Warehousing automation’s high return-on-investment has made it a popular subject in the world of logistics. A properly executed shift towards automation can provide several benefits for companies in the long run, in addition to a hefty return on investment (ROI). There are many reasons a business may choose to move forward with automating their facilities. Some popular cases include fulfillment accuracy improvement, lower labor costs, and streamlined operations. Let’s take a look.
But before getting started, it’s important to identify your warehouse’s individual needs. Automation solutions are dynamic and your results can differ depending on several parameters. These might include warehouse layout or design, material flow processes, and budgetary or financial standards.
Opportunities With Automation
A study conducted by McKinsey & Company shows that most companies are spending much more than they need to on warehousing operations. The study concludes that with proper analysis there are often solutions that can save businesses 15-20% of their operations costs and identifies automation systems as a potential means of improvement. Identifying the scope of a warehouse’s needs can help narrow down the processes that would most benefit from adding automation and can help maximize return on investment in the facility’s lifetime.
These benefits must be weighed against the costs of implementing the automation system, including the capital cost and ongoing maintenance. But over the long term, automating processes tends to pay back and reduce the risk profile of the operation.
Automation Lowers Direct Costs
The most compelling case for automating a process is to lower direct labor cost. Automated systems don’t need to take breaks. They work constantly as long as they are maintained and have power. They can be depreciated to zero, whereas labor cost remains forever.
Each process needs to be evaluated for its own automation opportunity. Usually this compares the initial capital outlay for robotics to the labor savings over a 3, 5, or 10-year period to see whether the investment makes sense. In many cases, the robotics will pay off.
Some vendors are even offering “robotics as a service” for picking or handling automation, which can change the payback profile. But the idea is the same: manage and reduce the direct cost per transaction in the warehouse. A good example of this is Burro, a robotics company that specializes in agricultural automation solutions. They claim a fleet of their System One robots enables 8-12 people to produce 43% more boxes of fruit each day. Burro creates collaborative robots designed with people tracking capabilities that can navigate rough farm terrain, scout rows of plants, and hold additional crops exceeding the quantity the human picker would be capable of carrying. Burro sells this concept as a service, pricing each unit at $2099 per year.
This pricing model eliminates the burden of a massive down payment, making warehouse automation more accessible. The perks of this concept go beyond the initial costs.
inVia Robotics is a company more adept to automation in traditional warehouse environments that also offers robotics as a service. Their primary selling point is their user friendly services. inVia handles system operations, maintenance, integration, and everything in between creating a practical option for a company that may have little to no experience with automation.
Adding savings from quality, soft costs, and risk management make the investment even more attractive.
Automation Leads to Quality Savings
One of the instant returns you’ll see from a transition to warehouse automation is immediate improvements in order accuracy. There will always be margin for human error in traditional warehouse settings, no matter how talented or accurate the picker may be. As the shift progresses and fatigue increases, the human picker becomes less accurate over time. Automation brings precision to the outbound picking process, to an extent that no human can replicate, with robotic cranes and automated guided vehicles picking at practically perfect rates at all hours in a day, with no buffer for a decrease in accuracy. This has immediate effects.
To start, an uptick in accuracy will yield an improvement in customer satisfaction and will help create a sense of trust between the customer and the business. The effects of good quality also impact into operations costs like picking. More accuracy in fulfilling orders means fewer returns. Any product sent back to the facility processes through the material handling system all over again, similar to product that comes from production. Returns and restocking requires time, attention, and labor to reintroduce merchandise within the facility and have it flow through the outbound process yet again.
Over time, returns can add up, especially at high volume facilities so saving your operations from the added time, attention, and labor that comes with the burden of returns can certainly go a long way.
Automation Lowers Overhead “Soft Costs”
While there are many reasons to consider a shift to automation, the one that comes to most people’s minds when having this discussion is the reduction of labor costs. On the surface the concept is simple: over the long-term, the cost of automated robots, vehicles, and infrastructure will end up less than paying hourly labor wages.
While that may be enough justification, the benefits run much deeper. The economy is unpredictable, and throughout the pandemic we’ve seen a labor shortage like no other that has not only left warehouses understaffed but has also overworked and overwhelmed the current workforce in operations settings. By not relying on human labor, automated processes can mitigate such environmental factors that create inconsistencies within the workforce.
This also applies to seasonal peaks. Companies desperate for labor are forced to pay hefty overtime wages and seasonal temporary workers. Automation can help keep these costs level.
While the decrease of direct labor costs alone is enticing, reduced direct labor also leads to a decrease in overhead costs. With the safety and precision of automation systems, a much safer work environment means less spent on health and safety. Implementing automated systems can reduce unsafe ergonomics and fewer injuries on the job. In the long run, this creates a safer overall work environment. And a safe work environment not only breeds a better culture among current employees, but creates a more desirable place to work.
Automation can be a great means of achieving a streamlined operations process. The decrease in overhead costs isn’t limited to what takes place on the warehouse floor. Fewer full-time employees lead to fewer full-time benefits packages that need to be distributed, as well as less support from the Human Resources team. With how expensive automation can become, the uphill climb to breakeven on your investment can seem daunting when only taking direct labor costs into consideration. However, with the thousands of dollars saved on overhead costs, the investment can become very profitable in the long run.
Conclusion
Warehouse automation come a long way and still has huge promise. The technological advances in guidance systems, data processing, and robotic articulation will enable automation of more processes for more types of products. These will save tremendous direct costs and improve operations quality and customer experience.
But the benefits are not a given. Robotics are still expensive and require detailed analysis and design to make sure they work for a facility. Otherwise, the automation may not deliver the benefits the operation signed up for.
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Author: Adam Murphy , Supply Chain Consultant at PL Programs
If you have high labor costs and quality issues, you might benefit from automation or a warehouse process assessment. Visit PL Programs at warehouseimprovement.com to learn more.