Let’s Talk Warehouse Automation ROI

An ROI on warehouse automation isn’t always automatic. Companies need to do their homework before flipping the switch. That due diligence process was one of several aspects of warehouse automation ROI discussed during a recent episode of the Unboxing Fulfillment Podcast. Host Chad Warzecha tackled the issue during a conversation with Lori Gibson, Director of Consulting Services at Hy-Tek Intralogistics Consulting.

Here are some excerpts from the conversation, along with commentary.

“Think out your process before thinking about automating.”

Even before considering any automation, Lori says to make sure you’re getting good productivity, good throughput and strong utilization of the assets that you already have. Why invest if what you already have is sub-optimized?

“People get excited by the shiny object without making sure it has a payback”

Lori discussed a recent client that asked for a capacity optimization analysis after they had bought a high-end, goods-to-picker type system. It was sitting in the middle of their distribution center unused. Lori’s team gave the client the bad news that it would take 10–15 years for the system to pay for itself. “I don’t think that they ran the numbers before purchasing it,” she said.

“Understanding how products flow through the facility helps understand where you can use automation.”

It's good to look at your overall operation even before you start planning automation. Start with that process map. That will help you understand the best places to use automation and how. Or, frankly, how to achieve the desired output without automation.

“Process optimization and technology assessments can be done at the same time.”

You don’t necessarily have to delay looking at automation systems until baseline process mapping and optimization is complete. You can do them at the same time, which is good news for operations that are anxious to automate.

“We’ll come in and do a process automation optimization and, at the same time, determine what types of technologies might work best for your operation,” said Lori. “Then we calculate the ROI to help determine if it makes sense.”

“With increasing labor rates, companies are finding it easier to justify some technologies than they used to.”

Today, companies just cannot find enough warehouse workers and many have reached the ceiling on how many people they can employ. This challenge is a major trigger for warehouse automation projects.

Even though technology prices have gone up, companies are less inclined to experience sticker shock on high-end automation equipment because the alternative is a larger and more expensive workforce – and, unlike equipment costs, those labor costs never go away.

“Warehouse automation can allow you to scale in the same footprint.”

Labor savings is not the only driving force behind warehouse automation ROI. Making the most of available space can be a huge factor, as well. For instance, if an automated storage and retrieval system can be installed that gets more throughput in less space, then it might be possible to avoid expanding the warehouse or having to open a new distribution facility.

With real estate prices and rents at historic highs, we’re talking about savings in the millions, potentially. It’s an aspect of ROI calculation that many do not consider – the costs you avoid.

“To get C-suite approval of automation investments, know your numbers and have the backup to defend them.”

Developing that great business case is super important. Show company leaders what their savings will be and have all the background and all the backup to prove it. Know your baselines – cost, throughput, productivity rates, accuracy – and what the improvement will be post implementation.

CEOs and CFOs are numbers driven so lead with ROI. But don’t leave out the qualitative stuff. Greater accuracy, happier customers, easier training… These are great benefits you want to highlight, even if they aren’t part of your ROI formula.

“Don’t delay action in anticipation of the next great thing.”

Companies worry that the technology they pay for today is going to be yesterday’s solution in a year. There will always be improvements in technology year to year, but those improvements are typically incremental and not revolutionary. “It's okay to invest in a technology that you feel really good about,” Lori said.

3PLs and Warehouse Automation

Outsourcing to the right 3PL can bring you the productivity-enhancing advantages of the latest automation technology without the large capital investments. Staci Americas writes often about automating order fulfillment, addressing questions like:

• What level of automation makes sense for you?
• How can warehouse robots address labor challenges?
• How can Robots as a Service allow you to automate without a big cash outlay?

To learn how partnering with a fulfillment 3PL can help you access the latest automation to improve fulfillment operations, talk to a Staci Americas specialist.