When Amazon acquired Kiva and took it in-house in 2012, it left a hole in the market for robotics to augment human warehouse workers. Since then, there has been an explosion of tech companies creating alternatives to serve large retailers. While the arms race does not have any clear winner, or even a consensus on how the concept is best implemented, the market has become hyper-competitive and there is little room for an early-stage company to enter the fray.
There is another market, though, where the same technology can become immensely valuable but has yet to take hold. When a flight lands, you can look outside the window and see a team of men unloading baggage from the plane, loading it onto a truck, and driving it to baggage claim. In 2017, it is unimaginable that this could be the most efficient possible process. By introducing internet-connected robotics to the baggage system, airports could save money, speed up processes, and greatly improve customer service.
Smart Robotics System
The introduction of a robotics system into airport baggage could provide value in a number of ways. The first, and most obvious, is by reducing the amount of manpower that airlines need to hire (more on this in the next section). Moving fifty pound bags for long shifts is not a job that humans are designed for, and machines will be able to do the job in a cheaper and more efficient manner.
A network of smart robots, though, could have an even more disruptive impact on how baggage is handled. Some airlines are already beginning to equip baggage with RFID labels, and robots would be able to instantly scan each bag they touched and constantly interact with each other and keep track of every bag in transit. They would also be able to quickly organize the bags, which could revolutionize baggage claim and make rerouting bags far more efficient. Worldwide in 2015, 23.1 million bags were mishandled, a large improvement over 2014 but still far too many, and smart robotics would greatly reduce this number. Lastly, robotics could improve the manner in which bags are handled. Employees today whip around bags that are too heavy for them to efficiently handle, and a powerful machine could gently place bags where they belong.
As of 2010, the Bureau of Transportation reported that airlines employed 29,471 workers for “cargo handling”. While they haven’t reported employees by segment since, they have continued to report the number of total employees, which has grown by 29% in the past six years. Assuming the same growth rate for cargo handlers gives an estimated 38,000 cargo handlers today. Assuming a $10 wage and an average of 30 working hours per week, airlines pay cargo handlers approximately $600MM per year, before additional costs such as health insurance and workers compensation. Of course, robotics would not entirely replace this workforce, but would vastly reduce its size.
Barriers to Entry: A Curse and a Blessing
While a robotics innovation will eventually revolutionize the way airlines handle baggage, when such an innovation will arise is less clear. The reason for this is that there are significant barriers to entry in the industry. Any innovation to be used in an airport will surely require a security clearance which comes through a difficult process. Furthermore, disrupting the entire current system and putting in place a new system will be an expensive and time-consuming endeavor for airlines to undertake. Lastly, the innovation is sure to face opposition from airport workers across the country that risk being displaced by its implementation.
While these barriers to entry initially pose a problem, they will ultimately prove useful to the company that is able to surpass them. Once a company has established a network of robots and an infrastructure for effectively moving baggage with security clearance, it will be very expensive and difficult for competitors to break into the market. Furthermore, as one airline implements a smart robotics system, other airlines will be hard-pressed to adopt a similar system as quickly as possible or risk being left out to dry as its competitors advance beyond it technologically. Once a robotics company can break into the world of baggage, the upside is massive.