IKEA's Journey with Warehouse Drones

“Flying drones in a warehouse? But why?” I was instinctively skeptical when I first heard of drone startup Verity’s idea to fly drones in industrial warehouses. A few years later, more than a hundred Verity drones fly in IKEA’s warehouses worldwide. Here’s the lesson I learned.

See also: Netland, Maghazei & Lewis, A better way to pilot emerging technologies, *MIT Sloan Management Review*, Summer 2023, p. 5-7

Where’s the business case for warehouse drones?

Verity—a state-of-the-art drone technology company based in Zürich—had the idea to count and check inventory regularly and automatically. A job that is notoriously tedious and labor-intensive. Perhaps drones could replace this job task, freeing human warehouse workers for more intellectually demanding work?

It may sound like a pretty good idea, but any professional in industrial operations knows it has several problems: First, solve the root cause, don’t patch technology on problems. If the inventory records are wrong, there has to be a better way to ensure they aren’t. Second, if you have single-stack racks, you might fly a drone to read a barcode on a pallet, at least if it is clean and oriented outwards, but you can’t look into the box on the pallet. Third, you may save human counting hours, but you pay the costs of administering, integrating, and maintaining the drone technology. And fourth, if you find errors, you still need a human to fix the mess. Not even mentioning privacy, noise, and safety issues with drones. Overall, the business case for drones in warehouse operations doesn’t look amazing at first sight.

Most companies adopt new technologies by estimating their potential business value, then testing their hunch in a pilot project. Making this kind of estimate—a business case—sounds like a logical way to make an important business decision. However, our investigation into drones in IKEA’s warehouses taught us that it has one drawback: it seldom works with cutting-edge technologies!

The useful use case

The business case approach can work for traditional upgrades of technology already being used, such as an industrial robot, a CNC machine, or a new warehouse management system. But how about an emerging technology, such as drones? Can we expect such cutting-edge technologies to follow the same pattern of technology adoption as more mature technologies? The experience of IKEA and other companies that have successfully adopted drones and other Industry 4.0 tools suggests that the answer is “no!”

A better approach for emerging tech is to apply it to solve a critical business problem—to focus on a “use case.” The use case for IKEA was clear: replace manual counting and control with drones to achieve better inventory accuracy. There was no doubt that this was an important use case for IKEA. Monitoring inventory is a labor-intensive and costly operation in retail, and that’s not even considering the cost of frustrated customers who travel to the warehouse only to find they can’t go home with the Billy bookcase they wanted. Despite IKEA’s years of technology development and practice, human errors inevitably creep in at a company that moves thousands of pallets daily in its warehouses. By finding the errors, drones can lessen this pain.

From pilot to scaled implementation

IKEA began with drone pilot projects in Italy and Switzerland. Initially, IKEA’s logistics team tested different drone solutions from vendors that offered different technologies with different advantages. Notably, IKEA put a global team in charge of coordinating all pilots. A global team can keep a bird’s view on the problem-technology match, better see where potential technologies can be scaled next, and avoid suboptimization related to local standards and solutions. The pilots allowed IKEA to identify the benefits and drawbacks of the drones while the vendors iteratively improved the technology to fit the specific use case better.

Today, IKEA is scaling Verity’s fully autonomous inventory control system, improving inventory stock accuracy by letting the drones fly autonomously, scanning pallets on nightly reconnaissance missions. In one of IKEA’s Swiss warehouses, Verity drones fly at night to check the locations of all pallets that have been moved during the day, and on Sundays, to all pallet locations—providing up-to-date insight about IKEA’s stock status.

A Verity drone checking inventory in an IKEA warehouse (credit: Verity)

From use case to business case

What can we learn from IKEA’s adoption of drones? Faced with such fast-emerging technologies as drones, companies should not only follow the traditional technology adoption approach based on project accounting methods. Focusing too early on the business case may lead to many missed opportunities.

Instead, companies should focus on a “use case,” which allows a solid business case to emerge over time (see Figure). A good use case is usually not hard to find; technology vendors often provide long laundry lists. The challenge is to pick the right problem. Identify a key problem like IKEA’s inventory management challenge and apply a solution that cost-efficiently solves the problem.