Warehouse automation project budgeting can be tricky. There are a lot of potential costs involved. It is important to get them right (or close to right) so you can get project selection and payback right. Let’s review the major buckets of costs and how to estimate them.
Major Automation Project Cost Categories
Automation projects are completed at either a new (“greenfield”) site or at an existing (“brownfield”) site. In either case, there are common areas of cost to consider when budgeting for and approving automation.
Automation System
The automation system costs get a lot of attention. But there are many parts to the lump-sum number, and some parts of the total cost are not always on the proposal. The automation system often includes the hardware, software, installation, project management, and testing of the system. Some parts are taxable, some are not. Don’t forget freight and to read the scope inclusions/exclusions for responsibilities onsite.
Other important items to pay attention to that can affect the total price, is the quoted exchange rates or commodity indices quoted in a system price. Finally, consider whether there will be any financing costs involved. This may not be part of the proposal but can impact the total business case.
Facilities / Construction
All the work inside the 4 walls to make the system work. Big ticket items to pay attention to are power/electrical, slab work, building upgrades, and permitting. And, if you’re unlucky, fire suppression.
IT Applications
3 lines belying the complexity of the art and science of understanding all requirements, correctly integrating with the system, developing all features, and fully testing a new system. Often a capitalized cost in a startup. This is on the client side, as the automation system probably comes with its own controls and WMS. Support cost may come after testing and startup.
IT Infrastructure
The new system is useless without a network to communicate on. It needs servers, wi-fi or cellular, monitors, cabling through IDFs and MDFS, and the entire infra setup.
Warehouse Equipment
May be capitalized, may be part of operating cost. But in any case, these items need to be considered for how the system will integrate into the warehouse workplace. Railing, signage, mirrors, pedestrian traffic control, or various other items should be considered in the overall implementation cost.
Contingency & Risk Management
Last, let’s think about risk management. Include some contingency to ensure the budget can be managed through any surprises, risks, or changes.
Operating Expenses For The System
And that’s the capital. How about operating expenses? There’s a long list of items to consider for operating an automation system. Most cost comes from operating the system itself, but don’t forget about improvements and risk management.
And that’s it! A checklist to avoid being surprised halfway through a project (or worse, afterwards) with lots of unanticipated costs. It helps to do the diligence up front to meet the budgeting and business needs of the project.