business is certainly many years away, and DHL should consider which technologies it adopts as intermediate steps and which is views as the long-term solutions.

  3. I love the idea of leveraging AR to increase the productivity of people – it’s not something I’ve thought about prior to this. However, I struggle to see how this could be more cost-efficient vs. just using robots to do the picking in the long run (like what Alibaba is doing right now). As you rightly pointed out in the case, combining AR+humans is still subject to some element of human error and could result in injury (and hence higher costs due to insurance or mistakes). I feel that AR+humans would be better used in a situation that is more liable to subjectivity and human error, but where machines will never be as effective – perhaps in the packaging process for fragile items or where the aesthetics of the packaging would matter more.

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