Risks of New Technology in Warehouse Automation Projects

Automation projects in warehouses and distribution facilities can yield substantial returns in the long term. That being said, new technology often introduces new risks. Let’s break some of these risks down, along with ways to mitigate them.

Warehouse conveyor with cases
New technology comes with benefits and risks

Unfamiliarity With New Technology

Technological advancements in the world of industrial automation can remove many laborious burdens within a warehouse but they do come with complexities in functionality and design. Being unfamiliar with new warehouse automation technology can make it difficult to identify the correct solution for your needs. This can lead to a lack of clarity when seeking out solutions and may result in misdiagnosing areas for improvement.

Further, may technologies have their specific best use cases and limitations. A lack of familiarity with these limitations may result in unpleasant surprises down the road.

What might this look like? You may implement a solution for your facility, finding out only later that it doesn’t solve the original problem or improve the process it was intended to. Perhaps the technology does exactly what it was sold to do, but you thought it would do something in a different way or you had a different outcome in mind.

This can lead to additional expenditures that far exceed the original cost of the solution, to fix, repair, or implement an entirely new solution for your facility. The last thing anyone wants is to spend money fixing a problem that may not exist, especially if it takes more time to recoup initial expenditures spent.

There are ways to properly navigate this risk. First, it’s important to properly identify your facility’s individual needs and use case for automation. These requirements should be very detailed, including numerical data to back them up, such as required throughputs, picking accuracy, and include non-functional requirements such as response times, usability, and “how” the result is accomplished.

whiteboard with engineering

Using this information, it’s then time to conduct analysis on whether an automation solution is right for you and your facility. There are risks in both implementing new technology and staying the same, so it’s imperative to identify them in order to make the best informed decision on whether to make the change.

Once the requirements are clear, it is useful to speak to industry experts. A wide array of vendors and consultants will not only be able to help provide more clarity to the solution you’re seeking, but also provide specific examples of suitable technology. Utilizing venues such as trade shows and site visits to meet industry experts and established vendors can increase your awareness of available technology options.. Witnessing the technology at work firsthand, along with the quantitative data, is a great way to learn what specific technologies can do.

If a third-party trade show or site visit doesn’t qualm the fears of uncertainty, it might be a good idea to reach out to a vendor for prototyping. Prototyping, or testing a solution in-house on a smaller scale, can demonstrate what an automation solution will look like and what it will do in your facility. This might include on-site testing or visiting a site that has the technology in operation. Testing new technology with your team present will not only remove uncertainties for you and senior management, but also for the operations and IT staff that will be monitoring and managing the equipment on a regular basis.

Large Capital Expenditures

One of the more daunting matters of transitioning to warehouse automation is the burden of justifying the cost. Large-scale automation projects can be very expensive, with payback calculated by the amount of manual or other labor saved. The Return-on-Investment is very important, and if the payback doesn’t materialize, then the big dollars spent could have been better used somewhere else.

There are ways to lessen risks of not achieving payback. The first is solid analysis of the need.

Second, the returns on large-scale automation projects can be massive, depending on the payback period and how the company decides what is worth investing in.  Some companies want short payback periods so that the return on investment is immediately high. Other companies approach automation and new technology from a strategic point of view of reducing complexity, reducing risk, or enabling flexibility, and will accept longer payback periods. The investment and operating philosophy will dictate what levels of investment are tolerable for the organization.

Due to the low(er) operating expenditures required, automated solutions can create far more savings than manual labor processes in the long run. The longer an automation solution is operational and the higher its utilization, the longer a company is going to save on operational costs. Creating a long life and high utilization for your automation solution is going to help a business cut operational costs and maximize savings. You can do this by planning for a robust preventive maintenance program.

If the cost of a system or technology is too high, there may be other options for financing.

Cutting-edge technology tends to be more expensive and less reliable, so waiting for the technology to mature may reduce costs.

Also, there are vendors in the industry who offer “robotics as a service.” Instead of large up-front costs for installation, companies are charged based on a subscription model where a business may pay monthly or yearly fees for a vendor’s technology, with support and maintenance included. Although this changes the payback model from a large capital investment to an operating cost driven by unit economics, this route can still create substantial savings in operations by avoiding direct labor costs.

New Tech Affects Employees

It’s no surprise that new technology is going to have implications for your current employees. In fact, this is an issue that clouds the industry with negative publicity. New technology that takes the place of the current labor force can cause mass layoffs within a business. Not only does this create a period with high turnover, but it can also be a recipe for disaster when it comes to bad press.

There are effective ways to integrate new technology into an operation. A best practice to mitigate this risk is to offer team members opportunities to stay within the company working in different roles. There may be other facilities or departments where these team members’ skills may be necessary, where the staff are needed. Or they may be retrained to other positions in the company. Looking for ways to keep employees allows the company take advantage of employee experience and instill a culture where the employees feel valued despite the evolving role of technology. All this leads to higher retention rates.

Whether or not all employees will be retained, nobody should be surprised! The company must plan for the impacts to the team. This should include planning for communication, re-placement, training for automation integration, and if layoffs occur, having a detailed plan for notification, compensation, and employment assistance.  For example, phasing in the new technology may be a way to reduce layoffs by allowing natural attrition to occur. It’s a lot less concerning to lose a few members of the workforce normally each quarter than it is to see the number cut down all at once. But if a layoff has to occur, companies should thoroughly plan it with the affected employees’ interests in mind.

New IT Applications & Infrastructure

            Depending on a vendor that is selected in automating your facility, you will likely encounter different technological interfaces that are integrated with the automated solution. New IT interfaces can be a scary thing for any facility regardless of any other changes. One way to ease the transition to the new IT system is to ensure there’s extensive training built into the vendor services agreement. That way, as the ramp up period occurs,  Everyone is competent and able to operate the WMS and any other IT interfaces that may come with it. No one gets left behind.

            Another risk when adopting new automation solutions and systems is support from the counterparty. New solutions that are tailored specifically to a facility will require extensive support. It is important during the procurement phase to understand whether or not a vendor is able to support the solution, and for how long. Without vendor support, your IT staff can be left completely in the dark dealing with technical issues on infrastructure they may not particularly be familiar with.

More often than not, technical departments for a logistics or distribution company are not equipped to troubleshoot and problem solve on completely new interfaces and applications by themselves. This is why it’s crucial to establish a robust support plan with the vendor for the automation solution. This can help save a facility from unexpected downtime and unforeseen technological shutdowns.

Maintenance Management

            Maintenance is another topic to carefully consider when contracting with vendors. With most automation solutions, there’s usually periodic maintenance as well as instances of unplanned maintenance. But with a new technology, all the maintenance requirements might not be apparent until the system is installed in operating conditions.

 Unplanned maintenance can completely shut down production for a period of time. In order to mitigate this risk, it’s necessary to have the maintenance management processes coordinated with the automation vendor and embedded into the integrated IT solution. This will help ensure production isn’t shut down for any longer than necessary.

            An additional consideration here outside of active maintenance is spare parts. Over the life span of a new automation solution it is certain that parts will need to be replaced. Discussing this before signing any contracts can save a lot of headaches down the line. If the vendor is already prepared for maintenance or replacement on parts before problems arise, it can result in fewer shutdowns and less downtime in the long run, maximizing product flow and operational consistency. Having a spare parts maintenance and replacement plan within the vendor contract will keep your facility proactive and healthy, with up-to-date equipment always being implemented and attended to.

Timing & Opportunity Cost

Technology is changing rapidly. Nonetheless, it’s an important piece of information to keep in the back of your mind when evaluating new technology within your facility. These automation solutions have long lifespans which makes their payback attractive but can lead to technological lock-in.. Anyone exploring automation should attempt to understand the technological trends, not only what is available to the client in the present day, but where the technological advancements may be headed, and when.

            Reaching out to a wide variety of vendors and industry experts is key here as well. Doing so will help you stay current with the technological trends. Hypothetically, you may think you’ve found your ideal solution now, but you also run the risk of missing out on cutting edge innovations that may be available a year or two later. It’s not ridiculous to imply that certain innovations could not only save money in the long run but may also be more effective and efficient when applied to your facility and its given needs. Jumping the gun on a solution prior to cutting edge technological innovations can cost facilities hundreds of thousands of dollars, perhaps even millions in the long run over the facility’s lifespan.

Security Risks

Finally, there is also the risk of security breaches and data breaches. As warehouses increasingly rely on newer technology and adding many systems, there is a growing risk of cyber attacks that can compromise sensitive information and disrupt operations. It is important for warehouses to have robust security measures in place to protect against these risks.

This is especially important when automation controls or data repositories are stored in off-premise or connected environments. The security plan for the automation integration must seriously consider security and what happens if a breach occurs.


Introducing new technology into your warehouse or facility can bring an array of new risks and challenges to the table. One thing to keep in mind is many of these risks can be mitigated , and not as distressing as they may seem at first glance. Through careful planning and analysis, the introduction of new technology and a transition to automation can happen quite seamlessly, with results that are difficult to contest.

Credit to Adam Murphy for this post.

Leave a Reply

%d bloggers like this: