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Supply Chain Challenges, Warehouse Operations, Reduce logistics costs

Warehouse Automation and Robotics: A Practical Perspective

Jim McMurphy, CIO | November 04, 2021

The logistics industry is in the grips of a disruptive labor shortage. Along with the truck driver shortage, reliable warehouse workers are also hard to find and keep, and wages continue to rise.

Warehouse automation, mechanization and robotics can be part of the answer to the warehouse labor shortage, but they can’t be universally applied. We need to assess automated solutions in the context of key operational characteristics to ensure investments will have a proper return.

We’ll get to that.

warehouse-automationLet’s start, first, with the obvious upside of automation. During a pandemic when warehouse labor rates are skyrocketing, robots and conveyors don’t come down with COVID, they don’t call out sick, they don’t ask for a raise, and they don’t quit to join a competitor for 50 cents more per hour.

These obvious advantages are why interest in robotics and automation has spiked among executives, like you, who don’t want your operations (or those of your 3PLs) compromised by inadequate staffing. Also, controlling labor costs and ensuring the reliability of capacity is an ongoing challenge.

Automation is certainly one answer.


Warehouse automation can help mitigate labor shortages, but…

Warehouse automation provides many benefits, but it can come with a steep price tag. And, given today’s disrupted supply chains, equipment is often unavailable. Equipment costs were coming down pre-COVID, but are still high based on the capability and flexibility of the potential solution. A running average for automated Material Handling Equipment – the kind used in warehouses – will run you anywhere from $150,000 to $200,000, so an investment in warehouse robots needs to make economic sense.

Here are several characteristics that need to be in place to make robots a practical choice in the warehouse:

  • Repeatable process. Unlike humans, the same robot can’t jump from case picking to full-pallet movement to unloading a truck. You need a steady flow of the same activity. Even if the activity is the same, like packaging, if you often change the way that packaging gets done, you’ll still struggle to make robots deliver a good financial payback.
  • High volume. In addition to the previously mentioned cost of warehouse robots, there is overhead associated with programming and integrating them into your distribution center. To account for all those costs, you’ll need to deploy at least 5 pieces of automation aimed at the same repeatable process for the investment make sense.
  • Current people-intensive environment. Robots are more expensive than people but, unlike robots, people can’t work two shifts. If the activity at your facility is enough to keep a robot busy over multiple shifts, you end up avoiding the need to hire two new people to handle the same work. You need at least that kind of ratio or, again, the math doesn’t work.

If these characteristics are not in place, the cost of warehouse automation will outweigh the benefit.


No cookie-cutter solutions to warehouse automation

Deploying automation in the warehouse is not a one-size-fits-all proposition. The characteristics of your operation will determine what kind of equipment makes sense and how and where it will be deployed. The right 3PL can work with you to answer the necessary questions, like the size and weight of products, how they are picked (each/case/pallet), the inbound and outbound volume, and the consistency of that volume. Current staffing and the number of shifts to handle the throughput are also key data points.

With this information in hand, 3PLs can, through a combination of modeling and practical experience, outline multiple automation options – including the option with the best ROI.

3PLs are well-versed in selecting, buying and deploying technology in the warehouse. But automation designed for a specific client could have implications for 3PL contract length. A 3PL will want to take more of a partnership approach to technology deployment, ensuring that there is a powerful advantage for the customer, but also that 7-figure investments can be amortized over time to cover those costs.


Greenfield or brownfield? It matters.

A greenfield project is one that’s custom-designed to optimally address all of the unique operational characteristics of your distribution operation. The downside to this model is that there are a lot of upfront costs involved in buying/leasing a building, purchasing automaton and other equipment, and upfitting the facility. The upside is that, when it’s built, operations will meet your exact requirements in the most efficient way. The risk will be how much your business changes over time.

A brownfield operation is a solution built within an existing warehouse. The mistake many make is assuming they can simply replace people with robots in the same warehouse configuration. But it doesn’t work that way. Here’s an example. To maximize storage efficiency in a racked environment, companies typically place racks close together with narrow aisles to store more inventory in a smaller footprint. Automated vehicles have improved, but for safety and operational purposes need wider aisles to operate. It may only be a matter of 12 inches, but doing that rack reconfiguration across a large warehouse would cost hundreds of thousands of dollars. Plus, you would lose a percentage of your storage capacity.

The right 3PL can make automation work in either a greenfield or a brownfield operation. However, a greenfield operation certainly makes it easier to design a truly custom solution. Your 3PL needs the expertise to investigate both approaches.


Segregated inventory versus common processes

Making warehouse automation a practical investment for some companies may also require a change in the way they think about their inventory. In a multi-client 3PL warehouse, that inventory tends to be segregated. There may be a section for Brand A, a section for Brand B, a section for Brand C, and so on. Within each area, you could have some each picking, case picking and full pallet picking. Alone, each of these brands may not have the volume required to get a good return on robotics for the different picking activities.

But what if you segregated product not by brand, but by activity?

By putting all each-picking activity in one area, for instance, 3 low-volume manual operations could transform into 1 high-volume, highly automated, highly efficient operation. With the right WMS, order and inventory accuracy rates would not suffer and cost and reliability would improve.

Sometimes people have to wait for the technology to catch up. In this case, the technology is already here. It’s the people, and some traditional mindsets, that may need to change to make it easier to leverage warehouse automation.


The way forward

We can’t assume that the labor challenges we face in today’s supply chain are short term. That’s why shippers and their 3PL partners need to work together to create distribution operations that are both efficient and reliable. It’s hard to imagine a future solution that does not involve more warehouse robots. It’s not a question of IF, but WHEN.

If you’re looking for an efficient, high-volume warehouse distribution solution, let’s talk. Contact a KANE expert today.