Five in 5: Warehouse automation

1. Given the current economic environment, where are you seeing clients find opportunities for cost reduction across logistics and warehousing?

Christian Riemann: In logistics, clients aren’t looking to reduce costs as much as they are trying to manage a shrinking workforce. Companies are turning more toward automation to either augment or replace functions currently performed by warehouse workers. While this does reduce labor cost, it’s not the primary objective of automation. Automation is really about reducing the reliance on a volatile labor force while also increasing accuracy, reducing cycle time, and hedging against future workforce disruptions (for example, a pandemic).

2. How should clients think about balancing the need for efficiency and flexibility in a network strategy—especially given the demand for a quick turnaround time?

Christian Riemann: Flexibility typically comes at a cost. Do I build excess capacity at nodes in my network to absorb demand volatility? Do I expedite shipments from other distribution centers (DCs) to meet spikes in customer demand? Modeling your network and performing a “what if” analysis can identify how sensitive your network is to fluctuations in demand and help answer questions like those above and more. Generally, if you know the customer service level you want to achieve, you can model your network to evaluate the cost to serve across multiple scenarios and identify the optimal solution for your circumstances. By dialing inputs to those models up or down, you can better understand how robust your solution is with respect to errors in forecasts and other assumptions.

3. It can appear as though supply chain bottlenecks are solely driven by logistics challenges—long shipping lead times, distributed warehousing, etc. How does warehouse automation inside the four walls drive improvements in delivery time?

Wanda Johnson: Warehouse automation can help delivery times by improving the efficiency and accuracy of various processes inside the warehouse, such as picking, packing, sorting, and shipping. By improving these warehouse areas using automated systems such as robots, conveyors, and software, there are reduced human errors and better throughput—which reduces the risk of late shipments or back orders. Warehouse automation can also enhance the flexibility and scalability of the warehouse operations—enabling companies to adapt to changing demand patterns and better handle peak seasons.

4. For clients that heavily utilize third-party logistics (3PL) solutions, what are the best ways to automate inventory synchronization between their enterprise resource planning (ERP) system and warehouse management system (WMS)?

Christian Riemann: This is a great question, and like many other scenarios, the answer is “It depends.” The most common approach is to ensure that all transactions that receive, ship, or adjust inventory are published from the 3PL system in a consumable manner for ERP and other systems to consume. Real-time updates are ideal and typically accomplished through pub/sub queue processes. Many other approaches are often available as well and should be tailored to a specific set of systems, technologies, and budgets available.

5. What are the cost components of automation? How do clients think about their break-even costs between automation and labor?

Wanda Johnson: The core cost components of warehouse automation include:

1. Initial capital investment for purchasing and installing the automated equipment.
2. Ongoing operational costs for maintenance, repairs, upgrades, and energy consumption to keep automated systems in the warehouse running.
3. Training or redeploying the existing workforce.

Break-even costs between automation and labor can be compared by looking at the cost of ownership of the automated system in the warehouse versus the total labor cost of the manual process over a given set of time.

Common cost of ownership includes initial capital investment and continuous operating costs, while labor costs should include wages, benefits, and training of the labor force. Additional impacting factors such as safety and employee well-being should be considered as well. Automated activities traditionally replace repetitive and strenuous warehouse work—which creates for a better working environment for employees generally resulting in lower employee turnover.