Warehouse Automation, when implemented correctly, has many positive ramifications on distribution center operations, but there needs to be a detailed analysis performed prior to starting the project to understand the financial savings generated by the investment. The project sponsor doesn’t want to discover several common budgeting traps after the start of the project, once automation implementation has already begun. Before deciding to automate, customers need to know: How much will it cost upfront? How much will it cost to maintain? And how much will it save over time?
These answers can be complicated to answer when determining a project’s ROI due to the sheer number of available automation options. It’s more than just hardware and selecting robots, conveyors, or technologies such as voice picking or pick-to-light, and finding the right software partner for integrating automation into an existing business’s enterprise resource planning (ERP) or warehouse management system (WMS) software.
There are industry vets who have spent their careers analyzing the ROI of different or blended automation technologies. Dan Hanrahan, with The Numina Group, is one of them. He recently sat down to talk with us about what drives him to find the most effective and affordable ways to introduce automation into businesses of every size, his thoughts on the industry in general, and how we can work together to advance operations.
Understanding the innovative landscape
Today’s competitive market is ripe, with many newly formed companies offering innovative solutions that seem attractive for their promised performance. But without an experienced team and careful planning, integrating these innovations can have unforeseen – and unintended – effects on your operations. Especially for small to mid-size firms with minimal in-house engineering staff.
Warehouse automation isn’t a one-size-fits-all prospect. Ever-evolving advancements open up a myriad of avenues that give companies of all sizes affordable access to game-changing technologies. Finding the right answers for their individual needs, however, takes both creativity and experience. For smaller firms or automating a specific process such as packing and shipping, analyzing peak shipping periods or time of day order throughput are the initial design services required to selecting the right ratio of automation justifiable for the project.
A knowledgeable partner enables individualized solutions
Businesses are investing in warehouse automation to improve accuracy, lower labor costs, and streamline distribution center (DC) operations. Ensuring these three things happen is part of the integrator’s job of designing the solution and selecting the right technologies to achieve the desired ROI. Hanrahan stated, “the work starts in the initial phase during the project’s planning stages well before the system purchase or go-live date. Our job begins by helping businesses realize that it requires in-depth discussions regarding the process design before considering which technologies will drive the highest ROI and how automation will be integrated with the current operation to work seamlessly with the business system.”
When it comes to automating a DC, the first step is to understand the current operation and process to help develop a design plan that evaluates the benefits obtained with improved processes, slotting, ergonomics, and a focused look at how to reduce non-valued touches throughout the pick, pack, and ship operations. The improved design can then be compared to the current operating performance and labor requirements to estimate the projected results achieved from the operational changes and leaner processes.
This is when the right level and blend of automation technologies – suited to specific warehouse operations – can be accessed. The combination of lean processes and enhanced automation yields far greater gains in productivity, especially in solutions that are comprehensive and holistic, and implemented across the entire order fulfillment operation.
What process and technology yields 99.98% picking accuracy while lowering labor costs?
Most facilities are eager to achieve 100% accuracy in their picking process while simultaneously reducing their labor costs. It’s an area of great opportunity, especially since industry averages show that up to 50% of distribution labor is spent in order picking and QC activities.
How can your facility achieve it? Review your current picking process and answer the following questions:
- Is order picking a discrete order process?
- Are pickers picking orders one at a time?
- Do you lack Cartonization Logic to pick and pack directly to the shipping carton?
- Where’s the #1 bottleneck in the operation during peak periods?
- How much is your yearly spend in secondary QC labor to audit picking?
The goal is to use the data you have to understand the opportunities to drive productivity and reduce costs across your operations. Once a facility’s processes and performance data have been evaluated for potential rewards or losses, you can begin the technology evaluation and consider the investment choices.
One example Hanrahan gives is justifying the investment in autonomous mobile robots (AMRs). The latest generation of AMR’s are safe, efficient, and can manage their paths throughout picking zones while transporting pick carts with 15 or more orders at one time and with loads of up to 600lbs. Part of evaluating their fit within a facility is understanding a facility’s SKU slotting, total SKU’s at the DC, and SKU velocity movement along the pick zones and travel paths and how AMRs will seamlessly fit within the current or desired schematic.
Further, what will a cart weigh after picking 15-20 orders at a time? When the weight is 500lbs. or more, the ability of an AMR to handle this weight is far greater and reliable than an operator who may suffer fatigue or injury that can lead to increased labor time and costs. This benefit can become a critical factor in determining ROI.
If adding AGV’s, in another example, saves 20% on labor costs and the company uses 20 employees, then it may be a long time before they would see the return on that investment. However, if the company is growing 10-15% and having difficulty recruiting and retaining good workers due to issues such as fatigue and ergonomics, the AMR investment could indeed be the best choice for their ongoing needs.
Considering all the factors in calculating your ROI to choose the right warehouse automation
Hanrahan re-emphasized that before investing in any warehouse automation, a facility should profile their SKU velocity and travel paths, adjust the warehouse design to project/accommodate increases in productivity, and simulate and contrast manual operation versus automated operation to understand the impact to the labor costs and throughput achieved.
Sometimes the best first investment is implementing process improvements managed by pick-by-voice or pick-to-light pick technologies, which can have an ROI of one-year or less. Equipping a workforce with voice terminals, headset, and hands-free barcode scanning and integrating with a new or existing WMS or ERP can boost productivity by 25% to 30%. Voice picking can increase a picker’s productivity by up to 250 picks per hour in high-velocity pick zones.
Partnering with a material handling integrator like PeakLogix and a warehouse automation specialist like The Numina Group at the onset of considering automation can have significant results on your ROI. By bringing our expertise together, we’ve consistently met or exceeded performance and ROI projections for our clients. One example, we recently partnered to integrate voice pick and print and apply technologies at Merit Medical, which yielded a 200% boost in pick productivity and $100,000 in freight savings.