What do you know about the economics of warehouse Automation?

warehouse automation

Depending on the level of automated system installed and the requirements of the warehouse automation, an investment in warehouse automation technologies could produce a three-year ROI.

The leading player of warehouse Autonomous Warehousing Solutions Online has classified the extent of automation that is most typically implemented by warehouses and distribution centres into four categories:

Level 1: Conventional Picking with Process Improvements

This is bare-bones automation, with minimum addition of any automation equipment and focus is primarily on improving picker productivity and inventory/order accuracy through:

    • Warehouse management system (WMS)
    • Radio-frequency (RF) or voice-directed picking

Labour management system (LMS) There is no dedicated automation equipment installed and does not require many changes to the existing warehouse layout and design. Replacing paper pick lists with a WMS to consolidate orders, plan picking routes and track inventory boosts the speed and accuracy of workers. Hands-free devices, such as light- and voice-directed picking, increase productivity and overcome potential language barriers. In most cases, training on these highly-intuitive systems is fast for end-users, frequently taking 20 minutes or less.

The baseline cost for this level of automation starts at $500,000 to $1 million. As a rule of thumb, while calculating ROI for these types of installations, payback period for these can be as low as 6 to 12 months.

Level 2: Mechanized Solutions

In addition to Level 1 systems, there are dedicated warehouse automation equipment added for operation improvement, the main focus of such Autonomous Mobile Robots Online solutions is on automating horizontal transportation, reducing staffing levels by up to 10-20%, and improving inventory/order accuracy through technologies such as:

    • Conveyor and/or pick modules
    • Automatic stretch wrap and label print-and-apply
    • Layer picking equipment

The cost of Level 2 implementations can range from a $1 million to $5 million and the ROI payback for these types of mechanized solutions can be as quick as 1 to 2 years.

Level 3: Semi-Automated Installations

The goal in Level 3 type of installations is to reduce warehouse staff by as much as 25-50% while minimizing travel time with “goods to person” SKU deliveries, and gain greater storage density and by leveraging a new or existing building’s height. Such type of automation requires highly specialised technologies and equipment such as:

    • High-density automated storage and retrieval systems (AS/RS)
    • Conveyor and sortation
    • Warehouse control software (WCS) to connect equipment and direct its operation in line with WMS

In addition to this, this level of automation requires significant redesign in the layout and workflow of the existing warehouse in case of Brownfield facility or a systems design stage in case of Greenfield developments. Before implementing such projects, it is important to figure out how to match the right automation technology to the specific challenges of a specific operation. Key areas for evaluation are:

    • Number of pallets received per day
    • Number of cases picked or shipped per day
    • Number of orders picked per shift
    • Number of lines per order
    • Inventory accuracy

Costs can range from $5 million and $15 million, depending on the area, volume of goods and the type of goods stored. Payback on semi-automated solutions tends to be in the 3-4 year range for ROI.

Level 4: Fully-Automated Solutions

This is a completely integrated, virtually operator-free installation that can cut labour requirements by >50% and offer high-speed, high-volume and high-accuracy throughput. Such type of warehouse is usually engineered as part of Greenfield construction, as Brownfield development has significant costs associated in terms of redesign. The technologies used in such type of warehouse are even more specialised and are customised as per the needs of the customer. Below technologies and solutions are used:

    • AS/RS
    • Extensive conveyor and sortation
    • Automated layer picking and case palletizing
    • WCS and WMS
    • AMRs and AGVs
    • Robotic picking

The cost for such systems can range from $25million and upwards and have a long ROI. These longest-term investments have an ROI in the 5-10 year or more range. However, given the 20+ year lifespan of warehouse automation equipment, the ROI calculations are usually in favour of automation.


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