Warehouse automation technology is well-established, and its benefits are substantial. Yet, in North America, only about 20% of warehouses have adopted any form of automation. This raises pressing questions: Why is the adoption rate so low? Why is implementation so complex? And for those who succeed, how do they do it? These uncertainties highlight the confusion surrounding warehouse automation despite its proven advantages.
Automation is increasingly becoming a priority for organisations and industry leaders. A recent survey of 65 logistics and supply chain executives revealed that 70% plan to invest nearly $100 million in automation within the next five years, aiming to enhance speed, stabilise processes, and reduce dependency on labour. One pharmaceutical executive noted, “Hiring more staff is always an option, but eventually, that approach wouldn’t resolve the underlying issues.” The president of a global supply chain at a major industrial distributor added, “Automation in our distribution centres enables complete next-day order deliveries while replenishing branches for same-day customer availability.”
By 2027, over 75% of companies are predicted to adopt some form of cyber-physical automation in warehouse operations. Despite these ambitious goals, the current pace of adoption lags behind. The number of automated warehouses in North America is projected to grow at a compound annual growth rate of 8.3%, leaving only about a quarter of warehouses automated by 2027.
Why Is Warehouse Automation Adoption Low?
Several factors explain the slow uptake of automation in the distribution sector:
Belief in Existing Processes Many organisations perceive their current operations as adequate, believing they can scale to meet future growth.
Unclear Business Needs Misalignment among stakeholders about business objectives can lead to poor investment decisions. Without a clear understanding of evolving product portfolios, expected growth, and other factors, organisations risk choosing unsuitable technologies and setting unrealistic expectations.
Limited Knowledge of Automation Technology A lack of understanding about available technologies and their capabilities often leads to suboptimal choices.
High Initial Costs and ROI Concerns Automation projects often have long payback periods, sometimes exceeding the lease duration of the automated building, making the investment seem unjustifiable.
Overwhelming Options The sheer number of solutions available can be daunting. For instance, at MODEX 2024, a premier supply chain trade show, over 50 autonomous mobile robot (AMR) vendors were present, complicating the selection process.
Why Is Implementation So Difficult?
Even after committing to automation, implementation poses its own challenges:
Lack of Internal Expertise Many distributors lack the operational and IT expertise required to manage complex automation projects. Partnering with a systems integrator (SI) can help but often adds complexity.
Process Misalignment Automation without process redesign often leads to suboptimal outcomes. Ensuring frontline workers embrace the technology is essential for achieving efficiency and scalability.
Keys to Successful Automation
Despite these challenges, many organisations have successfully implemented warehouse automation by focusing on:
Strategic Fit Identifying where automation will add the most value to the organisation.
Comprehensive Assessment Evaluating business needs, systems, and operations before selecting solutions.
Phased Implementation Starting with pilot programmes to test and refine automation strategies.
Employee Engagement Gaining employee buy-in and providing thorough training before deployment.
Process Integration Redesigning workflows and involving stakeholders to maximise the benefits of automation.
Examples of Automation Success
A regional grocery chain faced with outdated warehouse operations implemented a retrofit strategy, including network optimisation, DC performance assessments, and future growth modelling. This approach resulted in 20% savings, a fourfold increase in productivity, faster response times, and reduced space usage.
Similarly, a global logistics company integrated AMRs into its picking process. Starting with a pilot of 1,000 units in North America, the company expanded gradually, achieving a 200% productivity boost, 50% cycle time reduction, and a “zero-defect environment.”
Starting Your Automation Journey
To plan a successful warehouse automation project, focus on five critical areas:
Evaluate Process Maturity and Governance Establish clear SOPs and robust governance mechanisms, ensuring sufficient process maturity and integration capabilities.
Understand Handling Profiles Identify the areas where automation can deliver the most value, focusing on high-labour tasks and risk-prone operations.
Engage IT Early Collaborate with IT from the start to define technical and functional requirements, ensuring seamless integration.
Narrow Down Solutions Evaluate potential technologies based on predefined criteria, such as order volume, operational needs, and organisational maturity.
Assess Technical Capabilities Determine your organisation’s readiness to support and maintain automation. Based on these insights, decide whether to work with an SI or source directly from an OEM.
Warehouse automation offers significant benefits when executed correctly. By addressing the challenges of adoption and implementation with a strategic, informed approach, businesses can unlock transformative improvements in efficiency and performance.
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