Warehouse automation or automation within a distribution center (DC) can be implemented through various technologies, such as automated mobile robots (AMRs), pick-to-light systems, and automated sortation systems. As warehousing systems grow more complex, the need for technological assistance increases. While automated systems can improve output by reducing labor-related challenges, it’s not always easy to determine whether automation is the right strategy for your operation. If you’re considering automation for your business, consider these factors before making an investment.
1: Start with a plan
The first step is simple: plan thoroughly as if you were definitely going to implement warehouse automation. Demand planning and forecasting are essential in determining what tools are appropriate and necessary for your continued growth. A detailed demand plan will empower operations to source automation that is robust enough to handle all its needs. One of our partners at Radix once opined, “Going from Zero to Hero with a new AMR solution – if not synergized with upstream demand planning steps first – is fraught with unnecessary risk.”
A detailed plan will inform the automation budget, what type of automation and equipment will be best, and when the right time to implement may be. A detailed look into upstream needs can also help ensure the choice made considers future growth. If your operation is dealing with capacity constraints, use your projected order and product volume growth predictions to understand whether future growth will require your operation to automate to meet demand. Given the significant upfront costs of automation, ensure that demand constraints are cost-justifiable and not just a result of seasonal demand fluctuations.
The planning process will enable you to see what gaps your operations may be contending with and identify ways to address them, whether they be automation or not.
2: Assess existing infrastructure
Before investing in automation, audit your current systems to identify what works and what needs improvement. This is an opportunity to engage the operation’s IT team to assess all existing systems, be they enterprise resource planning (ERP) or warehouse management systems (WMS) for any vulnerabilities or potential weaknesses. Existing system issues can only hinder the automation process, so address them before adding new technologies.
Automation works by improving current systems, but that doesn’t mean it solves all issues within a system. Gaps or errors in existing processes and operations must be addressed before any automation is implemented.
3: Identify labor needs
Labor availability and cost have been a challenge in the supply chain industry for decades. According to Gartner research, 75% of surveyed supply chain leaders believe voluntary turnover will continue to increase over the next five or more years. It appears that recruiting and retaining a willing workforce will continue to be a challenge.
Determining whether labor availability is becoming a challenge for you can be calculated with a time-to-hire recruitment metric. Assess the amount of time between a warehouse job posting and the candidate’s acceptance of a job offer. The longer the time in that interval, the harder it is becoming to hire talent. This may be an indicator that it is time to invest in warehouse automation.
Rising labor costs are another reason to consider automation. Warehouse labor costs are typically 65% of the total operating cost. If your labor spend exceeds 65%, it may be a good idea to consider ways to cut down costs by implementing automation. Automation is especially helpful in that it can take care of mundane tasks, reserving higher-skilled tasks for the labor force.
4: Strive for accuracy
Accuracy is crucial to the success of warehouses. Most operations aim to have between 98% to 100% order-picking accuracy. If order-picking accuracy falls below 98%, consider investing in automation such as robotic picking, wave picking, or automated storage and retrieval systems (ASRS). With automation, there can be improved picking precision and fewer errors, which leads to increased customer satisfaction.
For operations in e-commerce environments, speedy order fulfillment is in high demand. For those companies, order fill rate metrics will provide insight into whether automation is necessary. The goal is to achieve over 99.7% accuracy. If the fill rate falls below 97%, chances are the operation can benefit from automation, like a WMS, barcode scanning systems, or RFID systems.
5: Protect your employees
Worker safety is imperative; your employees are your most valuable asset. Warehouses with ongoing health and safety challenges face the risk of losing current workers or inadvertently dissuading potential employees from entering the company to begin with. Warehouse work often involves physical tasks, such as heavy lifting, which can lead to injuries or worker fatigue. If you notice a high incidence of employee injuries, automation could help.
Robotics and automation can take on the more burdensome tasks of lifting and moving, reducing the risk of injury for your workers. Fewer injuries reduce insurance premiums and worker’s compensation claims while enabling employees to keep working to provide for their families. Employees take note of when their employers care for their well-being. An investment in technology that will help them stay safe will only help in retaining talent in the long run.
5: Calculate potential return on investment (ROI)
Implementing any kind of automation into an operation will require a significant upfront cost. As such, it’s important to calculate ROI before investing. In terms of automation, ROI is calculated by comparing the cost of purchasing and implementing the system with the financial benefits generated by its implementation, like fewer errors, increased productivity, and reduced labor costs. According to Gartner, the average time to ROI is between three to seven years. If your ROI calculations exceed this timeframe, it may not be the right time to automate.
It’s not always easy to calculate ROI, especially since so many factors affect overall spending, like the kind of automation, the complexity of the process being automated, the initial cost of the system, training, and many others. This is why it is sometimes best to work with a consultant, like Cornerstone Edge, who not only understands your operation but has experience with a wide range of systems.
Following these six steps will give you a clearer understanding of whether automation is right for your operation. Remember, even if warehouse automation isn’t right today, that doesn’t mean it won’t be at a later date. An objective consultant’s insights can help ensure your decisions are based on facts rather than assumptions. Whether you’re looking to automate, need a roadmap for success, or are moving into a new distribution center, we can help. Give us a call, and together we can make your supply chain your differentiator.