Given that prices are continuing to increase alongside customer expectations, lowering warehouse operating costs has become a growing priority for most distribution centers and any business that finds itself "storing stuff." There's much more associated with the cost of warehousing than just space. Warehouse costs involve obvious factors like rent and utilities, but also other elements such as productivity, accuracy, and safety.
Of course, most businesses have thought about warehouse automation. But, there are many misconceptions around automating that tend to make it seem scary and expensive. The truth is that it's completely achievable and affordable. Here's what you need to know about the true cost of warehouse automation and what it can do for your business.
What is Warehouse Automation?
Warehouse automation is the process of automating the movement of inventory into, out of, and within warehouses with minimum human assistance. When implementing various automation solutions, warehouses can reduce or eliminate labor-intensive tasks that involve manual and repetitive physical work.
For example, a warehouse employee may place picked products on an autonomous robot that moves the items from one end of the warehouse to the other. The robots improve the speed, efficiency, and reliability of this task. This is an instance of physical process automation.
In digital process automation, a technology solution will replace a worker's manual task. One example is using RFID tags to identify, record, and track inventory within the warehouse instead of doing so manually.
Facts About Warehouse Automation
Warehouse automation can help your business address labor shortages, inefficient operations, and insufficient space issues. Online sales of retail goods are predicted to approach over $500 billion dollars in the next year, increasing the demand for warehouse services.
A majority of warehouse operators recognize that cost-cutting measures are vital to successfully balancing the challenges of the current labor market and supply chain with the need for more services and space. But, does it make sense to spend money to do this? In short, yes. Failing to plan for inevitable trends in this sector is likely to cost more than the expenses associated with warehouse automation.
How much can warehouse automation save a business? Here are just a few facts as illustrations:
- Labor costs make up, on average, about 65% of most warehouse operations operating budgets.
- The typical American warehouse has grown in size to larger than 180,000 square feet.
- Over 2.3 billion square feet of new warehouse space will be required by 2035.
- On average, retail inventory is only accurate about 63% of the time.
- According to one warehouse survey, the largest challenges faced by these operations are insufficient space, unqualified workers, outdated equipment, and inadequate support systems.
- Pick-to-Voice, RFID, and Pick-to-Light solutions reduce picking error rates by up to 67%.
- Increased use of robotic has the potential to drive up to a 30% reduction in average labor and manufacturing costs.
How Much Does Warehouse Automation Cost?
As a business, your bottom line matters. Understandably, you want to get as much information as possible about the cost of automation so that you can make an informed decision. Your ultimate cost will vary depending on the type and level of automation you choose. For example, a full overhaul of a large warehouse operation that wants to go "lights out" can cost tens of millions of dollars. But, that's pretty radical, and most businesses opt for progressive measures that assist their workforce instead of completely replacing it.
Figuring Out Warehouse Automation ROI
Most organizations don't make radical changes without first using some automation solutions first. To determine if a particular strategy is right for your business, begin by calculating your estimated return on investment (ROI).
Start by estimating the budget for your current warehouse equipment and existing labor, including any expected annual increases. Next, factor in your average turnover rate for workers as well as the cost of hiring and training new staff. Then, determine the purchase price of the warehouse automation solutions you'd like to implement, such as wireless infrastructure, voice technology, or RFID tags, and figure out how those solutions will save you money when it comes to labor, maintenance, efficiency, and productivity. You can then compare those figures come up with an estimated ROI for your warehouse automation solution.
How Warehouse Automation Impacts Other Operations
The above discussion on figuring out ROI might be a bit simplistic. In truth, automating functions within your warehouse can have far-reaching consequences - in a good way. For example, if you upgrade to a warehouse management system (WMS) that automates many of the tracking and record-keeping functions in your warehouse, how does that impact other functions in your company? Will you save resources and time that might improve cash flow and relationships with vendors? And don't forget about customer service metrics. If your operations become more efficient, imagine what that will do for the overall customer experience.
Rules to Follow When Investing in Warehouse Automation
Of course, some businesses automate quickly and completely, and the results might be less than desirable. Automating your warehouse in a way that gives you the best return on your investment requires a deliberate plan. If you want to get the best results from your warehouse automation strategy, follow these simple rules:
- Take a long view. Don't expect a complete return on your investment overnight. Most successful warehouse automation strategies involve progressive steps implemented over time. With the right technology options, you'll get the results you want and need.
- Choose high-quality equipment. Low-cost is not the way to go when it comes to automation. Any initially perceived cost savings are likely to be replaced quickly by costly repairs or inconvenient downtime.
- Involve staff early. Avoid waiting until just prior to implementation to involve your warehouse staff in the project. Get them involved early to ensure buy-in and increase the chances of success.
- Choose the right partner. Find a warehouse automation partner that specializes in this sector. They will understand your businesses' pain points and make sure that your unique requirements are met at every stage of the implementation.
If you're thinking about implementing warehouse automation solutions, the upfront cost shouldn't be a deterrent. When you calculate the ROI of these solutions, both short and long-term, you'll quickly realize why they are superior to manual systems. Find out more about how automation solutions like mobile workstations, voice tasking, and RFID can give your warehouse operation the results it needs.
